A prenuptial agreement helps protect your assets in a divorce.
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Prenuptial agreements are popular with wealthy celebrities, but plenty of ordinary couples are taking steps to protect their assets in case their marriage ends in divorce. Some 20% of American couples have a prenup, and 50% of Americans said they support the use of prenups, according to a 2023 Harris Poll, up from 42% in 2022.
Julia Rodgers, a family law attorney who co-founded Hello Prenup, a website that helps users create a do-it-yourself prenuptial agreement, says a prenup is particularly important for couples who have children from a previous marriage. Baby boomers will leave an estimated $80 trillion in assets to their millennial and Generation Z children through 2045, according to Cerulli Associates, a research and consulting firm. “If you want to keep your wealth in the family and not lose it in a divorce, you should protect it with a prenup,” Rodgers says.
If your marriage ends and you don’t have a prenup, a divorce court determines how your assets will be divided, and divorce laws vary by state. “By having a prenup, you decide the rules for yourself,” Rodgers says. “Without a prenup, you’re letting the state decide for you.”
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In a prenuptial agreement, each person must disclose all of their financial information, including assets and debts. Assets that should be listed in a prenup include bank accounts, investments, real estate, small-business holdings, jewelry and other valuables.
Assets designated as separate property in the prenup can’t be divided with your spouse in the event of a divorce. Assets that aren’t designated as separate will be considered marital, or community, property and split 50- 50 in a divorce.
Although your Social Security payments are not considered community property, you can use the prenup to protect retirement plans and accounts such as pensions, 401(k)s and IRAs, says Kristen Marinaccio, a family law attorney with Brach Eichler LLC in Roseland, N.J.
Amanda Singer and Brad Farrow, who were married in 2020, decided to keep their retirement accounts as separate property in their prenup but designated their investment accounts as community property. Singer, a family law attorney in San Diego, says their prenup also stipulates that the percentage of her business that’s designated as community property will increase every five years that the couple is married.
In addition to determining how to divide assets, a prenup can help you split up your debts. If you and your future spouse don’t want to be liable for each other’s student loans, credit card balances and other debts in the event of a divorce, your prenup can clarify that you want to keep your debts separate.
If you earn more than your spouse or vice versa, you can specify in your prenup how much support the lower-earning spouse will receive if you divorce. You can also spell out whether the support will be provided in a lump sum or monthly payments, along with how long you’ll need to be married before a specific amount of support is provided, Marinaccio says.
Singer and Farrow’s spousal support agreement is based on a percentage of the difference in income between the higher- and lower-earning spouse. For example, if the difference between their salaries is $30,000, the lower-earning spouse could get 10% of the difference, or $3,000 a month, in spousal support. They also limited how many years spousal support will be provided, based on a percentage of the number of years they’re married. If they divorce after 20 years, for example, the lower-earning spouse can only collect spousal support for 10 years.
Child support or child custody can’t be included in a prenup because that must be settled by a family court judge. You also can’t include day-to-day non-financial matters, such as how to divide chores.
If your marriage ends and you’re unhappy with the terms of the prenup, you can contest it in a family court. The court can void the prenup if it finds that the agreement gives one of the divorcing spouses an unfair advantage, Marinaccio says. However, challenging a prenup is difficult. In most cases, you must demonstrate that it would leave you destitute or that you signed it under duress.
Once you’ve drawn up a prenup, both you and your partner should sign it, and you should also have it notarized. In some states, such as Florida, an attorney must review the prenup in order for it to be valid.
If you live in one of the nine community-property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), a prenup can override community-property laws that require you to split your assets and debts 50-50 in a divorce. A prenup will also override laws in states that require equitable distribution of assets based on both partners’ incomes.
If you’re planning to move after your marriage, you can include a “choice of law” clause that lets you choose which state will enforce your prenup. For example, if you sign your prenup in New York and stipulate that you want your prenup enforced under that state’s prenup law, the prenup will be enforced according to New York law even if you divorce after moving to New Jersey.
In addition, the Uniform Premarital Agreement Act can help you make your prenup binding in multiple states. The UPAA has been enacted in 28 states and Washington, D.C. (find the full list of states here). The act creates a unified standard for prenups that can be enforced in participating states. You should consult a lawyer to see how each state will interpret your prenup, especially if you live in a state that hasn’t enacted UPAA.
Hiring a family law attorney to draw up a prenuptial agreement can cost from $1,000 to $10,000, depending on the complexity of the contract.
Hello Prenup charges $599 per couple, plus $50 for notarization, for a program that guides you and your intended spouse through detailed questionnaires about your assets, debts, inheritances and more. You can ask an attorney questions for an extra $99 per partner. If you want an attorney to represent you, conduct a thorough review and digitally sign your prenup, it’s an additional $699 each.
Rocket Lawyer provides a template you can use to create a prenup. The cost is $19.99 a month after a seven-day free trial. Another DIY option is Law Depot, which offers a downloadable prenuptial agreement. You can sign up for a one-week free trial; after that the cost is $33 a month. If you use one of these services, consider paying a lawyer to review your prenup to make sure it’s enforceable.
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Staff WriterElla Vincent is a personal finance writer who has written about credit, retirement, and employment issues. She has previously written for Motley Fool and Yahoo Finance. She enjoys going to concerts in her native Chicago and watching basketball.
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