Marriage is a long-term commitment that does not always go the distance. We have all heard the statistic, about 40% of marriage ends in divorce. Prenuptial agreements deal with that real possibility of divorce by creating a future financial foundation to start over. Here’s what you need to know about these arrangements:
- Prenuptial agreements, a contract for the future possibility of a breakup;
- What goes into the agreement? – There are limitations on what can go into the contract; and
- Benefits of having a prenup – Protecting your future well-being.
An Agreement on Future Possibilities
Simply put, a prenuptial agreement, or prenup, is a contract between two people made before marriage outlining what will happen upon the breakup of the marriage or even death. Maryland has no laws regarding prenups, instead contractual law regulates these agreements.
Despite no prenup law, the contract is legally binding and enforceable upon a divorce. Prenups require a written document of the agreement, signatures of both parties, notary public verification, and review by a separate attorney for each party.
Having an attorney review the prenup prior to signing ensures fairness. A grossly unfair agreement is contestable in court, possibly nullifying the agreement.
Yes, someone can challenge a prenup in court based on fraud, duress, coercion, mistake, undue influence, incompetence, or unconscionability. But, the goal of prenups is to reduce conflict and prevent any contested issues.
In essence, a prenup secures the well-being of each party by providing a fair outcome for a possible future event. Although it sounds odd to plan for the end of marriage, in America roughly 40% of marriages end in divorce, so why not protect your future?
The 21st Century brings a modern take on marriage and divorce in America. Once frowned upon, prenups are shedding their stigma. According to the American Academy of Matrimonial Lawyers, prenups increased between 2013 and 2016 by 62%. Showing a trend of Millennials asking for these agreements.
The driving forces behind the increase happens to be because Millennials are marrying later in life after accumulating money and assets as well as the fact many are children of divorce and already know the importance of protected interests.
So, if the prenup’s goal is to protect interests, what interests are allowed in the agreement?
What Can be Included in a Prenuptial Agreement and What Cannot
There are limitations to a prenup. Despite popular belief, you cannot put anything you want into the contract. Here is what can go into the agreement.
- Property rights – either acquired before or during marriage;
- Inheritances;
- Alimony;
- Monetary rewards;
- Deductions and claims for tax purposes;
- The use of mediation to solve any potential disputes;
- Business ownership/claim;
- Retirement benefits; as well as
- Separating debt.
Pretty much anything to do with finances or property goes into prenups. Taking care of financial issues makes for a smoother divorce since there is already an agreement in place to settle them. This eliminates attorney fees and court costs from lengthy litigation over finances. What cannot be included is:
- Child custody;
- Visitation;
- Child support;
- Waivers of right to alimony;
- Anything illegal; or
- Provisions that encourage divorce.
Typically, things to do with children do not go in prenups, although the exception to that rule are children from an earlier marriage or relationship. Custody, visitation, and child support are issues a judge must rule with the best interest of the child in mind, and normally children come after marriage. If there is no child, then the best interests cannot be known.
These agreements are no longer for the wealthy and elite, Millennials are shifting the trend to include dreamers and world changers. Prenups protect those dreams from the possibility of divorce dashing them.
Managing the expectations of what happens during the divorce and afterwards creates a harmonious transition to the next phase of life.
Considering a Prenup? – 7 Beneficial Reasons to Create One
Allowing the parties involved to decide how a divorce or separation goes is the greatest benefit of a prenuptial agreement. State laws and judges have no say in your future, you do. Six other benefits of prenups are:
When One Party Has More at Stake Than the Other
A party who enters the marriage with a bigger chunk of the American Pie should consider a prenup. High value assets like property, real estate, trusts, savings, and even income are key to setting up a new life post-divorce. Having a financial foundation leaving a relationship ensures stability.
In fact, a spouse who makes significantly less than their partner may want alimony payments included in the prenup to ensure their lifestyle and financial stability post-divorce.
Plans of Investing or Already Investing
Maybe, one or both spouses have invested money in stocks, businesses, IRA’s, 401k’s, or a startup. Or there are plans to build an investment portfolio and retirement savings. These assets set individuals up for life after work and losing them means an uncertain retirement.
Saves the Cost of Litigation Later
When couples disagree during a divorce, they spend more time with attorneys and in court driving the cost of a divorce well above the cost of a prenup. An average divorce in Maryland costs $11,000 – $13,500, while the cost of a prenup averages $1,200 – $2,500. That’s money in both parties’ pockets leaving the relationship rather than spending it on litigation.
Protection from an Ex’s Debt
A very popular reason for a prenup is debt. No one wants to be saddled with debt they did not accrue. By including provisions that separate each party’s debt, spouses walk away in a similar financial spot as when the entered the marriage. Burdened by debt only hinders someone from a fresh start.
Prepares You for The Worst
Many people are children of divorce or have gone through their own divorce, so they know what divorce can do. Having those experiences means acceptance that divorce is a fact of life and needs planning; roughly 40% of marriages end that way. Just because a couple creates a prenup does not mean they will divorce; they are just prepared for the possibility, making the consequences less harsh.
Promotes Full Financial Transparency
Finally, a fantastic benefit of prenups is transparency. By openly talking about credit scores, debt, spending patterns, and income a couple learns to better communicate. There might even be some discoveries about your partner you never knew about. Plus, to create a fair agreement full disclosure is necessary. Hiding financial information can lead to nullifying the prenup.
Creating a prenuptial agreement takes honesty, integrity, and compromise. Tough conversations must take place, but those chats create strength and trust in one another; solidifying an already close bond.
An experienced family lawyer can help write a valid prenup that is enforceable by Maryland courts. We can also look over a contract to make sure the agreement is competent and not grossly unfair or illegal, keeping it fair and considerate for all parties involved.
Schedule a free initial consultation withThe Law Office of James E. Crawford, Jr. & Associates, LLC to see how divorce is a fact of life better prepared for now than later. Discussing all the issues with your partner ensures you really know what you are getting into with a marriage.