Home Agreements Prenuptial Agreement

Prenuptial Agreement

November 19, 2022

638

This article is written by Ms. Sushree Surekha Choudhury, a law student from KIIT School of Law, Bhubaneswar. The article talks about prenuptial agreements in the United States, mentioning relevant laws and providing a sample draft copy of the agreement.

It has been published by Rachit Garg.

Table of Contents

Introduction

When a person is about to get married, there are a thousand questions running through his/her mind. These questions include the manner of division of properties, managing finances after marriage, conduct of their spouse, among many others. Often enough, a person is reluctant to discuss this with their partner because it feels insensitive. But these little questions can create misunderstandings and confusion in a marriage because they never truly discussed them. Absolutely all of us would wish not to be in this situation, right? Yet people face this in reality. The lack of clarity on sensitive issues like handling finances, bearing liabilities, etc., weakens marriage and leads to divorce. Even in the event of divorce, it becomes difficult to reach mutual grounds of agreement because it has never been determined before. All these problems can be solved at once with the help of prenuptial agreements. Marriage agreements can be classified into prenuptial and postnuptial agreements, both serving the same purpose of determining various facets of a marriage, such as handling finances, defining expected conduct, different restrictions, guidelines, and must-dos. A prenuptial agreement determines all of these with joint negotiations between parties and mutually agreed terms. These terms and conditions become binding on the parties when they marry. While prenuptial agreements are gaining recognition, there are social stigmas attached to them as people believe it to facilitate divorce. Contrarily, it mitigates the possibility of divorce by bringing transparency and clarity. To shed more light on this statement, this article will discuss everything you need to know about prenuptial agreements.

What is prenuptial agreement

A prenuptial agreement (otherwise known as an antenuptial agreement or a premarital agreement) is a form of marriage agreement executed between two people who intend to marry. It is negotiated, drafted, and executed before the marriage takes place. It is a myth and a misconception that a prenuptial agreement is beneficial only for rich people. Conversely, it becomes a factor for healthy marriages and problem-free divorces if the situation so arises. A prenuptial agreement defines the rights and obligations of each party. It gives a detailed description of the finances, properties, assets, debts, liabilities, premiums, etc. that each person carries into a marriage. It also contains other essential elements that the spouses may choose to add to their prenuptial agreement. A marriage agreement made before marriage is known as a prenuptial agreement, and when it is made after marriage, it is called a postnuptial agreement. A prenuptial agreement can be detailed and long or brief and crisp, depending on the needs of each couple. The foundation of a prenuptial agreement is based on transparency and honesty in financial and other disclosures.

An ideal prenuptial agreement is made with the free will and consent of both parties. Both parties sign the agreement after being fully informed. There must be complete transparency and honesty in making disclosures. The terms of a prenuptial agreement should be fair and reasonable. To ensure this, the parties shall be accompanied by their individual legal counsels.

Need for a prenuptial agreement

Prenuptial agreements help determine various arrangements between couples. A prenuptial agreement is needed because:

It protects one spouse from the other spouse’s debts and liabilities unless they wish to contribute. It provides a host of other rights and freedom from liabilities.
It helps determine the financial burdens, rights, and obligations of each party individually as well as both parties jointly. It further determines the contents of separate property and community (joint) property.
It helps avoid arguments and conflicts during marriage and in the event of divorce.
It determines separate property for children of one or both spouses, born out of previous wedlock.

Objectives of a prenuptial agreement

A prenuptial agreement aims to fulfill the following objectives:

Clarity

A prenuptial agreement clarifies the expected conduct of both spouses in a marriage. It clarifies expenditures, financial goals, etc. It also acts as a tool to ensure security for the dependent or financially weaker spouse in marriage by defining their rights. It brings overall clarity to the marriage with the help of pre-determined terms in a prenuptial agreement.

Certainty

A prenuptial agreement provides certainty to couples about their obligations. It guides the entire marriage and also provides guidance in the event of divorce, death, or separation. With concise pre-determined terms, there is no scope for confusion or doubts. This ensures certainty in the event of the dissolution of a marriage. This certainty also leads to a happy and content marriage.

Protection

A prenuptial agreement protects the assets of each party. Assets may include inheritance, ancestral property, or self-acquired property. It also protects against unwanted debts and liabilities incurred by the other party. Further, it protects reputation in case of rising feuds and conflicts between them. Finally, it protects from the financial burdens of litigation in the event of divorce.

Trivia

The glitz and glam of Hollywood never fail to be the topic of discussion in town. Prenuptial agreements also seem to be popular among celebrities and business tycoons. With celebrities facing a 52% higher degree of divorce than the general public, prenuptial agreements are also more common among them. Some notable celebrity couples that decided to enter into a prenuptial agreement are:

These are a few examples of famous celebrities and big names who used a prenuptial agreement to lay clear grounds during their marriage and for divorce. Apart from them, there are many other reputed names with similar prenuptial agreements. Can you name some of them?

Enforceability of a prenuptial agreement

Recognition and enforceability are important aspects when it comes to different agreements. Laws governing recognition and enforceability may vary from state to state with an overall general framework. The enforceability of a prenuptial agreement depends on various factors, such as its legality, consent of the parties, etc. For a prenuptial agreement to be enforceable:

It must be a valid contract. It must contain all essential elements that make a contract valid, like the competency of parties, free will, etc. It must be made without coercion or compulsion. The parties must have consented to it out of their own free will.
The terms of the contract must be fair, reasonable, clear, and consented to by both parties.
The contract must be in writing. It must be signed by both parties.
The agreement must be executed before marriage.
The agreement must be made voluntarily by both consenting parties.
The agreement must be notarised and legally executed.
The agreement must contain a severability clause. A severability clause prevents the whole contract from becoming invalid if one or more of its provisions become illegal or invalid. A severability clause protects the valid portion of the agreement and ensures its enforceability.
The agreement must not contain any false or misleading information. Minimum due diligence must be made before enlisting provisions of the agreement.
Disclosures like financial disclosures, assets, and liabilities of both parties must be disclosed fully and without false information.

Laws governing prenuptial agreements in the US

At a point in time in American legal history, prenuptial agreements were not enforceable as the courts saw them as a source and proponent of divorce [Brooks v. Brooks (1959)]. However, this has changed with time, and prenuptial agreements are now recognized and enforceable in the US. US laws give recognition to contractual freedom, and the right to contract and have this contract enforced is enshrined in the US Constitution (Article I, § 10).

The enforcement comes with reasonable restrictions, keeping in mind the welfare of children born out of marriage, etc. It mandates following the procedural requirements, ensuring substantive fairness during execution and enforcement, etc. These specifications make it unique and cause a little deviation from a typical commercial contract. However, the current position is that prenuptial agreements are recognized and enforceable in US courts if they follow certain formal procedural requirements and fulfill the principles and provisions that make them valid contracts. Additionally, it also depends on certain factors, such as:

The length of the marriage,
Foreseeability of certain events in the marriage,
The substantive law of each state where the agreement is to be enforced,
General property laws and family law in the States,
Children born out of the marriage, and
Substantive fairness.

26 states in the US have adopted the Uniform Premarital and Marital Agreements Act (UPAA) with minor modifications. Thus, UPAA governs prenuptial agreements in many areas of the US. The remaining states follow common law principles and general statutory obligations dealing with prenuptial agreements. General rules under this act as well as other regulations governing prenuptial agreements in the US make the following mandates:

Technicalities

The prenuptial agreement must be in writing and signed by both parties before a notary. This is the basic requirement under UPAA as well as other contract laws.

Legal counsel

Both parties should get an equal opportunity to seek legal help from attorneys. The absence of legal counsel will not render the prenuptial agreement invalid. However, every party must have an opportunity of choice.

Financial disclosure

As already stated, both parties must make complete financial disclosures about their assets and liabilities. This must be supported by documentary evidence if and when needed.

Execution

For a prenuptial agreement to not be challenged in a court of law, it must be signed before the commencement of the marriage. Some states have a rule that a prenuptial agreement should be signed at least 24 hours before the marriage takes place.

Marriage is an essential

The most basic requirement on which the whole prenuptial agreement depends is marriage. The validity of a prenuptial agreement is contingent on the occurrence of marriage.

Public policy

Anything mentioned in the prenuptial agreement that is inconsistent with the public policy of the state is unenforceable. For instance, a clause mentioning child custody in a prenuptial agreement is against public policy and thus invalid.

Fairness and enforcement standards

The degree of ‘fairness’ differs from state to state. All the aforementioned grounds, like proper financial disclosures, written agreements, etc., can be broadly put under the category of fairness and enforcement standards.

Clauses in a prenuptial agreement

Prenuptial agreements are considered essential tools for facilitating a hassle-free marriage. They help in establishing clarity and defining rights and obligations for both parties to these agreements. Therefore, it is essential to draft relevant clauses in a prenuptial agreement. It is essential to have complete disclosure and transparency of finances and the financial arrangement of both parties. Financial disclosures should be made by each party in good faith. It should be free from ambiguity or reservations of any kind. Exhibits listing financial information of properties and assets of each party are attached to the prenuptial agreement. These exhibits should contain the following information:

Financial accounts of each party,
Values in banks or other financial accounts,
Property in the form of real estate and interests therein,
Businesses,
Investments, and
Information relating to their tax returns of two preceding financial years.

This list is inclusive and will contain all other relevant financial information. Once the finances are listed and made transparent, the next step is to determine how these finances, among other things, will be managed in a marriage between the parties. This is done by the clauses in a prenuptial agreement. A prenuptial agreement includes the following clauses:

Classifying separate property

Separate property refers to the properties owned by each party before entering into a marriage. It belongs to the person who owned it before marriage and is not classified as joint property. This may be in the form of money in accounts, cash, real estate, investments, life insurance, etc. Complications arise when this property is invested in acquiring new properties or assets after marriage. This is when separate property merges with joint property, and classification becomes difficult. Similarly, joint property may be invested in separately owned property, for instance, by paying loans on a house that forms part of one party’s separate property. In this situation, joint property is eligible for an interest in the separate property.

Therefore, to avoid confusion and determine the divisions of separate and joint properties, it is essential to draft a classifying clause. This clause shall determine what constitutes separate, or joint property and how both are to be managed when interest accrues.

If the parties wish to avoid such confusion, they can determine and decide that the separate properties will be managed by income from separate property alone, leading to no overlapping of interests.

Handling income earned during the marriage

Under general provisions, income earned after and during the marriage is considered the joint property of both spouses. Even so, the parties to a prenuptial agreement have the liberty to determine and distinguish between properties that would be considered joint property and others that can be defined as separate property.

This clause can be articulated in such a way, for instance, that parties can specify the individual income of each party to be deemed their separate property. Further, they would make a certain percentage or ratio of contributions towards a fund that would be termed their joint property. They can also specify the assets and classify them as separate or joint properties. Parties can further determine everything that would be maintained or financed through joint property money, such as gifts, vacations, savings, etc. Establishing clarity through this clause is essential for avoiding confusion as well as ensuring overall growth as individuals and as a team.

Handling debts and liabilities

Past debts and liabilities

It is pertinent to note that one of the most important clauses in a prenuptial agreement is determining debts and liabilities. It is probable that one or both spouses may have had debts, loans, and liabilities before marriage that they would carry into the marriage. This clause will determine the repayment of loans and debts in that context. It will specify if the debts and liabilities will be repaid by both spouses (from joint property and income) or solely by the spouse who owes them (from separate property and income). This clause will answer the following questions:

If the debt or liability is repaid out of the joint property, will it be considered a gift from the other spouse?
Will such payment by the other spouse create his interest in that property?
If yes, how will that interest be paid?
If not, will the amount paid from the joint property be reimbursed, and in what manner?
When the debt is continuing but the spouses decide to divorce one another, how will the debt payment arrangement continue post-divorce?

Future debts and liabilities

Debts and liabilities are not limited to the past. There will also be future debts, loans, and liabilities in a marriage. Loans and liabilities may arise after marriage, such as home loans, car loans, life insurance premiums, study loans for kids, credit card bills, etc. It becomes essential to determine how these loans will be repaid and what liabilities or interests it will create for each spouse.

In this clause, the spouses shall answer all these questions and determine the manner of payment of debts and loans. The spouses will decide whether these loans will be paid from one spouse’s separate property and income or from the joint income and property of both spouses. While it can be uncomfortable to discuss this clause, it is essential to maintain transparency, clarity, and dignity in a marriage.

Spousal support – in case of divorce

In the event of divorce, the general rule is that the higher-earning spouse will provide financial support to the other spouse. It depends on factors like the degree of dependency of the spouse seeking spousal support on the other spouse, whether or not the spouses are financially independent, etc. If a spouse was fully dependent on the other spouse during the course of their marriage, he or she is entitled to receive spousal support after divorce. This support can last for a specified period of time, or forever, depending on the agreed terms under the prenuptial agreement between them.

Therefore, it becomes essential to determine the grounds for providing spousal support in case of divorce, the amount or percentage of income that will be provided to the other spouse, and the time period for which the financial support will last. It is advisable to determine these factors in the prenuptial agreement to avoid conflicts and disagreements during divorce proceedings.

Spousal support can be structured in one of the following ways:

The parties can agree on a certain amount to be paid as spousal support, either fully or in parts.
They can decide a specified percentage of income to be paid as spousal support every month.
They can decide this amount to be paid throughout the lifetime of the spouse.
They can decide this amount to be paid till the time the other spouse attains financial independence.
They can also decide on the spousal support to be paid for as long as half of the duration of their marriage.

The decided terms of spousal support shall be fair, reasonable, and consistent with the public policy of the state.

Education and career plans

The spouses may have been pursuing their education, career, some educational courses, or lifestyle courses before marriage, which would continue after marriage as well. It is essential to determine the manner in which these goals and plans will be financed after marriage. It is to be decided through this clause in the prenuptial agreement. The manner of financing education and career goals shall be determined with the consent and approval of both parties. Further, it is also to be determined if these goals and plans will be financed from their separate properties or joint properties of the spouses. If it is paid from the joint property, further interest accrued will be determined under this clause.

Handling businesses – separate or joint

One or both spouses might hold businesses before marriage that will continue post-marriage. While it might be maintained from the separate property or individual income before marriage, the details will mostly change after marriage. Parties must determine if the individual business owned by them will continue to form part of their separate property or if the other spouse will develop an interest in this property. If the other spouse is to have an interest in a separate business, it is to be determined if he has to make a contribution to that property and in what manner.

In the case of a joint business developed by the spouses after marriage, its management structure, income, profit-sharing, and all other relevant classifications must be decided by the parties. Parties must decide the fate of joint businesses in case of divorce, separation, or division of these businesses. Big business empires may fall due to a bad marriage. This is where the prenuptial agreement comes to the rescue. Parties have an opportunity to clarify the terms of their businesses, properties, and assets through a prenuptial agreement to avoid future conflicts.

Social media guidelines

The most useful, as well as dangerous, tool in the modern world is social media. While it helps in many circumstances by enhancing outreach, it also poses a threat to the reputation, peace of mind, dignity, and privacy of an individual. Therefore, it becomes additionally essential to restrict spouses’ portrayals of one another in social media. This clause becomes operative in cases of feuds, separation, or divorce.

The social media clause restricts spouses from posting hateful comments, pictures, or any other form of derogatory remarks concerning their spouse on social media platforms. In the event of divorce, this clause prevents spouses’ personal lives and professional reputations from being tarnished. Therefore, parties must determine the grounds for social media restrictions in this clause.

Pet clause

This issue is more sensitive than it seems to be. When spouses own pets, it becomes impossible to determine who will keep the pet with themselves in the case of a separation or divorce. Therefore, it is advisable to pre-determine who will have the right over the pet or pets owned by them jointly. This should be based not only on the desire of the parties but also keeping in mind the best interest of the pet(s).

Mediation for dispute resolution or divorce

It would be correct to term this the most essential clause in a prenuptial agreement. Litigation can be ugly, more so when it involves sensitive issues like marriage and divorce. In this context, alternative dispute resolution methodologies like mediation come as a boon. It provides party autonomy that gives an opportunity to the parties to determine the terms and manner of resolving conflicts. The biggest advantage of mediation is the confidentiality of the process. It preserves reputation, prevents sensitive information from being out in public, provides for an amicable way of settling the dispute or agreeing on the divorce, and is a cost-effective way of resolving issues.

Therefore, spouses may agree to use mediation as a first resort in case conflicts arise between them. Including a mediation clause in a prenuptial agreement is a smart thing to do. This clause will bind the parties to adopt mediation to resolve their issues amicably and respectfully.

Sunset clause / amendment clause

A typical sunset clause tells about the longest possible extension of an agreement. It is the time period beyond which the agreement becomes inoperative or unenforceable. A sunset clause in a prenuptial agreement determines a duration beyond which the parties decide they no longer need a prenuptial agreement.

While a sunset clause benefits ordinary contracts by enhancing their enforceability, it is rather advisable to use an amendment clause instead of a sunset clause in a prenuptial agreement. It is at the discretion of the parties whether to add a sunset clause or an amendment clause. An amendment clause leaves room and flexibility to amend the provisions and terms of a prenuptial agreement in situations of significant changes occurring in one or both spouses’ lives, financial or otherwise.

Additionally, a prenuptial agreement will include clauses to discuss topics like the real estate properties of both parties, a will or testament for divulging their properties in the future, savings, bills, retirement plans, insurance policies and their financing, administration and restrictions on joint accounts and joint property, etc., as the parties may deem fit.

Clauses that are not included in prenuptial agreements

While we discussed the essential clauses in a prenuptial agreement, it is also important to know the clauses that cannot be included in a prenuptial agreement. Prenuptial agreements cover clauses discussing finance, legal implications, the rights and obligations of both spouses, etc. However, they do not include the following clauses:

Discussing child custody in the event of divorce. Child custody and maintenance are subject to judicial determination, in accordance with the public policy of the state keeping in mind the welfare and benefit of the child. Thus, this cannot be pre-determined by the marrying spouses as it will depend on the legal implications and circumstances of the case.
A prenuptial agreement cannot discuss sensitive issues like infidelity in marriage. Infidelity and like grounds are unenforceable in prescribing punishments to spouses. Thus, it is immaterial to add a clause regarding this in a prenuptial agreement.

Drafting a prenuptial agreement

The process of drafting a prenuptial agreement between parties comes with certain chronological steps to be followed. They are mentioned below:

Defining parties

Parties to a prenuptial agreement are two people who are going to be married: husband and wife. A prenuptial agreement must contain the basic details of both parties along with other details such as the date of marriage, the date of execution of the prenuptial agreement, and the date on which the prenuptial agreement will come into force (the day of solemnization of marriage).

Defining properties

The first step in this step includes both parties disclosing their total properties, assets, debts, etc. After the disclosure is made, the parties sit down and negotiate on the manner of division and classification of their properties. Parties also determine their rights over their own property. The property law of the state having jurisdiction over the parties and their prenuptial agreement shall be followed here.

Taking legal advice

Since complexities are to be put into simpler, definitive terms, it is advisable for parties to hire attorneys to guide the entire process, right from the beginning of negotiations till the final execution. They can choose to hire one attorney for each party or a neutral attorney to govern and guide them in negotiating the terms of the agreement. This is an essential stage as it ensures neutrality and helps make an informed decision.

Understanding terms

Before signing a prenuptial agreement, it is essential for both parties to fully comprehend and understand the terms and conditions laid down in it. Each party, with the help of their attorney, must take substantial time to understand the terms of the agreement before signing it. It is the duty of their attorney to ensure that the parties are well-informed about these terms and conditions.

Contingency of contract

A prenuptial agreement is contingent on the occurrence of a marriage. A prenuptial agreement becomes operative only when the parties marry. Therefore, a prenuptial agreement is very much dependent on the intention of the parties. This should be determined at the beginning of the negotiations itself.

Property description

Parties should provide details of their separate properties owned before marriage that will continue to remain their separate property even after marriage. They shall also describe the properties and income that will continue to remain their separate property even though they would be acquired after marriage.

Joint property description

After deciding upon the separate properties, the parties shall also clarify what will constitute their joint property. This marital property shall be jointly owned by both spouses, and they shall bear equal obligations towards it. It shall include all properties, assets, etc., acquired during the marriage. Gifts and inherited properties are usually excluded from the list of joint properties.

Termination of agreement

This is discussed and added to the agreement at the will of the parties. They can decide the grounds on which the prenuptial agreement can be terminated or when the agreement expires, as mentioned in the sunset clause of the agreement.

Verifying assets

Under this stage of drafting a prenuptial agreement, the enlisted assets and properties of both parties are verified to be legitimate and ensure complete disclosure. This is necessary before the assets can be classified as separate properties or joint properties. Any misleading information found at this stage can be grounds for declaring the entire agreement invalid.

Choice of law

During the execution of a prenuptial agreement, it is necessary for the parties to determine the laws that will govern it. As a general rule, the law of the land where the parties have their residence or decide to have their matrimonial home governs the prenuptial agreement between them.

Voluntariness

One of the most essential stages of a prenuptial agreement is ensuring the voluntariness of parties in entering into it. Every stage of negotiation and the drafting of a prenuptial agreement must proceed only after obtaining the full and voluntary consent of both parties.

Essential documentation

The prenuptial agreement must be signed by both parties. It must be accompanied by all necessary documents that might be required to provide evidence for the facts stated and disclosures made by each party.

Entire agreement clause

The entire agreement, or the integration clause, is added to a prenuptial agreement to ensure that the written agreement made between the parties is a complete agreement between them. This is to ensure that the prenuptial agreement between two parties that have incorporated an entire agreement clause is deemed to include all the clauses between them and no clause or provision is left out from its ambit.

Amendment clause

It is important to insert an amendment clause in a prenuptial agreement between parties to give it scope for amendment. This clause is invoked when parties wish to add, omit, or modify certain clauses in the prenuptial agreement.

Bindingness

The bindingness of the prenuptial agreement can be made watertight by adding a clause in this regard to the prenuptial agreement. It is most crucial to ensure the bindingness of a prenuptial agreement, without which the purpose of its drafting will fail as enforcement will become difficult. The bindingness clause will extend from the parties of the prenuptial agreement to their heirs and successors upon death or divorce.

Severability

When one or more parts of a prenuptial agreement become inoperative, it should not render the whole prenuptial agreement inoperative and invalid. This is the purpose of deciding to add a severability clause to a prenuptial agreement. This clause states that the parts of the agreement that remain operative will continue to be valid even when one or more parts of the agreement become invalid.

Fees

Parties decide on attorneys to help negotiate their draft while making the prenuptial agreement, and issues in case of divorce. During this process, each party should pay their attorney’s fees individually. Expenses incurred in invoking the agreement or its enforcement may be borne by the party who initiated divorce proceedings.

Signatures

Every prenuptial agreement must be signed by both parties. It ensures that the agreement has been executed with the free will of both parties and that they have consented to the terms of the agreement. It also ensures the bindingness of the agreement and the parties’ consent to being bound by it. Parties must sign the prenuptial agreement in the presence of their attorneys and notaries.

Notarisation

For a prenuptial agreement to be valid, it must be signed by the parties before a public notary and stamped thereby. Thus, the parties, along with their attorneys, must visit the notary to get their prenuptial agreement stamped. This ensures the legal validity and enforceability of the agreement.

Drafting a prenuptial agreement: sample

A typical prenuptial agreement between a husband and a wife would look like this:

For further information, under this agreement:

The prospective husband shall be referred to as Party A, and

The prospective wife shall be referred to as Party B.

They shall be collectively referred to as ‘the parties.’

The prenuptial agreement between party A and party B is entered into on this ___ day of ____ 20__.
Whereas parties A and B intend to marry and therefore, wish to establish their rights regarding property, assets, etc., acquired by each of them, before or after marriage.
The parties further intend to establish their obligations in case of termination of their marriage.
Whereas both parties are aware of each other’s acquired properties and assets which has been enlisted in exhibit A and B.
Further, both parties are fully aware of the contents of this agreement and have consented to enter into this agreement of their own free will, free from any coercion or compulsion.
Except otherwise provided, party A and party B agree to the following conditions:
- Property acquired during marriage shall be considered as ‘joint property.’
- Pre-marital and post-marital debts shall be paid mutually by them.
- They shall pay taxes individually.
- They shall share retirement benefits, medical claims, and life insurance, mutually and in equal proportions.
- Providing temporary as well as permanent maintenance for the spouse.
- (Any additional provision as may be required.)
- If and when additional clauses are inserted into this agreement, it shall be done with the consent of both parties with their signatures, in the presence of their respective counsels.
In case one or more parts of the agreement become void or inoperative, it would not render the operative part void as well. The operative part will be severed from the inoperative part during the execution of the agreement.
The law governing the agreement will be the law of the land where both parties reside (have their matrimonial home).
If the parties fail to marry on the prospective date due to unforeseen circumstances, the entire agreement would become null and void.
This agreement would come into force immediately on the performance of marriage between the parties.

Declaration

I HAVE READ AND FULLY UNDERSTOOD THE IMPLICATION OF THIS AGREEMENT AND I AM FULLY AWARE OF ITS CONTENTS. I HEREBY GIVE MY FREE CONSENT FOR BEING A PARTY TO THIS AGREEMENT. I HAVE SIGNED THIS AGREEMENT OF MY FREE WILL, WITHOUT ANY COERCION OR COMPULSION.

Signatures:

Party A

Party B

PARTY A HAS SIGNED THIS AGREEMENT IN MY PRESENCE, WITH HIS FREE WILL AND AFTER FULLY UNDERSTANDING ITS IMPLICATIONS.

Signature of party A’s counsel

PARTY B HAS SIGNED THIS AGREEMENT IN MY PRESENCE, WITH HER FREE WILL AND AFTER FULLY UNDERSTANDING ITS IMPLICATIONS.

Signature of party B’s counsel

(Source for sample: https://blog.ipleaders.in/how-to-draft-antenuptial-prenuptial-agreement/ )

Negotiating in a prenuptial agreement

Prenuptial agreements are pathways to a successful and solid marriage based on transparency, mutual understanding, and clarity. It is important to have a well-drafted agreement to fulfill its purpose. Needs and requirements vary from party to party. Therefore, it is important to fully understand the circumstances and expectations of each set of people aiming to formulate a prenuptial agreement. Thus, parties must discuss and negotiate the terms that their prenuptial agreement will contain. There are four known ways of negotiating a prenuptial agreement:

The traditional model of negotiation

The traditional model of negotiation is the one used most frequently since a long time ago. The traditional model of negotiation takes place in the following manner:

One spouse finds the requirement of a prenuptial agreement and thus, contacts his or her lawyer to initiate the process.
His or her lawyer will make the first draft of the agreement.
This draft is sent to the other spouse for consideration. Thus, the negotiations begin at this stage.
The other spouse will now consult his or her lawyer on the terms of this draft and suggest modifications. He or she can either agree to the terms set in this draft or reject them and suggest changes.
After a few rounds of negotiation and discussions, the parties shall come to a common consensus on the terms of their prenuptial agreement.
When the final negotiation is done and the final draft is prepared, the parties will sign and execute the agreement.

Collaborative negotiation

Collaborative negotiation is when both parties meet for a joint session along with their respective lawyers to discuss the terms of their prenuptial agreement. It is only after they have negotiated and made final decisions that the prenuptial agreement is drafted. The final prenuptial agreement is made on these negotiated terms.

The one-on-one discussion in the joint session has an advantage over other methods of negotiation because it ensures fairness and reduces the chances of conflicts arising from misconceptions and disagreements. This method is usually preferred by business people with complex finances involved. Other couples with comparatively simpler financial structures do not opt for this method of negotiation.

Mediation

In this method, each party is given a chance to give their input and share their perspective on the terms of their agreement. They seek independent legal advice. The final prenuptial agreement is drafted after they have each provided their input. This process is often facilitated by the lawyers of each party to ensure there is no ambiguity in the process and each party takes an informed decision after understanding the legal and financial implications. One issue that remains attached to this method of negotiation is the differing perspectives of both parties. Each party will have their own perspective on financing decisions in their marriage, and it will differ from the other party’s perspective. Thus, it becomes essential to reach a common consensus after settling these differences.

Co-mediation

This method of negotiation involves two mediators, either one for each party or jointly. These mediators facilitate discussions and negotiations between both parties to decide the terms of their prenuptial agreements. Co-mediation is usually used by people who have children and property from their first marriage and are negotiating the terms of the prenuptial agreement of their second marriage. It involves clauses about family planning, child welfare, the distribution and division of income, etc.

Nexus between prenuptial and postnuptial agreements

Prenuptial agreements and postnuptial agreements serve the same purpose, i.e., determining the division of assets, liabilities, finances, properties, and obligations in marriage. A prenuptial agreement is drafted and executed before the marriage takes place, and a postnuptial agreement can be made after the parties legally marry.

As we already know, parties enter into a prenuptial agreement before their marriage where they discuss all the above mentioned parameters. On the other hand, a postnuptial agreement can be made after marriage. The legal validity and enforceability of a postnuptial agreement are subject to judicial scrutiny and interpretation, unlike prenuptial agreements, which become valid and enforceable by virtue of marriage. Postnuptial agreements can be considered as an additional chance provided to married couples who failed to draft and execute a prenuptial agreement.

Sometimes it also happens that couples are reluctant to negotiate a prenuptial agreement because they find it uncomfortable and unhealthy to discuss finances and other subjects before marriage. They believe it to be ruining the sanctity of marriage. Therefore, a postnuptial agreement provides a second pathway and opportunity to put finances and other obligations under legal scrutiny and implication. It may also happen that a couple who has been married for five, ten, or more years decides to make a postnuptial agreement when they see differences arising in their marriage. This is to ensure that the end of a marriage does not become ugly and conflicting for both parties.

Merits and demerits of prenuptial agreements

Mentioned below are the merits of a prenuptial agreement:

While many times marrying couples hesitate to enter into a prenuptial agreement, in reality, it is a good way to bring clarity into marriage and can reduce conflicts.
The divorce rate in every nation is an indication of the need to have assets, liabilities, obligations, and financials predetermined in a marriage.
People view prenuptial agreements as apprehension and preparation for divorce but that is not true. Conversely, prenuptial agreements reduce the risk of divorce as parties have a clear idea of sensitive issues that they otherwise would hesitate to discuss and which leads to conflicts in the future.
There can be a variety of assets and properties involved when two people decide to marry. At times, one or both spouses might be pursuing their careers and education. All of these when pre decided bring stability and transparency in marriage.
It prevents professional and personal reputations from tarnishing.
It maintains confidentiality and protects the personal data of parties from being public.
In case when one or both spouses are expecting to receive a substantial inheritance, it comes with several discrepancies. In this situation, it is best addressed and settled through a prenuptial agreement between spouses.
Differences in financial status and position of spouses can be managed through a prenuptial agreement.
It comes with a good degree of enforceability. A written, signed, and executed document clearly stating the terms of finances and other obligations in a marriage can more easily be legally enforceable than mere promises or words of mouth that lack legal enforceability.
It also takes care of children born out of the first wedlock when a person is marrying for a consecutive time.
It is cost-effective since it saves parties from hiring high-paying divorce lawyers and it also reduces the cost of conflict resolution.
It helps the spouses in planning out their estates.
A clear distinction is established between separate properties and their joint property.
In the case of divorce, prenuptial agreements facilitate the procedure with ease.
It protects one party from bearing the debts and liabilities of the other party by distinctly defining classifications.
It protects spouses and their heirs in cases of death or any other unfortunate event.
It prevents parties’ businesses from facing splitting and division in the event of divorce.

The merits of a prenuptial agreement are plenty. There are no true demerits of a prenuptial agreement except the moral notion about it. People find it awkward to ask their spouse for a prenuptial agreement. It is seen in a way that the parties entering into a prenuptial agreement are already apprehending that their marriage would not last. With that notion, it is difficult for couples to decide whether to make a prenuptial agreement. This is also why many states have dynamic laws governing prenuptial agreements. This legislative irregularity also leads to ambiguity.

Societal status of prenuptial agreements

With changing times, prenuptial agreements are gaining more acceptance and recognition. Years ago, many countries did not allow and give legal validity to prenuptial agreements because they considered them to be proponents of divorce. In American legal history, mutual divorces were not recognized by law. Divorces were allowed only on grounds of genuine intentional faults. With this position on divorce, anything that seemed to be promoting it was not given validity by American courts. This idea of ‘fault divorce’ was omitted from the American legal system in the 1970s, thus, paving the way for prenuptial agreements. While it seems like the legal barriers to prenuptial agreements have been crossed, the social barriers remain. Society links prenuptial agreements with divorce and attaches a stigma to them. This causes reluctance in people from entering into a prenuptial agreement.

In reality, prenuptial agreements contribute towards a healthy, transparent, and respectful marriage. Spouses often reach the stage of divorce due to minor and major misunderstandings that occur due to a lack of clarity on sensitive issues. These confusions continue as they avoid talking about these important, sensitive issues. This issue is resolved with the help of a prenuptial agreement. Prenuptial agreements include minor details about finances, conduct and expected behavior from the marriage, division of property and assets, etc. Therefore, a change in mindset and acceptance towards these marital agreements will help enhance their societal status. Visible changes can be seen in the US with states recognizing and enforcing prenuptial agreements, but we still have a long way to go.

Conclusion

Prenuptial agreements are as essential to a marriage as any other contract is to a business or arrangement. Despite the social stigmas attached to it, prenuptial agreements have proved to be beneficial in saving not only marriages but also multi-billion businesses. When two people marry, there is more involved than just a union. It affects their past and future relationships, dependants, businesses, properties, obligations, etc. All of these must be protected by a clear state of mind. Imagine if a person, say Mr. MZ, who has a high net worth, did not have a prenuptial agreement. When he faces divorce proceedings, the toll is felt even in his business. It will not only ruin the profits of his business but also affect the world economy at large. All of these could be easily avoided by executing a prenuptial agreement. However, this does not in any way lessen the importance a prenuptial agreement holds for ordinary, middle-class working couples. It helps them bring transparency and clarity to determining the terms of their choice. Therefore, having a prenuptial agreement seems to be a win-win situation for all its stakeholders.

While different people might possess different opinions about prenuptial agreements, it has its own set of advantages and benefits in guiding a marriage as well as future separation or divorces should the situation so arise. A prenuptial agreement saves both parties from having to go through years of courtroom proceedings, souring battles, or arguing over alimony and other divisions of finances. It saves a lot of time, energy, and resources. This also reduces the chances of fraud or misappropriation during divorce proceedings. A prenuptial agreement also protects the parties from bearing each other’s liabilities and debts. Prenuptial agreements create financial security for the parties as well as their children, both those born out of previous wedlock as well as the present. Prenuptial agreements protect businesses and properties from getting divided. Prenuptial agreements also ensure spousal support, alimony, and maintenance in the event of divorce, which thus guarantees financial security to each spouse. These advantages among many others are the reason for prenuptial agreements gaining fast recognition and enforcement across nations. With changing societal dynamics and in a fast-moving world where everyone wishes to save time, energy, and resources, prenuptial agreements can be seen as a part of everyday life for married couples.

Frequently Asked Questions (FAQs)

Are prenuptial agreements legally binding in the US?

Prenuptial agreements gained recognition in 1848 with the enactment of the Married Women’s Property Act in New York state. This legislation granted women the right to their husband’s estates. Today, prenuptial agreements are recognized after entering validly in a notary.

Which states in the US recognize and enforce prenuptial agreements?

As of 2022, all 50 states recognize and enforce prenuptial agreements. Procedural law varies, with some states following common law while others have enacted specific regulations to regulate prenuptial agreements. However, a validly made prenuptial agreement in any state is enforceable in all other states.

How much does executing a prenuptial agreement cost in the US?

A typical prenuptial agreement ranges between $1000 to $10000 in the US. It depends on several factors like the complexity of the assets involved, terms of the agreement, valuation of properties, attorneys fees, etc. It may vary from state to state keeping in mind various factors like attorney’s fees, notary expenses, etc.

What does a prenuptial agreement not include?

While prenuptial agreements provide clarity and transparency on a plethora of terms, they cannot be used to predetermine child custody or child support. These are determined by the courts in the event of divorce. It is decided after considering all the facts and circumstances and in the best interest of the child.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

https://t.me/lawyerscommunity