The laws governing the validity of premarital agreements vary from state to state. In general, the agreements must be in writing and signed by the parties.

In most states, the parties (particularly the wealthier party) must disclose their income and assets to the other party. This way, the parties will know more about what they might be giving up. In some states, it may be possible to waive a full disclosure of income and assets, but the person waiving that right should do so knowingly, and it is best if each party has at least a general idea of the other’s net worth.

Sometimes it is difficult to make a precise statement of a party’s net worth. If for example, the husband or wife owns a business that is closely held (meaning shares of the company’s stock are not traded on a public stock market), it may be difficult to ascertain the value of the business. In that circumstance, it usually is best to acknowledge the difficulty of precise valuation in the agreement and then state the minimum net worth or the range of possible net worth of the party.

In order to be valid, an agreement must not be the result of fraud or duress. An agreement is likely to be invalid on the basis of fraud if one person (particularly the wealthier one) deliberately misstates his or her financial condition. For example, if a man hides assets from his future wife so that she will agree to a low level of support in case of divorce, a court probably would declare the agreement invalid. Similarly, if one person exerts excessive emotional pressure on the other to sign the agreement, a court also might declare the agreement to be invalid because of duress.

In order to avoid an appearance of duress and to give the parties ample time to consider the agreement, the agreement should be reviewed and signed well before the wedding. Most states do not set a specific time at which premarital agreements must be signed, but the greater amount of time the parties have to consider the agreement, the greater the likelihood a court would find the agreement to be voluntary.

If the wealthier person presents the agreement to the prospective spouse for the first time one day before the wedding, a court may later find that the agreement was invalid because of duress. A last-minute premarital agreement is not automatically invalid, but timing may be a significant factor in determining whether the agreement is valid.

An agreement might be valid even if both parties were not represented by lawyers, but using lawyers is a good idea in order to help make sure the agreement is drafted properly and that both parties are making informed decisions.

The lawyer for the wealthier party usually prepares the initial draft of the agreement. The less wealthy party and that party’s attorney, if there is one, should review the agreement carefully and ask questions about any matters that are uncertain. The likelihood of having a valid, enforceable agreement increases if the less wealthy party’s interests are well represented and some back-and-forth negotiations take place.

In order to demonstrate that the parties truly know what they are agreeing to, some attorneys favor taking additional steps to illustrate the knowledge of each party about the agreement. In addition to signing the agreement, the parties also may place their initials on pages with key provisions, such as the provisions of the agreement pertaining to disclosures of assets, distribution of property, and support.

The parties, particularly the less wealthy party, might be asked to prepare a handwritten statement, in the parties’ own words, reflecting understanding and consent to the agreement. Alternatively, the signing of the agreement might be videotaped (or audiotaped) with the parties providing oral statements of their understanding and consent to the agreement (in addition to their written consent).

Sidebar:   When an Agreement is Enforceable

Mary and John are in their late forties. They plan to marry in five months. Each has been married before. Before getting married, however, they wish to clarify their financial relationship. Mary has assets of about $400,000; John has assets of about $200,000. They both work and are capable of self-support. They each wish to protect the assets that they will bring into the marriage.

After disclosing their assets to each other and consulting with their individual attorneys, they sign an agreement that provides:

  • Their future earnings will remain their respective separate property as long as the earnings are kept in accounts bearing only the name of the person who earned the money;

  • The savings, investments, and retirement accounts that they bring into the marriage, along with any growth in those assets, will remain separate property after the marriage as long as the assets are held in the name of only one of the parties;

  • Each party waives any right to future alimony or inheritance, although either party is free to include the other in his or her will;

  • The parties, if they wish, may make joint investments, such as in a house, condominium, or car, in which case, title will be held jointly with a right of survivorship (which means if one of them dies, the other will receive the property that was jointly held); and

  • They will share payment of common expenses, including housing, utilities, and food, in proportion to their incomes.

Since the agreement appears to be fair and not made under duress, it is likely to be valid and enforceable.