What is a Prenup?
“What is a prenup?” We have all heard of prenups, but you may not know what a prenuptial agreement actually does or what you can use one for.
Prenuptial agreements have existed in various forms for centuries and have become increasingly popular in recent years. Marriage has legal consequences as well as romantic consequences — including different financial implications. That’s where prenuptial agreements come in — they can be an innovative and practical way to create certainty and safeguard your financial future. A prenup is a legal document that outlines how to divide assets in the event of a divorce. It can also address other financial issues — such as whether there will be alimony. Prenups are creatures of state law, and so the requirements vary from state to state. Today, we’ll focus on Connecticut prenups.
In this article, we’ll explore the ins and outs of prenuptial agreements, including what they are, why they’re important, and how to create one. Whether you’re getting married for the first time or this is your second marriage, it’s crucial to understand prenuptial agreements. It will help decide whether a prenup is a good option for you. So, let’s dive into the world of prenups and start making a plan for the future.
What is a Prenup?
A prenup is also called a “prenuptial agreement” or a” premarital agreement.” Signing a prenup allows future spouses to decide and determine what will happen to their finances at the end of their marriage — whether that marriage ends by death or divorce. Today, we will focus on how prenups work in the divorce context. A premarital agreement allows future spouses to delineate both (1) how they will divide property and (2) whether there will be any alimony and, if so, how much and for how long. Essentially, Connecticut prenups essentially allow future spouses to “opt out” of Connecticut’s default approach to alimony and property division and instead “opt in” to a design of their own making.
In order to have a valid prenup, both parties must disclose their assets and liabilities. This includes any property, investments, debts, and income. Prenups are written contracts. The agreement should be fair and reasonable for both parties, and each party should have their own attorney review the document.
Once both parties understand and agree upon the terms of a prenuptial agreement, they can sign it. It’s best if this happens in advance of the wedding day itself.
Prenuptial agreements are not just for the wealthy, although they are often associated with high-net-worth individuals. Anyone can create a prenuptial agreement, regardless of income or assets. Prenuptial agreements can particularly benefit those entering a second marriage with children from their previous marriage. In addition, a prenuptial agreement can help protect assets for children or other beneficiaries.
Read: Prenup vs. Postnup
What is the Default for Alimony and Property Division in Connecticut?
Many engaged and married people — probably most engaged and married people — do not know what they agreed to by getting married. In other words, they are unfamiliar with how Connecticut’s default approach to alimony and property division works.
That means many, many people marry without knowing what they have automatically agreed to should they divorce. So, the first reason a prenup is such a good idea is that you’ll learn and understand how things work. The second is that a prenup allows you and your future spouse to choose something different instead.
Read: Do Prenups Work?
Prenups and Alimony
Connecticut courts have broad authority to award alimony for a period of time or even for a lifetime. There is no alimony formula. Instead, the court weighs several factors in making an alimony determination. As a result, many people enter into premarital agreements because they prefer to predetermine whether there will be alimony, and, if so, how alimony will work.
Prenups and Property Division
In a divorce, the court typically divides assets and debts between the two spouses. This property includes everything from real estate to art to bank accounts. Debts can include everything from mortgages to student loans to credit cards.
Connecticut doesn’t have a cut-and-dry rule for how to divide assets and debts in a divorce. Instead, the court weights a series of factors to help it decide what’s equitable. Notably, Connecticut is an “all property” state, which means that divorce courts have broad authority to award marital property to either spouse, regardless of:
- How it is titled
- When they acquired it, or
- Whether they received it as a gift or inheritance.
In theory, this means that everything owned by both spouses (and all debts owned by both spouses) is “fair game” or subject to division in a Connecticut divorce.
Separate Property and Prenuptial Agreements
Some states have a divorce concept of “separate property,” where assets owned prior to marriage stay with the original spouse. Some of these states are also community property states, where almost all property that the spouses acquire during marriage is divided equally between them in a divorce. As we described above, Connecticut is an “all property” state. It is not a community property state.
Connecticut divorce courts can divide property that belonged to one spouse pre-marriage between both spouses. In other words, unlike in some states, Connecticut doesn’t default to considering pre-marital property as separate property. Plus, Connecticut divorce courts divide assets and debts fairly which doesn’t necessarily mean equally.
Many people who enter into premarital agreements prefer to be the ones to decide how they will divide assets should they divorce down the road. They want to make their own decisions in advance, not leave it to chance, and plan to let a judge decide. For example, in their prenup they might decide that an asset a spouse acquired before marriage remains that spouse’s property. However, they might also choose to evenly divide the property they buy together during the marriage.
Why Get a Prenuptial Agreement?
There are several reasons why a couple may choose to create a prenuptial agreement. One of the most common reasons is to protect assets acquired before the marriage. This can include property, investments, and business interests. A prenuptial agreement can also address any future assets the spouses may be acquired during the marriage.
Another reason to get a prenuptial agreement is to define how you’ll handle debts during a divorce. This can be particularly important if one party has significant debts or enters the marriage with a poor credit history.
Third, a prenuptial agreement can also address alimony in the event of a divorce. This can be particularly useful for those entering a second marriage who want to ensure their assets are protected for their children or other beneficiaries.
Finally, a prenuptial agreement can provide peace of mind for both parties. By outlining the terms of a potential divorce in advance, couples can minimize the uncertainty and stress that often accompanies divorce proceedings.
When Should You Consider a Prenup?
If you are considering marriage, it is never too early to consider a prenuptial agreement. In fact, it is often easier to create a prenup before the wedding planning process begins. This allows both parties to clearly understand their respective financial positions and make decisions about their future before they’re in the busiest part of wedding planning.
However, it is vital to approach the topic of a prenuptial agreement with sensitivity. It can be a difficult conversation to have, and it is important to raise the subject calmly and respectfully. Being open and honest with your fiancé about your reasons for wanting a prenuptial agreement is also important. By constructively approaching the topic, you can ensure that you’re both comfortable with the agreement and that their interests are protected.
Common Misconceptions About Prenuptial Agreements
There are several common misconceptions about prenuptial agreements that can make it challenging to approach the topic. One of the most common misconceptions is that prenuptial agreements are only for the wealthy. In reality, prenups are an excellent tool for all couples who want to decide what they think is fair.
Another common misconception is that a prenuptial agreement is a sign that a couple does not trust each other. In reality, a prenuptial agreement can signify love and respect. By creating a prenuptial agreement, both parties demonstrate that they care about each other’s financial well-being and want to secure their future. Plus, they set up meaningful discussions about your dreams and future goals, strengthening your bond.
Legal Considerations for Prenup Agreements
Prenuptial agreements are legal documents, and it is crucial to ensure that they are legally valid and that a court will enforce them. This requires both parties to disclose all assets and liabilities and for the agreement to be fair and reasonable for both.
It is also essential to ensure that both parties have their own attorney to review the document. This can help ensure that the terms of the agreement are legally valid and that both parties understand their rights and obligations under the agreement.
Do You Need a Lawyer for a Prenuptial Agreement?
We highly recommend that both parties have their own attorney to review the prenuptial agreement. This can help ensure that the terms of the agreement are legally valid and that both parties understand their rights and obligations under the agreement.
While it is possible to create a prenuptial agreement without an attorney, we don’t recommend it. First, this is because prenuptial agreements can be complex legal documents. Second, involving an attorney can help ensure your prenup is legally valid. In other words, a court will enforce your prenup during a divorce.
The cost of a prenup is basically related to the legal fees for the two spouses’ attorneys. In some cases, your financial planner may also be involved and there may be some additional costs associated. At Freed Marrcoft our average prenup fees range from about $3,500 to $6,000. Prenup legal fees are most impacted by the complexity of the couple’s assets, the structure they seek, and how quickly they agree upon the prenup’s terms.
Prenups & Divorce
In the event of a divorce, a prenuptial agreement can be an important tool for dividing property. It can also minimize the uncertainty and stress that often accompanies divorce proceedings. By outlining the terms of a potential divorce in advance, couples can protect their assets and secure their future.
Child Custody & Prenups
It is important to note that a prenuptial agreement cannot address child custody or child support issues. The divorce court determines these issues based on the child’s best interests, and you can’t pre-decide them in a prenup.
The critical takeaway is that a prenup allows you and your fiance to decide how you want things to work.
Or, to start making a plan for your prenup, reach out. We designed our first step at Freed Marcroft, the Goals & Planning Conference, to unveil your true goals. Then, we analyze those goals and present you with recommendations and options to move forward.