Legal Definitions - Premarital agreement

A Premarital agreement (also commonly known as a prenuptial agreement or antenuptial agreement) is a legal contract signed by two individuals before they get married. Its primary purpose is to establish how their assets, debts, and financial support will be handled if their marriage were to end, either through divorce or the death of one spouse. By creating this agreement, couples can define what property will remain separate, what will be considered shared, and how issues like spousal support (alimony) or the division of assets would be managed, providing clarity and certainty regarding financial matters.

Here are a few examples illustrating how premarital agreements are used:

• Protecting a Family Business: Imagine Sarah, who owns a successful software company she founded years before meeting Mark. Mark is a freelance graphic designer with a more modest income. Before their wedding, Sarah and Mark decide to create a premarital agreement. This agreement specifies that Sarah's company, including its future growth and any proceeds from a potential sale, will remain her separate property. They also outline a specific formula for spousal support should they divorce, ensuring Mark would receive a fair but defined amount without impacting the business's stability. This illustrates how a premarital agreement can protect significant pre-marital assets and define financial support expectations.

• Managing Blended Family Finances: Consider David, a widower with two adult children, who plans to marry Emily, a divorcee with one teenage child. Both have accumulated significant assets, including homes and investment portfolios, which they intend to pass down to their respective children. Through a premarital agreement, David and Emily specify that their individual homes and certain investment accounts will remain separate property, ensuring these assets are inherited by their own children. They might also agree on how joint household expenses will be paid during the marriage and provide for a limited period of financial support for the surviving spouse if one passes away, without jeopardizing the children's inheritance. This demonstrates the agreement's use in managing assets within a blended family context and protecting inheritances.

• Addressing Future Earnings and Debt: Alex is about to complete medical residency, anticipating a high-earning career, but has substantial student loan debt. Jamie works in a non-profit organization. Before marrying, Alex and Jamie sign a premarital agreement. They agree that Alex's pre-marital student loan debt will remain Alex's separate responsibility. They might also establish how future earnings will be treated, perhaps specifying that a certain portion of Alex's future high income will be considered marital property, while another portion remains separate, or setting limits on how future earnings might factor into alimony calculations. This example shows how a premarital agreement can address existing debt and set expectations for the treatment of future income and financial responsibilities.