Contents
What Is a Prenuptial Agreement?
Why Create a Prenup?
How to Discuss a Prenup with Your Partner
What a Prenup Cannot Do
How to Get Started Creating a Prenup
Why and How to Work with a Lawyer
How to Make Sure Your Prenup Is Valid
Enforcement and Nonenforcement of the Prenup
Postnuptial Agreements
|
 |
 |
 |
|
How to Get Started Creating a Prenup
The first step in the drafting process is for both you and your future spouse to disclose fully and honestly anything that might affect the other person. In addition, as you write the first draft, you should identify what issues you want your prenup to address.
Information to Include
Start drafting your prenuptial agreement by compiling lists of things, such as assets, debts, and future goals, that have the potential to affect your spouse. These disclosures should be written and should include the following information.
Assets
Start by listing all your assets and the current value of each. If a title to an asset is not solely in your name, or if you own a partial interest in an asset, describe how title to the asset is held and the percentage of your share. Make sure to include all of the following that apply:
- Real estate
- Cash
- Bank accounts
- Stocks
- Stock options
- Bonds
- Mutual funds
- Life insurance
- Annuities
- 401(k) plans
- Pension plans
- IRAs
- Deferred compensation plans
- Business ownership
- Debts owed to you
- Alimony owed to you
- Divorce or other court settlement or judgment owed to you
- Vehicles
- Antiques
- Jewelry
- Art
- Collectibles
- Equipment
- Tools
- Animals
- Furniture
- Any other belongings of value
Additionally, if you are the beneficiary of a trust, describe the nature and extent of your interest and the name of the trustee. Also, list any advanced degrees, training, or certifications that you may have.
Debts
To account for your debts, include all of the following:
- Credit card debts
- Bank loans
- Lines of credit
- Private loans
- Student loans
- Business loans
- Spousal or child support
- Divorce or other court settlement or judgment
- Outstanding taxes
- Unpaid fines
- Any other debts
For each debt on your list, include the following information:
- The value of each debt
- The creditor to whom it is owed
- The date it comes due
In addition, for any secured loans, such as mortgages and auto loans, list the collateral by which the debt is secured.
Income
As you write your prenup, both you and your partner will have to list all sources of income and the annual amount from each (before taxes), including the following:
- Salary or wages
- Bonuses
- Tips
- Interest
- Dividends and investment income
- Business income from a sole proprietorship
- Income from rental property
- Income from a partnership or S corporation
- Capital gains and losses
- Social Security and other public assistance benefits
- Pension benefits
- Annuity income
- Stipends
- Any other source of income
Expenses
In addition to income, you’ll also have to list all your expenses. List all annual and monthly expenses and the amounts of each, including the following:
- Rent or mortgage payments
- Property taxes
- Homeowner’s or renter’s insurance
- Utilities
- Maintenance
- Condo association or co-op fees
- Car payments
- Auto insurance and registration fees
- Auto repairs and maintenance
- Fuel, parking, and tolls
- Bus, rail, or other public transit expenses
- Other transportation expenses
- Food
- Clothing
- Medical
- Dental and other healthcare
- Gifts
- Donations
- Membership dues
- Subscriptions
- Entertainment
- Travel
- Tuition
- Any other regular expenses
Credit History
State whether you currently owe any debt that is more than 60 days overdue, have been denied a loan or credit card in the last two years, or have ever been sued for payment of a debt. If possible, list your current credit score from a credit reporting company.
Financial Practices, Goals, and Values
Describe your current practices, goals, and values with respect to saving money, using and repaying credit cards, investing, bill-paying, borrowing and lending, and any other topics you feel are important to your financial status.
Future Plans and Goals
Describe any plans you have for the next few years that might affect your financial life, such as the following:
- A career change
- Retirement
- A major purchase or investment
- Relocation
- Starting a business
- Going to school
- Receiving an inheritance
Basically, you should list any major event that you foresee or that you would like to pursue that would result in a substantial change in circumstances.
Other Important Matters
Other information you should note in a prenup includes any physical or mental conditions, addictions, and disabilities you may have, and those for which there is a history in your
family. Also, describe any previous marriages and children, as well as difficult relatives, criminal convictions, and so on—anything that could be considered a significant surprise if your spouse finds out about it sometime down the road.
Identify What You Want to Accomplish
Your next step in putting together a first draft of your prenup is to articulate why you want a prenup and what you want it to do. Putting together this information will highlight areas that you’ll need to consider in detail and will also provide a road map for the discussions that will follow.
In particular, discussing all of the following issues will make the drafting of your prenuptial agreement significantly easier:
- Term of agreement: Though most prenuptial agreements remain effective for the duration of the marriage, it‘s not uncommon for an agreement to terminate on a specified date. Some couples take this route to keep assets separate for a period of years while premarital debts are paid off, while others want certain protections in place in case the marriage fails during the first few years.
- Ownership of premarital property: Think about what you want to do in regard to the property that each of you already owns. Which of these assets do you want to become marital or community property? Which do you want to remain your separate property? If one or both of you own real estate or a business, these assets should warrant special attention, as should any retirement benefits.
- Ownership of assets traceable to premarital property: Having made decisions about ownership of premarital assets, consider whether you want the same rules to apply to the proceeds from the sale of those assets, the profits from a business, income from a rental property, and so on. Also consider whether the same rules will apply to assets purchased during the marriage. Again, give special attention to real estate, businesses, and benefits.
- Ownership of assets acquired during marriage: For this category—and for the related categories that follow—consider whether the type of asset in question should be owned in equal shares by both spouses, separately by each (as though you weren’t married), or whether it should depend on whose name is on the title, or whose money is used to purchase the asset. Since state laws differ widely on these points, it’s a good idea to have a lawyer explain the default rules in your state. Be careful not to set yourselves a complicated accounting trap here—keeping track of how much each of you contributed toward the TV may not be worth the trouble. You may want to have different rules for different kinds of assets, keeping pricier assets such as real estate and automobiles separate while jointly owning everyday items such as groceries and household goods. Or you may want to have joint ownership of assets that you both use and benefit from, while keeping other things separate. Or you might want everything (or most everything) to be owned jointly regardless of where the money comes from.
- Ownership of income during marriage: Income—whether from salary or wages, business income, rental property, or stock dividends—is a special category of assets that should warrant special attention in your discussions. Does it make a difference whether income is earned (such as salary, wages, and bonuses) or passive (such as investment income)? Does it make a difference if one of you is working while the other is going to school, caring for children, starting a business, sick, injured, or disabled? Does it make a difference how much each of you earns?
- Ownership of inheritances and gifts during marriage: This is another category you may want to treat differently, so it should warrant a separate discussion.
- Joint accounts: Does money deposited in joint accounts become marital property, even though it comes from one person’s separate property? Establishing clarity on this point from day one is often a good idea.
- Responsibility for premarital debts: Every U.S. state treats premarital debts as each person’s separate responsibility, so you can’t be held responsible for your spouse’s premarital debts. The rules differ from state to state, however, regarding the extent to which creditors can go after marital or community property. Talk this issue over with your lawyers.
- Responsibility for debts and expenses during marriage: You’ll likely incur different types of debt and expenses for different reasons during your marriage. Though most couples deal with these on a case-by-case basis, some wish to set down firm rules about either joint or separate responsibility for all (or certain types of) debts and expenses. For example, you might want to distinguish between business expenses and household expenses, between credit card debts and a home mortgage, or between debts and expenses that benefit both of you and those that benefit only one of you.
- Distribution of property in the event of divorce: Once you’ve designated certain assets as marital and others as separate, the question remains as to how each category of assets would be distributed in the event of divorce. For marital or community property (for which the norm is equal distribution of some sort), the specific formula used to determine equal distribution can make a big difference. For instance, is it more important that each of you receive a monetarily equal share of marital property, or is it more important that certain types of assets go to one or the other of you? Must major assets be sold to achieve monetary equality?
- Distribution of property in the event of death: Deciding how assets and property will be distributed upon the death of either spouse can provide peace of mind. Should an untimely death occur, much pain and heartache can be avoided if these terms have already been laid out. State laws often distribute property to the living spouse regardless of the dead spouse’s wishes. A prenuptial agreement can ensure that assets and property are distributed according to the deceased’s, or couple’s, wishes.
| Acknowledgments & Disclaimer |
