Do Prenuptial Agreements Lessen the Financial Risks of Marriage?

By David Montoya

The prenuptial agreement, a legally binding contractual agreement between two people about to enter marriage, outlines the manner of asset distribution at divorce or death. This gives both parties more control over their financial circumstances, since the agreement has authority over pertinent state laws. Despite lessening financial risk through more control over asset distribution, prenuptial agreements have limitations. Contact an attorney for help negotiating and drafting a prenuptial agreement.

The prenuptial agreement, a legally binding contractual agreement between two people about to enter marriage, outlines the manner of asset distribution at divorce or death. This gives both parties more control over their financial circumstances, since the agreement has authority over pertinent state laws. Despite lessening financial risk through more control over asset distribution, prenuptial agreements have limitations. Contact an attorney for help negotiating and drafting a prenuptial agreement.

Basic Elements

The laws controlling prenuptial agreement formation vary by state, but several baseline requirements exist. Typically, such agreements must be in writing and agreed upon by both parties voluntarily. Additionally, prenuptial agreements must be notarized, require both parties to provide full financial disclosure and cannot include unconscionable or unreasonable terms.

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Invalid Agreements

A prenuptial agreement can only reduce financial risk if executed properly. Any defects involving the basic requirements may render the document invalid in family law court. Furthermore, wrongdoing can also invalidate the agreement. This includes fraud, coercion and misrepresentation of facts. If any defect occurs, the court has the authority to invalidate the specific terms containing the defect or the entire agreement itself. After invalidation, state law regains control over property distribution at death or divorce.

Non-Negotiable Issues

Prenuptial agreements cannot cover every financial matter. In fact, these agreements typically cannot contain terms specifying a spouse's right to child support, visitation or custody. The agreements also cannot contain any illegal terms, financial or otherwise.

Negotiable Issues

Despite several off-limits issues, prenuptial agreements cover a wide range of topics. Both parties can agree to terms covering assets acquired before the marriage, designate responsibility for debt brought into the marriage and waive rights to retirement plans. Prenuptial agreements also allow couples to determine which assets belong to each spouse, determine who pays for certain assets, such as the mortgage, and outline business management responsibilities if a business is brought into the marriage.

Who Needs A Prenuptial Agreement?

Several types of individuals benefit from prenuptial agreements. Individuals with children from a previous marriage, for example, may want assets to pass to them that would otherwise pass to the spouse under state law. Those with valuable assets, or high earning ability, may also consider such agreements to limit spousal support payments, thereby preventing one spouse from making future claims on the other spouse's wealth. Business owners can also draft prenuptial provisions to ensure that a spouse does not retain ownership in the business in case of divorce or death. A person about to marry someone with significant debt can also draft an agreement to ensure no obligation to pay for their future spouse's debts.

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References

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The Uniform Premarital Agreement Act in Florida

Few couples in Florida get married with the expectation their marriages will end in divorce. Unfortunately, divorce is a common event in this state. As of October of 2008, Florida had the highest number of divorces out of 44 responding states, according to a CDC National Vital Statistics Report. Florida adopted the Uniform Premarital Agreement Act in 2007 to give Florida residents the ability to enter into financial agreements prior to marriage in case their marriages end in divorce. The Act applies to all prenuptial agreements entered into from October 1, 2007.

Waiver of Net Worth Statements in a Divorce

A net worth statement is a comprehensive document that both parties are generally required to complete in most divorces. A net worth statement is like a snapshot of the financial history of your marriage and requires you to list your income, assets and debts in specific detail. It is rare that the court will allow you to waive the completion of a net worth statement because it is the only document that lets the court know the specific financial facts of your case. However, in very rare circumstances, a waiver will be granted. This is most often when the couple has been married only a short time or has very limited assets and debts and there are no contested issues in the divorce.

The Risks of Do-It-Yourself Prenuptial Agreements

Financial interdependence is a standard feature of the marriage relationship. If a couple divorces, assets acquired during the marriage are divided either equitably or equally between the spouses, depending on the state. However, a couple may prefer to have more control over the property division aspect of divorce, which may be accomplished in advance of marriage through a validly-executed prenuptial agreement. Although legal assistance is not required to create these contracts, there are several risks that you should be aware of before attempting to draft your own prenuptial agreement.

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