While many people think that legal contracts have no business in a marriage, prenuptial agreements are fairly common. Wealthy couples tend to favor the use of these agreements, though many couples of modest net worth also enter into this form of contract.

People entering into a prenuptial agreement might do well to understand a few important features of this contract before signing on the bottom line.

The role of state laws

Forbes defines a prenuptial agreement as a contract signed before marriage which determines how assets will be split in the event of a divorce. Each state has its own rules and laws that relate to the validity and enforcement of such contracts. Most states stress that the agreement must follow certain standards of fairness and integrity.

Disagreement can arise over which state’s laws apply. For example, a couple who married in one state but who resided in another state might argue over which state holds precedence. It is possible that the agreement will stipulate which state’s laws will prevail. Not unexpectedly, each person might argue to have the divorce settlement heard in the state most favorable to his or her case.

The positives of a prenuptial

US News & World Report lists a number of benefits of prenuptial agreements. Here are some of the primary advantages:

  • They help couples prepare for a divorce
  • They can protect one spouse from the debt of the other spouse
  • They force a discussion on finances
  • They can keep precious heirlooms in the family

As with any worthwhile legal contract, prenuptial agreements often result in greater clarity. Couples often learn more about each other in the process of laying their financial cards on the table.