The Risks of Do-It-Yourself Prenuptial Agreements

by Wayne Thomas
To be enforceable, a prenuptial agreement must be in writing and signed by both spouses.

To be enforceable, a prenuptial agreement must be in writing and signed by both spouses.

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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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Overview of Prenups

A prenuptial agreement, also referred to as a prenup, is a contract executed by a couple before marriage. The purpose of a prenup is to provide parties with the freedom to control how marital property is distributed in the event of divorce. Prenups have historically been used in cases where there is a large disparity in income or property between a couple, and the parties wish to preserve their relative financial status after divorce. However, today prenups are being used more frequently by couples with similar incomes in order to reduce uncertainty and bitter disputes in divorce. In addition to property, in some states, prenups can also cover spousal support, often referred to as alimony, specifying a set amount or preventing a judge from providing any award. Although prenups are valid in all 50 states and the District of Columbia, each jurisdiction has its own set of rules that must be observed.

Validity

In order for a prenup to be valid, it must be in writing and signed by both parties. Although generally not required, signing in the presence of a notary can help prevent later challenges to the legitimacy of either signature. Prior to signing, both couples must fully disclose the full extent of their finances. If one spouse later claims to not have known about certain assets, such as a bank account, this could result in the entire agreement being declared void. In addition, no signature may be obtained through coercion. The timing of when the contract is signed, such as the night before the wedding, can be a potential red flag to the court of a fraudulent prenup. Coordinating the execution of the contract far in advance, such as before the wedding invitations go out, and with other financial planning matters can guard against claims of coercion.

Oppressive Terms

Although freedom of contract does provide spouses with the leeway to allocate marital property according to their definition of fairness, there are limitations to this rule. Specifically, if a court finds that a prenup is so one-sided that it is unjustly unfair to one spouse, the contract could be thrown out. This might be the case, for example, if there was a huge discrepancy in business sophistication between a couple and the contract was written to provide the more educated spouse with all of the marital assets, leaving the other spouse with nothing. However, it is important to note that lopsided awards do not automatically rise to the level of unfairness. Typically, if one spouse is left something, the prenup will not be invalidated.

Unenforceable Terms

A common mistake that can be made by a couple that does not seek legal assistance before entering into a prenup is the belief that the document can cover more than property matters. By law, terms in a prenup that affect child support or custody are not enforceable. This is based on the rationale that the court must determine what is in the best interests of the child, and that parties cannot contract around this requirement. Further, prenups may not be used to punish either spouse for infidelity, specify what religion a spouse must practice or require a particular religious upbringing for the children.