About the Prenuptial Agreement
A prenuptial agreement is an agreement entered into before the marriage or civil union of two individuals. Generally, a prenuptial agreement sets forth the financial responsibilities of the two individuals upon a divorce or the death of one of the partners.
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Identification
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A prenuptial agreement specifies the financial ramifications of a divorce and will indicate what each party is responsible for upon a divorce. A prenuptial agreement can be very specific and limited to certain issues, such as alimony, or the agreement can encompass a wide array of issues.
Features
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Because a prenuptial agreement is negotiated by both parties, every agreement differs. Nevertheless, there are certain issues that frequently appear in prenuptial agreements. A prenuptial almost always deals with how property is to be distributed upon a divorce. A prenuptial agreement usually specifies how the couple's residence will be disposed of upon divorce. Moreover, the agreement can contain provisions pertaining to debts incurred by the couple during their marriage. A prenuptial agreement also may include sections that address alimony. However, some jurisdictions restrict the issue of alimony; it is imperative to check with the laws in the state where the agreement was executed. Finally, a prenuptial agreement can contain provisions indicating that the agreement will become null and void if the couple remains married for a specific number of years. This is commonly referred to as a "sunset provision."
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Exclusions
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A prenuptial agreement cannot contain certain subjects. Every jurisdiction is different, but generally child custody, support and visitation issues may not be included in a prenuptial agreement. The prenuptial also cannot be patently unfair; it cannot be made so that it's likely to be deemed invalid.
Considerations
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It can be a difficult subject to address, but there are many valid reasons to consider a prenuptial agreement. One partner in the relationship may have sizable assets to protect. One party may be a business owner who needs to ensure that his or her partner doesn't eventually gain partial ownership of the business. An individual may enter a marriage with significant debt that the other partner does not want to incur in a divorce. In instances in which one or both parties have had prior marriages with children, a prenup may help ensure that the children receive certain property upon each individual's death. Also, a prenuptial agreement can be used to avoid arguments regarding the disposition of property and the rights and obligations of each person. A prenup also can help achieve estate plan goals.
Warning
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In cases where there is no prenuptial agreement, the financial consequences of a divorce are addressed by state law. Some states have "community property" statutes, in which all assets acquired in the marriage are owned equally by both spouses, without reference to how much income a spouse did or did not contribute. Other states have "marital property" or "equitable distribution" statutes. In these, property acquired during a marriage is not automatically split equally; rather, factors such as the financial status of each spouse or his or her ability to earn a living come into play. State law will determine how the property is distributed. It is important for a couple to review state law before deciding if they want a prenuptial agreement.
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