The latest Harris Poll data, cited by Yahoo Finance, suggests that two in five Gen Z couples have agreed to sign a prenuptial agreement.
A prenuptial agreement is a contract like any other. And its value depends on whether the court will actually enforce it when the moment comes. According to New York prenuptial agreement lawyer Yonatan Levoritz, a court may later find a prenup agreement invalid if the involved parties did not draft it correctly.
It is important to know when a prenuptial agreement really makes sense, what it can and cannot do under the law, and what conditions must be present for it to be enforceable.
Let’s take a look at the scenarios where a prenuptial agreement can be beneficial.
Circumstances That Make a Prenuptial Agreement Worth Considering
Significant Asset or Income Disparity
The easiest situation to follow for a prenuptial agreement is if the two people start the marriage with different asset portfolios or different income outlooks. Without a prenuptial agreement, the regular default framework in the state where the couple lives or divorces takes over and dictates how to divide marital property.
In community property states, anything that gets acquired during the marriage is usually split 50/50. In equitable distribution states, marital property is divided by a court according to what it considers reasonable and fair. This division will be based on each person’s contributions, needs, and general situation. A prenuptial agreement replaces these methods with the terms they have already chosen for themselves.
A prenuptial agreement is not only relevant when one person is already wealthy at the moment they marry. It also matters when one person has real future earning power, is setting up a business, or expects a significant inheritance later on.
Separate property are assets that each party had before the marriage. It also includes properties received as a gift or inheritance. This type of property often remains with its owner after divorce.
In some cases, a problem occurs when the separate property increases its value. Any income coming from it during the marriage can make matters complicated. This issue is where a prenuptial agreement helps a lot.
The agreement can spell out what counts as separate property, how income from those separate assets should be treated, and what happens if that separate property gets mixed with marital assets? A clear definition of these terms means that there would be less likelihood of disputes in the future.
For more information on how assets are distributed, visit the family law firm website https://www.kramerzitser.com/
Existing Debt
A party going into a marriage with a meaningful pile of student loans or business debt, or even consumer debt, has reason to speak directly about that debt in a prenuptial agreement. Without definite contractual terms, the other spouse might end up exposed to creditor claims tied to marital assets, especially if they are living in states that treat spouses as jointly responsible for certain kinds of debt. The agreement can set out that any pre-marital debt stays the separate burden of the person who incurred it, which gives both protection and a bit more clarity.
Children From Prior Relationships
When either side has children from a prior relationship, a prenuptial agreement ends up doing fairly specific estate planning work. This aspect of the prenuptial agreement is important, but most people often forget about it.
It helps establish that certain identified assets will go to the children from that earlier relationship, rather than being treated like marital property that could be divided if the later marriage ends. This provision is a different matter from wills and trusts, where usual beneficiary designation changes. But it can work alongside those documents so the end result matches what you meant in the first place.
There is another limitation in a prenuptial agreement. It cannot predetermine child custody or child support amounts. The Uniform Premarital Agreement Act (UPAA) clearly prohibits such regulations and is enacted by the majority of states in one form or another.
The law does not permit enforcement of the prenup stipulations that either try to set a fixed schedule for children or lock a certain amount of monthly maintenance. These matters have to be decided at the time of divorce, using the children’s best interests as they exist then. They can’t be resolved from a contract made earlier, before the children were born, or before the situation was known. Including those kinds of clauses doesn’t automatically void the whole contract, but it does mean the problematic parts won’t be followed.
Business Ownership
A business’ appreciation in value during the marriage is among the common problems and disputes one can face without a written marriage agreement. As such, in the event of a divorce, they get tangled up in court processes that result in either an ownership transfer or a joint step-down of ex-spouses.
Divorce can even result in one ex-spouse gaining complete ownership of what was once a joint business, with the other simply buying them out at a valuation that the owner does not agree with. This scenario is a reason to believe that a business ought to be categorized as the nuptial property of the spouse. It is subject to the community property laws.
A prenuptial agreement can protect the business by stating that in the event of dissolution of marriage, the value of the business growth shall be derived as capital appreciation proportionate to the business acquisition cost. This term will benefit all the employees and associates who depend on the business.
What the Law Requires for a Prenuptial Agreement to Be Enforceable
Voluntariness and Timing
The need for both parties to sign on their terms is probably the most litigated reason people use to fight prenuptial agreements. Courts look at voluntariness from the whole set of circumstances when the signatures happen, and timing seems to matter the most.
If the paperwork were handed over only days before the wedding, its enforceability would be reduced. Courts will see this situation as an indicator that the agreement was not really planned and voluntary.
California also has a clear statutory rule. According to their rule, the other party must receive the complete agreement at least seven calendar days before the actual signing. Judges want to see that both sides had enough time to examine the terms, talk with an attorney, and then select the deal as a genuine choice.
Full Financial Disclosure
A prenuptial agreement that comes from inaccurate or incomplete financial disclosure can be argued as fraudulent. The parties entering the prenuptial agreement should share a fair amount of detail regarding their assets, debts, income, and day-to-day financial obligations. This doesn’t mean you must itemize every single financial account down to the dollar, but it does mean you need honesty and transparency about your financial situation.
For example, there was a case where a husband artificially inflated the value of the marital residence on the prenuptial agreement, listing it at $800,000 even though the market value was about $515,000. The court ruled that this inflated value rendered the prenup fraudulent and unenforceable. The main idea is that the other party should have enough knowledge to make an informed choice about the terms they are agreeing to.
Independent Counsel and the Unconscionability Limit
Most states do not legally force both people to have their separate legal representation as a condition for a prenuptial agreement to be valid. Still, having independent counsel matters since it makes enforcement much stronger. If, later on, someone tries to argue they didn’t understand what they were signing, that claim is far weaker when they were represented by their attorney during the discussions and the review phase.
California has a specific approach when it comes to this issue. If a party is waiving spousal support in a prenuptial agreement, that person must have had independent legal counsel at the time they agreed to give up that spousal support provision. A lack of legal representation means that the waiver will not hold up in court.
Courts won’t carry out terms that are so lopsided or oppressive that applying them would be grossly unfair. You can attack a prenup as unconscionable if it leaves one party with nothing, regardless of how long the marriage lasted, what contributions they made to the couple’s finances, or what their health and employment situation was when the divorce occurred.
Just having terms that are unequal by itself usually doesn’t get you over that line, since a person can agree to receive less than the other. Still, terms that push one party into severe financial difficulty are typically unenforceable in court.
What a Prenuptial Agreement Cannot Do
In prenuptial agreements, you’ll often see a few types of clauses come up again and again, but a lot of them will not actually be enforced. For example, any language about child custody or child support is typically unenforceable no matter how it’s worded, drafted, or polished. If a provision seems to encourage or nudge divorce, like an arrangement where one spouse gets paid more after divorce than what they would have gotten after the other spouse’s death, it can be pushed back on as contrary to public policy. On top of that, clauses trying to waive a spouse’s ability to use estate laws, or the spousal elective share, usually face extra scrutiny depending on the state involved and how that state views waivers in general.
Then there are the lifestyle provisions that try to regulate personal behavior. Clauses concerning fidelity requirements, weight maintenance, or splitting household duties are normally unenforceable too. Having them inside the agreement can raise doubts about how serious, or professionally done, the drafting really was.
The Right Time Is Earlier Than Most Couples Expect
As mentioned above, prenuptial agreements must be drafted long before the wedding. To some, it usually was drafted months ago and not weeks.
The preparation for such a contract can be tedious and long. The time it takes to finish full financial disclosure, review each other’s financial circumstances, negotiate the terms, and have each party speak with independent counsel ends up being more than most engaged couples even imagine.
A valid prenuptial agreement is usually one that was generated with effort and sincerity. And having a lawyer see the document gives it more credibility. Initiating the procedure sooner provides both sides with adequate time to read the contract in detail and prevents allegations that any party was forced to sign the agreement.
