How Does a Prenuptial Agreement Work?

With statistics showing that over 33% of all marriages end in divorce, it's no surprise that many couples consider using a prenuptial agreement before walking down the aisle. Although prenuptial agreements do not guarantee a couple's happiness, they do protect both the bride and groom's financial assets if they do indeed divorce. Why is this important? Well, if you don't have a prenuptial agreement, then the courts will decide how to divide both partners' assets. A prenuptial agreement, on the other hand, guarantees what each person would receive. But how do they work? Like the act of marriage itself, establishing a prenuptial agreement is a complex legal agreement that requires careful planning and research.

Prenups: The Who and Why

Because a prenuptial agreement must be signed prior to the marriage, it is recommended to discuss the subject early on in the engagement period. If either party is particularly wealthy, then the request for a prenuptial agreement will probably not be much of a surprise, as they are most commonly used by individuals who have acquired a large amount of assets that they do not want to lose. However, financial advisors recommend a prenuptial agreement be considered by anyone who owns a home or business, has children or grandchildren from a previous marriage, or will be supporting the other partner financially. A prenuptial agreement defines how those assets will be distributed in the event of a divorce, separation, or death. If neither of these events occurs and the couple lives happily ever after, then the prenuptial agreement does not affect the marriage. Essentially, it's just like an insurance policy - you use it only if you need it.

Once both parties have discussed the prenuptial agreement, they must meet with an attorney to draft and sign the contract. In fact, it's recommended that both the bride and groom have their own attorney in order to ensure that the terms of the prenup are fair. During the drafting of the agreement, both parties are required to disclose any and all of their financial assets. If, later down the road, it is discovered that either spouse hid something, then the prenuptial agreement can be declared invalid. After all of this information is disclosed, both partners must sign the contract in the presence of an attorney. At this point, the prenuptial agreement is considered legally valid and will be upheld in court. In the United States, all 50 states recognize the terms of these agreements and, only under the rarest of circumstances, will overrule the terms.