Prenuptial or premarital agreements are considered by many to be among the most cold-hearted, unloving and unromantic of all wedding preparations. The thought of retaining individual attorneys and taking accountability of finances and assets for the purpose of dividing it, often unequally, as marital and separate property is just as uninviting as a visit to the dentist.
Couples who wish to avoid the killjoy of a prenuptial agreement and instead focus on more enjoyable premarital tasks, such as planning for their honeymoon and choosing the bakery that will design the wedding cake, are essentially submitting to the prenuptial mandate that their state laws have in place.
Civil Statutes and Prenuptial Agreements
Each state of the Union has a body of law that governs important civil matters such as familial relations and property. Take, for example, the case of an individual who passes away without having left a will. How should his or her assets and liabilities, the estate, be handled and distributed. States have intestacy laws and procedures in place to handle these situations with a certain degree of equity and fairness, and similar laws and procedures exist to deal with property disputes that arise during divorce proceedings.
In the absence of a prenuptial agreement, a trust or other legal instrument to handle marital and separate property, states have certain statutes in place that direct the court to perform in a certain way. When the court is left to make decisions and take actions in distributing property during a divorce, the results can be swift and stern rather than right or fair. Some states have a strict 50/50 view of property distribution during marriage dissolution; it is almost as if they want to apply a chainsaw to disputed property just so they can split it in a half and move on to the next case in the court docket.
Prenuptial agreements are used as financial arrangement between couples who do not want to be left at the mercy of their state’s divorce laws. There are several problems with these premarital agreements, however, which is why irrevocable trusts often make more sense that prenups insofar as protecting assets from being unfairly distributed in case of divorce:
Validity of Prenuptial Agreements
Premarital agreements are subject to guidelines and limits imposed by state law. Would-be brides and grooms who think they can waive alimony or excessive child support must remember that many jurisdictions require prenuptial agreements to be conscionable, which means that incorrect waiver of certain rights may invalidate the entire instrument.
Couples are often advised to retain their own legal counsel prior to the drafting and execution of prenuptial agreements for the purpose of making sure that individuals’ interests are respected and that the instrument is valid. In this sense, a prenuptial agreement may represent a considerable legal expense before the wedding. In the end, the couple still has to sit down and go through the unpleasant motions of determining what to do in case they breakup. In a way, they are already planning for their divorce.
The construction of an irrevocable trust does not require the signature of the bride or groom. This legal structure is essentially a contract initiated by an individual who wishes to place his or her property and assets in trust for the benefit of someone else. Prenuptial agreements are often sought by people who wish to protect their property from what state laws dictate in case of divorce; irrevocable trusts are far better for asset protection than premarital contracts because they are not subject to the same legal challenges.
Predetermination of Asset Distribution
Chivalrous husbands who want to leave everything to their wives and children in case of divorce or death are better served by irrevocable trusts than by prenuptial agreements. Trust agreements empower individuals to make asset distribution determinations in advance and without having to wait on the approval of judges or juries.
Spouses can always be made beneficiaries of irrevocable trusts. A married woman who chooses to grant financial support to her husband can determine exactly how much and for how long through irrevocable trust instructions. During divorce proceedings, a judge will only look into an irrevocable trust to check for marital assets; all other property such as investments, jewelry, business assets, insurance policies, artwork, etc., is excluded.
Unlike irrevocable trusts, prenuptial agreements serve no estate planning purpose. Premarital contracts do not survive death; irrevocable trusts, on the other hand, continue to serve beneficiaries in perpetuity. Children are able to enjoy the assets according to instructions left by the grantor to the trustee, and scorned ex-wives or ex-husbands are not able to tap into the trust just so they can spend money on their new romantic interests.
To answer the question at the heart of this article: With prenuptial agreements, it takes two to tango. Even if a premarital agreement is not executed before the wedding, jurisdictional statutes will determine how assets are distributed should the marriage be dissolved in the future. This is not the case with irrevocable trusts since they do not require the signature of the groom or the bride or even their input. Irrevocable trusts are the clear answer to prenups.
Helpful resources: Common follow-up reading includes Asset Protection Trust, Revocable vs Irrevocable Trust, and official IRS estate and gift tax guidance for broader context on the planning choices involved.
What readers usually compare next
Readers looking at To Prenup Or Not To Prenup? Risks of Default Intestacy in Your State usually compare timing, control, and exposure before deciding what to do next.
Three practical points to keep in mind
- Timing matters because planning choices usually become narrower once a problem is already close.
- Control matters because the answer often depends on how much access or authority the owner wants to keep.
- Funding matters because a trust or entity has to be set up and maintained correctly to matter.
Helpful next steps
Readers often continue with Asset Protection Trust, Irrevocable Trust, and How It Works. When the question turns from reading to implementation, many readers move from these guides to a direct planning conversation.
