When properly negotiated a prenuptial agreement can protect various finances and assets that each spouse acquired before marriage, including real estate, and educational and/or retirement funds. The agreement serves as a contract between both spouses that sets forth everyone’s interests in the hopes of reducing any disputes in the event of a divorce. However, how do you know what to include in a prenuptial agreement? To help you with this process, we created a prenuptial agreement checklist for you to reference.
What to Include in a Prenuptial Agreement
Marital Property Versus Non-Marital Property
Florida is what is known as an equitable distribution state meaning after a divorce, all assets and liabilities will be distributed in an equal manner. To get started, the court will first need to determine which assets are considered marital and which are considered non-marital. While this may appear pretty straightforward, it is rarely that easy to distinguish these two types of assets due to co-mingling. Co-mingling happens when two spouses jointly own non-marital property, thus turning it into marital property. Additionally, when an individual adds his/her spouse’s name to a bank account, the money in this account becomes a marital asset.
A prenuptial agreement can clearly define what constitutes marital and non-marital property to avoid any confusion in the event of a divorce. Trying to untangle assets is time-consuming, expensive, and stressful. A prenup can eliminate the need for such complications.
Credit & Debt
Without a valid prenuptial agreement, creditors could go after marital property even though only one spouse I the debtor. A prenup can be used to protect the debt-free spouse from taking on the financial liabilities of the other. Additional things to consider include:
- joint credit issues, as well as using your home as collateral on business; or using a home equity line of credit to fund a business
- if you and your spouse plan on signing new credit obligations together
- Are any back taxes still owed? If there are, how will they be paid?
Provisions for Children from Previous Marriages
A prenup can be put in place to ensure your children from a previous marriage can still inherit the property and assets you would like reserved for them in the event of a divorce. In a prenuptial agreement, one or both spouses can give up the right to claim a share of the other's property at death. In addition, it's helpful to review your estate plan to ensure that it parallels the wishes of your prenup.
With a valid prenup, you can ensure your estate plan will be carried out according to your wishes. It is important to note that you will still need to create a will and other estate planning documents to protect your estate. Questions to be asked while making your estate plan can include:
- Who will be made the beneficiaries of your estate, which include life insurance policies, retirement plans, stock options, etc.
- Would the terms of your prenuptial agreement end upon death?
- Would the terms of your prenuptial agreement end if you became incapacitated?
You can protect family property, including real estate holdings, businesses, and heirlooms, reserving them for your children in the event of a divorce. A valid, properly executed prenup will help establish and protect your heirs’ inheritance rights. Questions to ask yourself include:
- Would a gift from a family member be marital or separate property?
- If you took out a loan from a family member, who is responsible for paying it back?
In the event the higher-earning spouse would like to waive the lower-earning spouse’s right to alimony and create other spousal support provisions, a prenup can be put in place. If you want to keep alimony options open, you can still modify certain aspects. Questions to ask yourself include:
- Will there be any limitations on the duration and amount?
- What are the expectations that both spouses will work?
Financial Obligations During Marriage
A prenup can be established to specify certain financial obligations in a marriage. This might include but is not limited to the following:
- Who is responsible for paying the bills
- How much each spouse will contribute to the household
- How major financial decisions will be distributed and decided
Although each state has its own laws pertaining to the distribution of assets and property during a divorce, a prenup can bypass many of them if the couple defines their wishes beforehand. The state of Florida recognizes equitable distribution meaning it will only divide marital property based on what the court feels is fair. Questions to ask yourself include:
- How will marital and separate property be defined?
- Who will get the home if a divorce is filed?
- Who will get the family pets?
State Laws Governing the Agreement
A prenup should specify which state has jurisdiction over the agreement as often couples live in a different state than the state the couple was married.
A sunset clause dictates the end of a prenup after a certain number of years of marriage. For instance, a couple could decide that after 10 years of marriage, the prenup will expire.
If you need assistance creating a prenuptial agreement, contact our office online or call us at (407) 753-4111 to get started today!