Prenuptial Agreements: 4 Big Mistakes That Can Cost You

4 Big Mistakes People Make With Prenuptial Agreements

1. Thinking you don't need one. A prenuptial agreement is more than just a blueprint for divorce. It can help you uncover financial issues that you didn't realize you had, and the result may be solving problems that could affect your marriage down the road.
2. Not understanding the terms. Certain elements, like a sunset clause or the inclusion of pre-marriage debts, need to be understood so they don't come back to haunt you in the future.
3. Thinking it only applies to divorce. Beyond making a will, you should also consider including provisions for your death in your prenuptial agreement to avoid conflicts after you're gone.
4. Trying to do everything yourself. Agreements made without proper representation can be invalid, so find an attorney to help you through the process.

Do Prenuptial Agreements Expire?

A common misconception is that prenuptial agreements automatically expire after a certain period of time. As long as your agreement is deemed valid by a judge, it can be enforced. However, many agreements contain a provision known as a sunset clause, which causes the agreement to expire after an agreed-upon period of time. It's a good idea to discuss this with your partner and your attorney before negotiating, since although it might sound good as a way to reward a loyal spouse, it will also invalidate the agreement, meaning if you do divorce, you'll have to go through an expensive and lengthy divorce process.

States With The Highest and Lowest Divorce Rates

Based on 2015 data of divorces per 1,000 married women in all 50 states plus the District of Columbia.

If I Have No Prenup, What Happens When I Get Divorced?

If you don't have a prenuptial agreement, you'll be subject to the laws in your state. Each state has different laws, and depending on the nature of your relationship with your partner and the amount of marital assets, it could be exceedingly complicated. Generally, you must have established residency in a state in order to file for divorce there. That's one of the reasons prenuptial agreements are popular: they supersede state divorce laws, meaning that if you have a valid agreement, you won't be subject to the complexities of the local laws when dividing your assets. It can simplify the process for both parties in the event of a divorce.

What Are The Ways To End A Marriage?

What Is A "No-Fault" Divorce?

A "No-fault" divorce simply means a divorce in which the parties do not need to offer grounds for divorce. In some countries, if one person wants to get divorced and the other doesn't, the person wishing to dissolve the marriage has to fight in court in order to be granted the divorce. A lot of people defend these traditions, often on religious grounds because they belong to faiths that oppose divorce, while others welcome the change to a no-fault system. In the United States, a no-fault divorce is a way to exit a marriage without the need for this kind of trial, and helps people move on more quickly. Some states are "True" no-fault states, meaning all divorces are treated as no-fault and the court does not take a position but merely dissolves the marital contract, while others are "optional" no-fault states, meaning you can file for a divorce based on "irreconcilable differences," but can also file for a divorce with cause. If you are looking to file for divorce, it's possible to do so without a prolonged court battle, although difficult discussions like child custody can become contentious regardless of whether both parties want to separate or not.

Which States Are True No-Fault States?

• California
• Colorado
• Florida
• Hawaii
• Indiana
• Iowa
• Kansas
• Kentucky
• Michigan
• Minnesota
• Missouri
• Montana
• Nebraska
• Nevada
• Oregon
• Washington
• Wisconsin
• District of Columbia

Most Expensive States To Get A Divorce

The Countries With The Highest Divorce Rates

In Depth

If you're getting married, the last thing you want to think about is what will happen if the marriage ends, but given the statistics, it's something you need to prepare for. These are the four biggest mistakes people make with prenuptial agreements that you'll want to avoid.

Mistake #1: thinking you don't need one. Sure, your relationship is rock solid, but a lot can happen as time passes, and your hubris can cost you. Mel Gibson and Rupert Murdoch lost fortunes because they didn't anticipate ever getting divorced. Murdoch's next go-around involved a prenup, and it was much easier to end.

Even if you aren't rich or suspicious of your partner's motives, what if it's not your first marriage? What if you both already have children? What if both you and your partner have businesses, assets you share with family members, and own property?

What if you both already have children?

A prenup forces you to take a hard look at your finances, which is important, since financial woes are one of the biggest reasons people end up getting divorced. The prenup isn't just in case your marriage fails; it can actually save your marriage.

And since your prenup will likely override state divorce law, you'll be in a better position to dictate the terms of a divorce, depending on where you live. The laws regarding prenups differ in each state, so make sure you do your research. Check out our full guide to prenuptial agreements by scrolling below this video.

Mistake #2: not understanding the terms. Not all agreements are designed to last forever, and your choices now will affect the future. Many prenups contain a "Sunset clause," which states that the agreement expires after a certain date.

Not all agreements are designed to last forever, and your choices now will affect the future.

That's the situation former General Electric CEO Jack Welch found himself in when he and his wife Jane Beasley got divorced after their prenup had expired. She was possibly entitled to half his fortune, but they ended up settling, depriving the rest of us more juicy details about their extravagant lifestyle and possible affairs.

Chris Rock was in a similar situation, with an expired agreement that not only meant he had to pay a lot in the divorce, but also meant that the financial break-up would be extremely complicated, negating the planning done in the first place. If you don't know how your contract works, you can't take advantage of it. Some who realize they have sunset clauses may try to rush to get divorced before they kick in, or wait them out to get more money.

We aren't lawyers, and this isn't legal advice, but if you're waiting a couple years to get divorced just so you can cash in, that probably isn't too healthy. Make sure you know what you're doing beforehand. Read our full guide to prenuptial agreements right on this page. Check it out beneath this video.

Make sure you know what you're doing beforehand.

Mistake #3: thinking it only applies to divorce. Imagine this scenario: you die a month after your wedding, without having updated your will. Your spouse and children could be tangled up in probate court for years to determine who is entitled to your assets. Just because you don't get divorced doesn't mean a prenup can't help with financial decisions.

The lack of a prenup can cause strife long after you're gone. Anna Nicole Smith was married without a prenuptial agreement, and ended up in court fighting her late husband's heirs. After she died, her estate continued to fight in court for its right to his estate. Both partners were gone, but the conflict outlived them. Consider having difficult conversations now and putting it in writing so your legacy isn't a battle between your loved ones.

Mistake #4: trying to do everything yourself. Prenups can be a good idea, but if they aren't done properly, they're useless. A judge can later rule your agreement invalid if you don't disclose all your assets, if one partner feels coerced, or if it isn't properly filed. Both you and your partner need to find an attorney who can help you with the process.

Both you and your partner need to find an attorney who can help you with the process.

That last item wasn't noted by Barry Bonds, who had a prenuptial agreement with his wife that would have kept her from tapping into his vast fortune. But she didn't have an attorney present when it was signed, so it was ruled invalid.

An even stranger story involves famed director Steven Spielberg and his divorce from Amy Irving. They had a prenup, but it was written on a bar napkin with no attorneys present. A judge threw it out, so he had to cough up $100 million.

You'll need help with these things, so make sure to read up on the law before proceeding. Check out our full guide to prenuptial agreements right on this page. You can find it beneath this video.