This is Part 2 of a 3 part series of articles. Part 2 seeks to elucidate upon how to draft a prenuptial agreements in the US and what mistakes to avoid.

Elements that can be included in a prenuptial agreement:

1. Differentiating separate and marital propertyThe regulations governing what property is considered separate property and what property is considered marital property vary from state to state (some jurisdictions utilize 'community property' laws, which frequently call for 50/50 asset divides). The court will divide all marital assets in accordance with state law upon separation brought about by divorce or death. A person can utilize a prenuptial agreement to prevent a judge from deciding what happens to the property the person acquired during marriage.
    
2. Protections against the debts of the other spouseIf there is no prenuptial agreement, creditors may seize marital assets even if only one spouse owes money. Limit one's debt responsibility in a prenuptial contract to prevent this.
    
3. Arrangements for children of former relationships A prenuptial agreement might be used if one of the spouses has children from a prior relationship and wants to make sure they inherit any of his/her possessions.
    
4. Safeguards for preserving family property A person can state in their prenuptial agreement whether they wish to maintain an ancestral heirloom, a family business, a potential inheritance, or another item of property with their birth family.
    
5. Protection of estate plans Prenuptial agreements are just one step in making sure their estate is distributed according to their preferences. Keep in mind that they must also draft and save other legal papers, such as living trusts and wills.
    
6. Guidelines for property division in the event of divorce Divorce is governed by the laws of their state, so keep that in mind. By deciding jointly who will receive what in a prenuptial agreement, they may get around many of these regulations. While some states forbid it, others even let them choose whether or not they'll be eligible for alimony. When preparing the prenuptial agreement, one must make sure that they are aware of the legal requirements in their state or consult a family law professional.
    
7. Descriptions of spouses' responsibilities
   There are several justifications for a prenuptial contract. The following is a list of components that prenuptial agreements frequently contain:
   
   • Independent businesses.
   • Retirement advantages.
   • Income, claims, and deductions for submitting tax returns.
   • Control of home costs and bills.
   • Agreement relating to funding certain purchases or endeavors, such as a home or company.
   • Control over credit card payments and use.
   • Investment contributions.
   • Distribution of property to the survivor in the case of death, including life insurance.
   • Arranging for one of the two spouses to attend school.
   • Resolution of possible disputes through mediation or arbitration.

Aspects barred from being included in a prenuptial agreement
What can and cannot be included in prenuptial agreements is governed by state law.

The following is a list of things that the majority of states prohibit in prenuptial agreements:

1. Dispositions outlining any illegal activity
   One is not allowed to include any unlawful provisions in their prenuptial agreement, regardless of the state. In fact, doing so might result in the prenuptial agreement as a whole or portions of it being invalidated.
    
2. Making decisions about child support or custody
   Child support and custody clauses are not permitted in prenuptial agreements. The determination of child support is ultimately up to the court. The 'best interest of the child' criterion, which takes into account a number of variables, is how the court decides child support. A prenuptial agreement that dealt with child support, custody, or visitation would never be upheld by a court since these are matters of public policy. The court retains the authority to determine what is in the best interests of the kid and will not deprive a child of the right to support or the chance to interact with a suitable parent.
    
3. Losses of alimony rights
   The clause that judges most frequently invalidate is this one. Several states outright forbid this. Some states frown upon it and place restrictions on their capacity to renounce their alimony rights. Alimony waivers are legal in several states. Make careful research on the laws of their particular state.
    
4. Divorce-encouraging provisions
   Prenuptial agreements are carefully examined by judges to search for anything that could provide a financial incentive for divorce. A clause will be overturned by the court if it might be interpreted as encouraging divorce. Due to society's opposition to divorce, courts used to see any clause outlining how the property would be distributed as promoting it. For this reason, judges pay great attention.
    
5. Information about non-financial and personal matters
   Personal preferences, such as who does what duties, where to celebrate the holidays, whose surname to use, information about child raising, or how to interact with particular relatives, cannot be included in a prenuptial agreement. Prenuptial agreements are intended to handle concerns on a financial basis. Any clause addressing matters other than money will not be honored. When a contract contains information about intimate family concerns, judges become uneasy and frequently deem the deal frivolous, invalidating it. If the person and their spouse do decide to reach an agreement over these matters, do it in a separate document so that the court will not be able to get involved.

Grounds that make a prenuptial agreement invalid
When considering marriage, a couple may find prenups to be a very useful tool. In the sad case of a divorce, a prenuptial agreement can assist a person in establishing the financial interests of both spouses, including safeguarding their personal assets or protecting the family company. Prenuptial agreements must be properly executed in order for them to be legal in their state.

Here are the top 10 reasons a prenuptial agreement could not be enforceable.

1. Absence of a written agreement
In order to be legally binding, premarital agreements must be put in writing.
 
2. Improperly executed
For a premarital contract to be regarded as legal, both parties must sign it before the wedding.
 
3. One of the parties was pressurized
A prenuptial agreement could not be enforceable if one of the couples felt coerced into signing it by the other (or by that spouse's lawyer or family).
 
4. One of the parties didn't read it
A prenuptial agreement may not be enforceable if a person signs it without reading it or if the future spouse hands over a stack of paperwork, including the agreement, and urges an immediate signature.
 
5. No time for consideration
Before signing a prenuptial agreement, a potential spouse must have time to read it through and give it some thought. The contract is most likely invalid if the groom gives the bride the paper and a pen right before she says, "I do."

Drafting of a prenuptial agreement
It is crucial to understand that there are two categories of state laws that regulate divorce when creating an agreement: equitable distribution, which is followed by 41 states, and community property, which is followed in varying degrees by 9 states. It's possible that an agreement made in a state with community property laws won't apply to situations in states with equitable distribution laws and vice versa.

To prepare for the possibility that the parties would reside in a state other than the one in which they were married, it might be essential to employ counsel in both states. People sometimes own several homes in various states, or they frequently relocate due to their jobs, thus it is crucial to consider this while drafting.

Prenuptial agreements are frequently upheld and enforced by courts in almost all states with regard to financial matters related to divorce. In other cases, courts have declined to enforce particular clauses or sections of these agreements.

Top clauses in a prenuptial agreement
Financial disclosure:

• Financial transparency and complete disclosure about one's financial position are essential, before entering into a marriage. It's critical that a person leaves no space for doubt or misunderstanding when it comes to finances before we begin with clauses.
• While going into a marriage, the spouses should both be completely honest about their financial condition with each other. A prenuptial agreement must include both parties taking this crucial step. Both parties will have a comprehensive grasp of the financial landscape of their future married life if their assets and obligations are spelled out in the prenup. This way, they may make a sworn declaration regarding each of their financial facts.
• The financial disclosures will identify all bank accounts and their valuations, as well as any ownership stakes in enterprises, real estate, and investments. They will also contain the last two years' worth of individual tax filings.
• In order to fully assess the conditions of the agreement, this phase is a crucial chance for each partner to ask the other for all the financial information they require.

Determining 'separate property':

• Alternatively known as "community property," "separate property" denotes that it does not belong to both spouses. Real land, bank accounts, cash, stocks, life insurance policies, businesses, and patents are examples of property. When the spouses utilize the separate property to purchase marital property or if they combine separate property funds with marital income, things might become tricky.

How to deal with income obtained while married:

• All earnings made while a couple is married are assumed to be common property. With a prenuptial agreement, a person may specify what income will stay separate property and what will be divided by all parties. On the other hand, one could have owned properties that generate income before being married, and if one wants to make sure that the money generated by those assets continues to be kept apart. This crucial provision allows the spouses the ability to strengthen their marriage by continuing to live independently and as a unit while remaining financially independent in both scenarios.

How to manage obligations and debt:

• Past debt: One or the both partners frequently enter a marriage with debt. Specify in the agreement if both of the will pay the debt or whether it is the obligation of only a particular spouse to do so. Also, respond to the following queries:
  • If both the spouses agree to pay, will the non-payment debtors be considered a gift? Or will the payor be eligible for repayment at a later date?
  • If there is a divorce, who is accountable for carrying the debt?
  • In a project centered on identifying a challenge and cooperating to solve it, will paying off earlier debt as a married couple be powerful?
• Future debt: Future debt, like past debt, can have a significant impact on a person's financial situation. Credit cards, auto loans, and mortgages are typical household staples.
  • Who is in charge of paying off debt incurred during the marriage?
  • Can any of the spouses use the separate property as collateral for a loan?
  • Debt is a difficult subject to broach but one that must be?

When to pay spousal support in a divorce:

• In the case of a divorce, a court would often order that the spouse with the greater income pay the other spouse spousal support, particularly if the payee was financially reliant on the other throughout the marriage. The duration of spousal support might range from half the duration of the marriage to, perhaps, indefinitely. At the time of divorce, spousal support determination can be a costly process requiring forensic accountants and attorneys.
• Prenuptial agreements reduce future disputes by allowing parties to specify the amount and duration of spousal support payments in the event of divorce. For instance, partners might decide that regardless of how long they have been married, spousal assistance will only last for half the term of the union. As long as it is fair and does not go against public policy, partners can also agree to limit the amount of spousal support that will be paid. This restriction can be a set sum, a portion of the payor's income, or any other arrangement the spouses decide upon.

Spousal support in case of divorce:

• If the prenuptial agreement in California contains any clauses relating to spousal support, both spouses must be represented by lawyers for the agreement to be valid.
• It's vital to remember that any spousal support arrangement will be judged for reasonability at the time of the divorce. With such arrangements, it is, therefore, advisable to err on the side of caution and be as liberal as possible, or to avoid restricting the amount to be paid completely.

Plans for education and a career:

• Taking time off from work or just paying for education may have a big influence on the marriage. By having a discussion about this, the spouses may provide for the marriage financially while the other pursues educational ambitions. Both the spouses should agree on who will be responsible for repaying any student loans or tuition payments. Both spouses are encouraged to consider and document their goals as a result of this chat. It's a good idea to consider their personal and joint life over the following 1, 2, and 5 years, both before and after getting married.

Managing independent or joint business:

• If the persons intend for their spouse to get a stake in their business if they own it before getting married, or if the spouse actively participates in the company, or in case they intend to launch a business with their partner, any misunderstandings about expectations will be resolved by a prenuptial agreement. All possible questions will be answered on insertion of relevant clauses in the prenuptial agreement that specify how these circumstances will be handled.
• Define who will own and run the firm in the case of a divorce if the spouses launch a new company after getting married. Clearly state in this section whether or not the spouses will continue to get a share of the business's revenues. Setting these rules in detail will not only help establish expectations for their marriage from the beginning, but it will also provide them peace of mind while they run their business(es).

Guidelines for social media:

• The person's standing on social media might suffer if they are portrayed negatively. The spouses might wish to incorporate a condition that prohibits hurtful remarks or damaging pictures or recordings both before and after marriage to forestall this. Even though it may be difficult to imagine them today, circumstances and people may change, especially when there are strong emotions present. With this preventive provision, one manages to safeguard their reputation and keep the contentious discussions within.

Pet clause:

• Most states allow judges to make decisions about pet ownership based on what is in the best interests of the animals. This, however, gives room for someone else to make the choice for them. To prevent a court from making a decision for them, they can determine this up front in a prenuptial pet clause and specify who gets the pets. Talk through this delicate subject immediately to avoid any surprises, since pets may be a sore spot and cause of conflict in divorce proceedings.
   

Mediation clause in divorce cases:
If things don't work out, a person can specify in the prenuptial agreement that they'll choose mediation over a lawsuit. If the spouses want to divorce amicably, this is a wise provision to include in the agreement. It's wise to incorporate this language while they're still in love and working together since it will save a time-consuming legal battle in the event of a divorce.

Sunset clause:
A sunset provision serves as the prenuptial agreement's expiration date. Before adding this clause, a person must speak with a family law attorney. Prenuptial agreements should be amended when their financial situation significantly changes, not when they decide they no longer need one. Instead of allowing the prenuptial agreement to expire and falling back on the state's default norms, using an amendment instead of a sunset provision allows for the possibility of shifting interests and financial circumstances.

Top mistakes in a prenuptial agreement
A prenuptial agreement may be deemed invalid for a variety of reasons, including the example of one partner signing under coercion given above, such as the following:

• Provides for child support and custody of unborn children among other things.
• Partial financial disclosure made by either party or both parties.
• Includes clauses that explicitly treat one party unfairly.
• One of the partners was unable to get legal advice.
• Prenuptial agreement was executed just before the wedding (such as in the car on the way to get married).
• It's crucial to realize that a prenuptial agreement does not act as a will or any other type of estate planning document, nor does it replace one.
• Each spouse should have a legally binding will or other legal instruments to preserve their assets and make sure they are divided in accordance with their intentions, even if a couple has a prenuptial agreement.

Sample prenuptial agreement
"________________________________________, hereinafter referred to as Prospective Spouse 1, and _______________________________________, hereinafter referred to as Prospective Spouse 2, hereby agree on this _____ day of ________________, in the year ______, as follows:

Prospective Spouse 1 and Prospective Spouse 2 contemplate marriage in the near future and wish to establish their respective rights and responsibilities regarding each other's income and property and the income and property that may be acquired, either separately or together, during the marriage.
Prospective Spouse 1 and Prospective Spouse 2 have made full and complete disclosure to each other of all of their financial assets and liabilities, as more fully set forth in the accompanying Financial Statements, attached hereto as Exhibits A and B.
Except as otherwise provided below, Prospective Spouse 1 and Prospective Spouse 2 waive the following rights:
To share in each other's estates upon their death.
To spousal maintenance, both temporary and permanent.
To share in the increase in value during the marriage of the separate property of the parties.
To share in the pension, profit sharing, or other retirement accounts of the other.
To the division of the separate property of the parties, whether currently held or hereafter acquired.
To any claims based on the period of cohabitation of the parties.

[SET FORTH RELEVANT EXCEPTIONS HERE.]
[ADDITIONAL PROVISIONS HERE. These can range from prescribing that the children will be raised in a particular religion to allocating household chores between the parties.]
Both Prospective Spouse 1 and Prospective Spouse 2 are represented by separate and independent legal counsel of their own choosing.
Both Prospective Spouse 1 and Prospective Spouse 2 have separate income and assets to independently provide for their own respective financial needs.
This agreement constitutes the entire agreement of the parties and may be modified only in a writing executed by both Prospective Spouse 1 and Prospective Spouse 2.
In the event it is determined that a provision of this agreement is invalid because it is contrary to applicable law, that provision is deemed separable from the rest of the agreement, such that the remainder of the agreement remains valid and enforceable.
This agreement is made in accordance with the laws of the state of _________________, and any dispute regarding its enforcement will be resolved by reference to the laws of that state.
This agreement will take effect immediately upon the solemnization of the parties' marriage.
I HAVE READ THE ABOVE AGREEMENT, I HAVE TAKEN TIME TO CONSIDER ITS IMPLICATIONS, I FULLY UNDERSTAND ITS CONTENTS, I AGREE TO ITS TERMS, AND I VOLUNTARILY SUBMIT TO ITS EXECUTION.

_______________________________Prospective Spouse 1

_______________________________Prospective Spouse 2"

The source of the above sample may be accessed here.

References:

• https://www.mediate.com/prenuptial-agreements-what-do-the-statistical-trends-say-2/
• https://www.collinsdictionary.com/dictionary/english/prenuptial-agreement
• https://www.merriam-webster.com/dictionary/prenuptial%20agreement
• https://www.businessinsider.in/personal-finance/prenups-arent-just-for-the-rich-or-famous-more-millennials-are-signing-them-before-getting-married-and-you-probably-should-too/articleshow/66018811.cms
• https://www.iafl.com/media/1169/prenuptial_agreements_in_the_us.pdf
• https://academic.oup.com/lawfam/article-abstract/12/3/307/911468?redirectedFrom=PDF
• https://www.forbes.com/sites/christinefletcher/2018/09/18/10-things-you-need-to-know-about-prenups/?sh=5a6ae77462ba
• https://www.uniformlaws.org/
• https://www.law.cornell.edu/wex/prenuptial_agreement
• http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0000-0099/0061/Sections/0061.079.html
• https://law.lis.virginia.gov/vacode/title20/chapter8/
• http://njlaw.rutgers.edu/collections/njstats/showsect.php?title=37&chapter=2§ion=31&actn=getsects
• https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=FAM&division=4.&title=&part=5.&chapter=2.&article=2
• https://www.uniformlaws.org/HigherLogic/System/DownloadDocumentFile.ashx?DocumentFileKey=f5d36125-9433-c7d8-28ec-6244f4a316e6&forceDialog=0

Disclaimer: The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter. Kindly seek legal or other professional advice since the contents of this post contain general information and may not reflect current legal developments or address your situation. The author of this post accepts no liability from the contents of this post.


Written By: Tejaswini Kaushal, 2nd year B.A. LL.B. (Hons.) student, Dr. Ram Manohar Lohiya National Law University, Lucknow, Uttar Pradesh.