Understanding a Pre-Nuptial Agreement

Although nobody likes to enter a marriage thinking about potential problems, nevertheless, they happen. If you're getting married you may want to explore prenuptial agreements. Chances are you won't need one, but finding out more about them will give you insight into your own relationship. And, depending on your individual circumstances, maybe you should consider one. Moral issues aside, these agreements can be useful financial planning tools.

The concept of prenuptial agreements is relatively new. This arrangement (often shortened to prenup) is a binding contract between two individuals who are deciding prior to their marriage what their legal relationship will be in the event of divorce. The emphasis is on the word "binding." That basically means the agreement will not be set aside unless a challenging party can show fraud or duress. Hence, this is not something you enter into lightly.

Eliminating uncertainty, a prenup allows the couple to decide how their marital and separate property will be defined before they tie the knot. This arrangement can also help the couple avoid an expensive legal battle if they do divorce some day.

How can you make sure a prenup is legally solid? Begin by hiring two lawyers, one for each of you. This is not as obvious as it sounds, as many couples share a lawyer. But the spouse without a lawyer can later wiggle out of a prenup, by suggesting he/she didn't know his rights or was somehow coerced. Pick independent lawyers. One judge threw out a prenup in part because the husband, a lawyer himself, selected and paid for his future wife's legal counsel. Then an appeals court overturned the decision. The purpose of a prenup is to keep things straightforward and simple, and clearly in this case it didn't work.