Prenuptial agreements, which spell out in advance who gets what in the event of divorce, are becoming more and more popular. In 2010, nearly three of four divorce lawyers reported an increased demand for prenuptial agreements over the preceding five years, according to a survey conducted by the American Academy of Matrimonial Lawyers.
Although you will often read about the benefits of signing a prenuptial agreement, there are a few things you should consider before putting your name on the dotted line.
Consideration 1: A prenuptial agreement may increase the likelihood of divorce
A plan for divorce is not always a good way to start off a marriage. A good marriage is built on trust. A prenuptial agreement suggests a lack of trust on the part of at least one of the two parties. Also, discussing divorce and property division is a purely business matter at the time when you should be at the height of romance. It may create an underlying resentment that will last throughout the marriage. A good argument could be made that prenuptial agreements not only help couples prepare for divorce, they actually encourage divorce.
Consideration 2: A prenuptial agreement may be one-sided
Even if a court later deems a prenuptial agreement to be legally valid, the truth is that such an agreement may favor one spouse over the other, typically the one with more money and a better lawyer. But many people find it hard to say no when they are young and foolish, madly in love, financially naïve, and have picked out their wedding attire, booked the venue, and sent the wedding invitations. They may not realize they have been taken to the cleaners until they get divorced.
Consideration 3: Things change
Before you marry, you and your spouse are still getting to know each other. During your marriage, many things may happen, and probably will, to change your joint financial status. You or your spouse might get a significant job promotion, get laid off, inherit a large sum of money, or win the lottery. These events cannot be predicted or accounted for when a prenup or postnup is signed.
Another event that cannot be predicted with certainty is whether you will have children or how many you will have. One of the most complicated aspects of a divorce, child custody and visitation, cannot be addressed in a prenuptial agreement.
During your marriage, both you and your spouse will be gaining maturity and financial knowledge you didn’t have before you got married. So a prenuptial agreement that makes sense now may not make as much sense years later.
Consideration 4: The judge may not accept the prenuptial agreement
A prenuptial agreement isn’t worth the paper it’s written on if the judge refuses to accept it during the divorce proceedings. The judge may decide that one party was not given adequate information before signing the contract or was under duress at the time. If children are involved, the court will consider what is in their best interests. Even though many couples sign prenuptial agreements to avoid court battles, they may end up in court battles over the agreement itself.
Consideration 5: State laws may already protect you
State law spells out how assets and debts will be divided during a divorce. For example, if you live in a community property state, almost anything you and your spouse accumulate during marriage is consider community property and is divided 50/50 upon divorce. Certain property, such as assets acquired before the marriage or through inheritance, may be considered the sole and separate property of one spouse. If this arrangement suits you, then there is no need for a prenuptial agreement.
The bottom line
Prenuptial agreements have advantages and may make sense for some couples. But think carefully about the possible consequences before signing one.