prenuptial-agreements-and-communication — behavioral and family finance

What Prenuptial Agreements Actually Are

A prenuptial agreement (prenup) is a legally binding contract between two people planning to marry that establishes how assets, debts, and financial matters will be handled during the marriage and in the event of divorce or death. The agreement overrides default state law provisions that would otherwise govern property division.

Approximately 5-10% of marrying couples sign prenuptial agreements in the United States, though this percentage rises significantly for second marriages (20%+) and high-net-worth individuals (American Academy of Matrimonial Lawyers, 2023). The practical purpose is not planning for divorce but creating clarity about financial expectations and protecting both parties from uncertainty.

The practical antidote to prenup anxiety is not avoidance. It's early conversation, full transparency, and adequate time - at least 30 days before the wedding, though 3-6 months is preferable.

Why State Law Variations Matter

Prenuptial agreements operate within state family law frameworks, and these vary significantly:

Community Property States (9 states)

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin

Default rule: All income earned and assets acquired during marriage are owned 50/50 by both spouses, regardless of who earned them.

Prenup function: Can designate certain income or assets as separate property; can waive community property rights to specific accounts or future earnings.

Example: A physician earning $400,000 annually in California would, without a prenup, share that income 50/50 with their spouse. A prenup could specify that professional earnings remain separate property.

Equitable Distribution States (41 states + DC)

All other states

Default rule: Courts divide marital property "equitably" (fairly, not necessarily equally) based on factors including marriage length, earning capacity, contributions, and needs.

Prenup function: Can establish specific division formulas, identify separate property, and set support terms that override judicial discretion.

Example: In New York, a prenup could specify a 60/40 division favoring the higher earner rather than leaving division to a judge's interpretation of "equitable."

Critical State-Specific Issues

Spousal support (alimony): Some states (California, North Dakota) allow prenups to waive spousal support entirely. Others (New Jersey) will not enforce support waivers that leave a spouse eligible for public assistance. Consult an attorney in your state.

Statute of frauds: All prenups must be in writing. Oral agreements about property division are unenforceable everywhere.

Sunset clauses: Some couples include provisions that void the prenup after a certain number of years of marriage (10-20 years is common). This addresses the changing nature of long marriages.

Requirements for Enforceability

Courts will enforce a prenuptial agreement only if it meets these requirements. Failure on any point can void the entire agreement.

1. Full Financial Disclosure

Both parties must provide complete written disclosure of all assets, debts, income, and financial obligations before signing. This typically includes:

Bank and investment account statements
Real estate valuations
Business ownership interests and valuations
Retirement account statements
Outstanding debts and liabilities
Expected inheritances (if material)

The point is: Non-disclosure is the #1 reason prenups are invalidated. If you hide a $200,000 brokerage account and your spouse later discovers it, the entire agreement may be void.

Best practice: Attach a detailed financial schedule as an exhibit to the prenup. Both parties sign the schedule confirming receipt and review.

2. Voluntary Signing Without Duress

Both parties must sign voluntarily, without coercion, threats, or pressure. Courts examine the circumstances surrounding signing.

Red flags that suggest duress:

Prenup presented for the first time on the wedding eve
One party threatened to cancel the wedding unless the other signed
Signing occurred while one party was intoxicated or emotionally distressed
Significant power imbalance with no opportunity for independent review

The 30+ day rule: Many attorneys recommend presenting the prenup at least 30 days before the wedding to demonstrate adequate time for consideration. Some states effectively require this through case law. Earlier is better - 3-6 months provides comfortable margin.

3. Independent Legal Counsel

While not legally required in all states, both parties should have separate, independent attorneys review the agreement. This serves two purposes:

Each party receives advice about their rights and what they're waiving
Creates evidence that both parties understood the agreement

Cost expectation: Attorney review typically costs $1,000-$3,000 per party. Both parties having counsel significantly increases enforceability.

If one party declines counsel: Document the offer and refusal in writing. The agreement should include an acknowledgment that independent counsel was offered and declined.

4. Not Unconscionable

An agreement cannot be so one-sided that it "shocks the conscience" of the court. What constitutes unconscionable varies by state and circumstances.

Generally enforceable: "Spouse A keeps all pre-marital assets as separate property" or "Business interests remain with the founding spouse"

Potentially unconscionable: "Spouse B receives nothing regardless of marriage length, contributions, or circumstances"

Factors courts consider: Relative bargaining power, sophistication of parties, whether terms were explained, length of marriage, changed circumstances

The Communication Process

How you discuss a prenup matters as much as what it contains. Follow this sequence:

Phase 1: Initial Conversation (6+ Months Before Wedding)

Frame it correctly: A prenup is not "planning for divorce." It's "creating clarity about our financial partnership."

Opening language that works:

"I want us to be completely transparent about finances before we get married. Can we talk about what a prenup might look like for us?"
"My family/advisor has suggested we discuss a prenuptial agreement. I'd like to approach this together rather than having it feel like something done to you."
"I've been thinking about how we want to handle finances in our marriage. A prenup could help us work through those questions now."

What to avoid:

Surprising your partner with a completed agreement to sign
Framing it as a demand or ultimatum
Discussing it for the first time less than 60 days before the wedding

Phase 2: Joint Discussion of Goals (5-4 Months Before)

Before engaging attorneys, discuss what you both want the agreement to accomplish:

Questions to answer together:

What pre-marital assets does each person bring? How should those be treated?
How will we handle income during the marriage?
What happens to future inheritances?
Are there business interests that need protection?
How would we want to divide assets if we separated after 5 years? 20 years?
What are our expectations about spousal support?

Document your discussion: Write down the points you agree on. This becomes guidance for your attorneys.

Phase 3: Separate Legal Counsel (4-2 Months Before)

Each party should:

Retain an independent family law attorney
Provide the attorney with full financial disclosure
Review proposed terms and understand rights being waived
Receive written advice from their attorney

Timeline note: Attorney calendars fill quickly. Engage counsel early to avoid last-minute pressure.

Phase 4: Negotiation and Finalization (2+ Months Before)

Attorneys draft, exchange, and revise the agreement. Common negotiation points include:

Sunset clauses (agreement expires after X years of marriage)
Modification triggers (terms change if children are born, if income changes significantly)
Specific asset protection vs. general formulas
Spousal support terms and duration

Phase 5: Signing (30+ Days Before Wedding)

Both parties sign the final agreement with their attorneys present. Ensure:

Final financial schedules are attached
Both parties acknowledge reading and understanding
Signatures are notarized (required in some states, recommended everywhere)

What Prenups Cannot Cover

Certain matters are legally off-limits:

Child custody and support: Courts determine these based on the child's best interests at the time of divorce. You cannot pre-determine custody arrangements or waive child support.

Non-financial matters: Clauses about household chores, frequency of visits to in-laws, or personal behavior are unenforceable.

Illegal provisions: A clause requiring one spouse to commit illegal acts, or that violates public policy, voids itself and potentially the entire agreement.

Future unknown children: While you can address children generally, you cannot bind children who don't yet exist to specific arrangements.

Checklist: Prenuptial Agreement Process

Begin conversation 6+ months before wedding with collaborative framing, not adversarial demands
Compile complete financial disclosure for both parties including all assets, debts, income, and expected inheritances
Engage independent attorneys for both parties at least 4 months before wedding date
Finalize and sign agreement 30+ days before wedding with both parties having had adequate review time
Keep signed original in secure location (safe deposit box, attorney's office, or fireproof home safe)

Next Step

If you're considering a prenuptial agreement, your first action is scheduling a conversation with your partner using the framing language above. Choose a calm, private setting with no time pressure. The goal of this first conversation is not to negotiate terms but to agree that you'll explore a prenup together. If you both agree to proceed, the next step is each engaging independent family law counsel.

References

American Academy of Matrimonial Lawyers. (2023). Prenuptial Agreement Survey.

Uniform Law Commission. (2012). Uniform Premarital and Marital Agreements Act.

Prenuptial Agreements and Communication