Skip to main content
diversification.com
← Back to M Definitions

Marital agreement

What Is a Marital Agreement?

A marital agreement, often referred to as a prenuptial agreement (or "prenup"), is a legally binding contract entered into by prospective spouses before marriage. This agreement falls under the umbrella of Legal Planning and is designed to define the financial and property rights and obligations of each party during the marriage and in the event of separation, divorce, or death. By establishing terms for matters such as property division, spousal support, and the distribution of assets, a marital agreement offers a clear framework that can supersede default state laws that would otherwise apply in the absence of such an agreement65. A key purpose of a marital agreement is to provide clarity and predictability, addressing financial matters proactively to avoid potential disputes later64.

History and Origin

Marital agreements have a long and varied history, dating back to ancient civilizations. Records indicate that forms of marital contracts, which established property that each spouse brought into the marriage, existed in ancient Egypt over 2,000 years ago62, 63. Ancient Jewish law also featured a marriage contract called a ketubah, which detailed property division in case of divorce or death, ensuring the bride's rights to her spouse's property60, 61. Similarly, the Roman Empire had matrimonial agreements that specified financial obligations and property rights, often protecting a bride's dowry59.

In the United States, prenuptial agreements gained more widespread recognition and enforceability beginning in the mid-20th century58. Before the 1970s, courts often deemed these agreements invalid, particularly if they were perceived to circumvent traditional marital roles or financial support expectations57. However, societal shifts, including the women's rights movement and increasing financial independence for women, led to greater acceptance55, 56. In response to a more mobile society and the increasing number of individuals pursuing careers, the Uniform Law Commission drafted the Uniform Premarital Agreement Act (UPAA) in 198353, 54. This act sought to standardize and provide uniformity for the enforceability of marital agreements across states, a crucial development given that state laws vary significantly regarding these contracts52.

Key Takeaways

  • A marital agreement is a pre-marriage contract that outlines the financial and property rights of spouses.
  • It serves to provide clarity and certainty regarding asset protection, property division, and spousal support in the event of divorce or death.
  • Modern marital agreements often extend beyond traditional wealth preservation to include provisions for business interests, intellectual property, and inherited wealth.
  • For an agreement to be enforceable, it generally requires full financial disclosure, voluntary consent from both parties, and often independent legal counsel.
  • The use of marital agreements has become increasingly common among younger generations as a proactive element of financial planning.

Interpreting the Marital Agreement

A marital agreement is interpreted based on the specific terms outlined within the document and applicable state laws. The primary interpretation focuses on how assets, debts, and potential alimony will be handled. For instance, it clarifies what constitutes separate property (assets owned individually before marriage) versus marital property (assets acquired during the marriage)51.

The interpretation also considers any waivers of rights, such as a spouse's right to claim an elective share of a deceased spouse's estate or the right to seek spousal support. The explicit language within the marital agreement is paramount, as it dictates the intentions of the parties at the time of signing. However, courts will also assess whether the agreement was entered into fairly, with full financial disclosure and without coercion49, 50. This ensures that the agreement aligns with principles of contract law and public policy, preventing terms that are deemed unconscionable or that would leave one spouse financially destitute47, 48.

Hypothetical Example

Consider Sarah, a successful entrepreneur with a thriving software startup, and David, a talented musician. Before their marriage, they decide to enter into a marital agreement. Sarah's startup, along with her pre-marital investment portfolio, represents a significant portion of her net worth. David, while having some savings, primarily earns income from his music career.

In their marital agreement, they agree that Sarah's pre-existing business interests and future growth of her startup will remain her separate property. They also specify that any intellectual property created by David from his music career will remain his individual asset. For marital property acquired during the marriage, such as a future home purchased together, they outline a 50/50 property division in the event of divorce. They further include a clause for spousal support, agreeing to a predetermined, temporary amount for a set period if they divorce, allowing time for the lower-earning spouse to become self-sufficient. This proactive approach allows them both to enter the marriage with a clear understanding of their financial landscape, reducing future uncertainty.

Practical Applications

Marital agreements are practical tools used in various financial and legal contexts, extending beyond simply protecting existing wealth. They are increasingly utilized by couples to establish clear financial expectations and manage potential complexities in their financial lives.

  • Protecting Pre-Marital Assets and Debts: A primary application is to distinguish separate property and liabilities brought into the marriage from marital property acquired during the marriage. This is particularly relevant for individuals with substantial pre-marital assets, inherited wealth, or significant pre-existing debt allocation like student loans45, 46.
  • Safeguarding Business Interests: For entrepreneurs or individuals with ownership stakes in companies, a marital agreement can define how business interests will be handled in a divorce, ensuring the continuity of the business and clarifying valuation or ownership percentages42, 43, 44.
  • Providing for Children from Previous Relationships: In blended families, marital agreements can secure inheritances or assets for children from prior marriages, ensuring that specific assets are designated for them and not considered marital property subject to division with a new spouse40, 41.
  • Defining Spousal Support Terms: Agreements can specify the terms, duration, or waiver of alimony or spousal support, providing clarity on financial independence in the event of divorce39.
  • Establishing Financial Expectations: Beyond divorce, a marital agreement can foster open communication about finances, including how shared expenses, savings, and investments will be managed during the marriage37, 38. This approach reflects a growing trend, especially among younger generations, who view these agreements as pragmatic financial planning tools rather than signs of distrust35, 36. According to data referenced by Entrepreneur.com, a Harris Poll from 2023 indicated that nearly half of U.S. adults are open to signing a prenup, with younger generations leading this shift34.

Limitations and Criticisms

While marital agreements offer significant benefits, they are not without limitations and can face challenges to their enforceability. Courts generally uphold marital agreements, but there are specific grounds upon which they may be invalidated or challenged.

Common criticisms and limitations include:

  • Unconscionability: An agreement may be challenged if its terms are so grossly unfair or one-sided at the time of execution that they would "shock the conscience" of the court30, 31, 32, 33. This typically applies when one spouse would be left in severe financial hardship while the other benefits excessively29.
  • Lack of Full Financial Disclosure: A marital agreement requires both parties to provide complete and accurate information about their assets, liabilities, and income27, 28. If one party conceals significant assets or misrepresents financial information, the agreement may be invalidated due to fraud or misrepresentation25, 26.
  • Coercion or Duress: If one party was forced or pressured into signing the agreement against their will, for example, by being presented with the document just days before the wedding or under threat of canceling the marriage, the agreement's validity can be questioned22, 23, 24. Consent must be given freely and voluntarily21.
  • Lack of Independent Legal Counsel: While not universally required, if one party did not have the opportunity to consult with their own attorney before signing, a court might view the agreement as unfair, especially if there was a significant imbalance in negotiating power18, 19, 20. The American Bar Association emphasizes that retaining proficient family law counsel for both parties is a primary way to ensure the most robust agreement possible17.
  • Provisions Against Public Policy: Marital agreements cannot include provisions that violate the law or public policy, such as determining child custody or child support, as these matters are typically decided by courts based on the child's best interests15, 16.
  • Changed Circumstances: Although less common, in some jurisdictions, a court might reconsider an agreement's enforcement if there has been a significant and unforeseen change in circumstances since the agreement was signed, such as one spouse becoming incapacitated14.

These potential pitfalls highlight the importance of careful drafting, transparency, and independent legal representation to ensure a marital agreement is enforceable and stands up to scrutiny, as discussed by the American Bar Association13.

Marital Agreement vs. Postnuptial Agreement

While both are legal contracts between spouses concerning their financial affairs, the key distinction between a marital agreement (prenuptial agreement) and a Postnuptial Agreement lies in their timing.

A marital agreement is executed before the marriage. Its purpose is to define financial rights and responsibilities that will become effective upon marriage11, 12. This allows prospective spouses to proactively plan for potential future scenarios, such as divorce or death, before they legally commit to the union.

In contrast, a Postnuptial Agreement is entered into after a couple is already married. These agreements might be created for various reasons, such as addressing a significant change in financial circumstances, unforeseen inheritances, or to clarify financial roles within the marriage that were not established pre-marriage. While both types of agreements aim to provide clarity and prevent future disputes, the prenuptial agreement offers the benefit of setting expectations before the marital union officially begins.

FAQs

What can a marital agreement cover?

A marital agreement can cover a wide range of financial and property matters, including the division of separate property and marital property, details regarding spousal support (alimony), management of debts, and protection of business interests or future inheritances9, 10. It can also address how assets will be distributed upon the death of a spouse, often playing a role in estate planning8.

Is a marital agreement only for wealthy people?

No. While historically associated with wealthy individuals seeking to protect substantial assets, marital agreements are increasingly utilized by couples from all economic backgrounds. They are seen as a tool for financial transparency and proactive financial planning, especially among younger generations who may bring various assets and debt allocation (like student loans or digital assets) into a marriage5, 6, 7.

Can a marital agreement be changed after marriage?

A marital agreement generally cannot be unilaterally changed. However, parties can often modify or revoke a prenuptial agreement through a subsequent written agreement, typically a Postnuptial Agreement, provided it meets the same legal requirements for enforceability, such as voluntary consent and full financial disclosure.

Do I need a lawyer for a marital agreement?

While it may not be legally mandatory in all jurisdictions, it is highly recommended that both parties obtain independent legal counsel when drafting and signing a marital agreement3, 4. This helps ensure that both individuals fully understand the terms, their rights, and the implications of the agreement, significantly reducing the likelihood of the agreement being challenged or invalidated later due to coercion or lack of understanding1, 2.