What Makes a Prenup Cost More or Less?
Understanding the Cost of a Prenup Agreement
The factors that influence the cost of prenup agreements are many. Legal fees of course are the first thing that comes to mind when discussing costs. What some don’t realize is that legal fees don’t account for all or even most of the prenup costs that will be incurred over the term of the marriage. I have encountered some clients (really, only some) who are reluctant to hire an experienced lawyer to draft a prenup agreement because of the legal fees involved. However, if a marriage ends up going south, it is almost always the case that a prenup agreement will prove to be one of the least expensive things about the divorce. The time and legal expertise of a reputable, experienced family lawyer is worth a lot more than its weight in dollars in a divorce scenario.
Other costs unrelated to the drafting of the agreement must also be considered and planned for. Among them are the fees that will be incurred if the agreement is challenged in court later on by one person or the other. If one of the parties’ interests gets challenged and the prenup contains an error in its drafting, or is otherwise perceived to be unfair in some way (even if it is not), the more that it will cost to litigate. Every additional court date , deposition, hearing or trial date has a price. However, the best way to avoid unnecessary litigation associated with a prenup is to focus on knowing that the agreement is fair, balanced and complies with all of the relevant laws. If the prenup is valid and its provisions are in line with applicable laws, then a challenge will be significantly harder and the likelihood of costly litigation will become substantially lower.
Other important factors that contribute to the cost of a prenup are some of the obvious ones such as the complexity of one or both parties’ assets and the geographic location of the parties at the time that the prenup is being drafted. The main reason that the location of the parties is relevant to the cost of the prenup is that different states and even some counties have unique laws that apply to prenups. Similarly, it is not uncommon for a couple to reside in one state prior to marriage, but thereafter move to another. The law of the state where the couple resides at the time of marriage will govern the enforceability of the prenup. If the parties relocate after marrying, the terminology and structure of the prenup may need to be revised depending on the new state’s stare decisis rules and approach to asset division.
How Much Prenup Agreements Generally Cost
On average, between $2,000 and $8,000 in New York. New York is on the high end, given the amount of work involved in a properly drafted prenup. Many attorneys will charge additional fees to negotiate the prenup agreement, and that time will not be included in the regular fee.
In other states, the prices can be in the $400 to $500 range to draft a prenup agreement. Many Southern states have prenups with much less of an economic scale – North Carolina prenup agreements of $200-$300 and Florida prenup agreements of $300-$500.
However, these lower fees tend to be focused on what is called a securities prenup (which basically regurgitates law as opposed to having specific factual issues addressed) and do not address more complex prenups, in which legal assistance will be a necessity to protect a client’s interests (there is also a possibility of the lower end prenup agreements being drafted by non-lawyers).
At the other extreme are the $20,000 prenups (and higher) consistently seen in the East coast markets for hedge fund managers, celebrities, figures in the entertainment industry, etc.
How Prenup Expenses Break Down
Generally, there will be three components to the cost of a prenup. First, you have the consultation fee for each spouse with their respective attorneys. Typically you see this around $300 to $500 per hour. Second, you have the drafting cost of the agreement itself. This can be less if you have assets that you do not feel are complicated in any way. If you are just listing assets and liabilities you have, the additional cost below may not occur. However, many individuals have more complicated finances with businesses, multiple real properties, trust issues, etc. The drafting cost can vary between attorneys, but generally should be between $1000 to $1500. Finally, there is court filing fees when the agreement gets sent to the court with the request to file. There is nothing more to say about this as it typically only costs a few hundred dollars.
In light of all the cost above, you also have to consider if you are going to need additional valuation of assets. For example, if you want a forensics accountant to help value your business, that’s an additional cost. Or perhaps your spouse has to meet with a Certified Public Accountant (CPA) to help value alimony. These additional fees can vary widely based on the complexity of what you wish. However, having these experts help value your income, assets, and liabilities can make your argument in front of a judge better in the event your prenup were to ever be considered for validity in a divorce litigation situation.
Prenup Savings Tips
For those who worry about whether or not they can afford a prenuptial agreement, there are a few ways to avoid the costs of the process while still managing to get a good result. The first thing to keep in mind is that the process often gets expensive because you and your fiancé are not well-prepared to discuss the issues you want to address in the prenuptial agreement. When you walk into office after office and provide the attorney with nothing but a few thoughts that may or may not relate to the prenuptial agreement you have requested, that is when you start spending money unnecessarily. The best way to avoid paying too much for your prenup is to prepare well for the process. Doing your homework can pay off in many ways. For example, while the first meeting with an attorney might cost a couple hundred dollars for a consultation, the second meeting can be much less expensive since an internal paraprofessional, such as an attorney’s assistant, can prepare an outline of points that your attorney can review and give you legal advice. Likewise, if you were to take some time to draft the language of your agreement before meeting with a lawyer, then some of the work can be accomplished by you and absorbed into your workday, rather than counting as billable hours for the attorney on retainer.
When Does a Prenup Make Financial Sense?
In some cases, the cost of a prenup may be justified. For example, the investment may be reasonable if you or your fiancé have significant assets to protect (perhaps from prior marriages or gifts or inheritances) or if you own a business which you want to protect. Either of those scenarios may warrant spending the time and money to craft a thorough, well-drafted prenup. And, that protection may also include limiting liability if the post-marital venture experiences financial problems.
In addition, when one or both partners pose a high risk for financial loss resulting from business dealings , hidden assets, addiction or other problems, a prenup can make sense. In fact, addressing the higher risk of loss in a prenup can protect the other spouse from being fleeced, losing their fair share of the marital wealth. While a healthy, contributing spouse may be a risk, losing wealth to a harmful influence or bad deals can be just as damaging. In such cases, working with your family law attorney to identify and protect your particular vulnerabilities can help to keep marriage from becoming financially disastrous.
Comparative Costs of a DIY and Lawyer-Prepared Prenup
When it comes to the cost of a prenup agreement, you have two basic options. On the first, you can create the prenup yourself using one of the many popular forms available online. On the second, you will hire an attorney experienced in this area to do the work for you. Which option is best for you, and how much can you expect to pay?
The Do-It-Yourself Option
Few things in life come that are truly free, but creating your own prenup agreement is one of them. Prenup forms can be found online for as little as $50. This makes the DIY prenup an appealing option for couples of modest means to obtain a contract that will stand up to scrutiny. However, there are a few downsides to this approach that you should consider.
For example, while one of these forms may contain blanks for all the things you want to cover in your prenup, it might not be written in clear and un-ambiguous terms. In addition, any provision that’s contrary to the law or public policy in your state may not be honored by a judge. Another thing to remember is that as a general rule, forms of this type are nonrefundable.
The Lawyer-Prepared Prenup
A prenup prepared by a qualified professional generally costs between $1,000 and $3,000, which is a much better deal than it once was. The savings of this fee versus the alternative of litigating disputes over prenups can be huge. Although you will likely pay a lot less to have the prenup prepared than most attorneys would charge, the fees that you pay to a qualified attorney will include certain protections that cannot be guaranteed with a form form. These include:
prenup is a highly effective legal tool to protect your interests. But first, you must determine whether you want to invest the time and effort to create the prenup yourself, or have an attorney do it for you.
Legal Issues and Validation
Both parties must have had an independent opportunity to retain their own counsel and, prior to signing, must have had adequate time to read and review or otherwise become informed of the contents of the agreement (and as mentioned previously, sufficient time to discuss and negotiate). In all, six requirements will ensure that the agreement is valid and enforceable if challenged: (1) full disclosure of all assets and debts by both parties at the time of signing, (2) opportunity to retain independent counsel, (3) willingness to accept advice of counsel, (4) if parties are not so represented, they must have expressly waived counsel representation, (5) each party must have been fully informed and afforded adequate time to negotiate and review with counsel, and (6) the agreement must not be unconscionable. At times when the parties cannot afford representation of counsel, waiver of representation may be allowed by the Court . Generally an argument against enforcement of a premarital agreement is a claim of duress, fraud or non‐full disclosure, so it is important to distinguish between gouging and "good fortune" on the one hand, and honest error or good faith disputes on the other. Too, a party may refuse to be represented by counsel and the agreement would not be invalid. If a party does not have counsel, the agreement may still be accepted by the Court to the extent that it was fair and reasonable. As far as unconscionably, there is no hard and fast rule or test, but several factors may cause an agreement not to be enforced: (1) a substantial change in the financial circumstances before the marriage compared to after marriage, (2) an unusually long period of time between signing and enforceability, (3) lack of independent counsel, (4) and whether the terms are fair and reasonable. As with almost everything in legal matters and law, particularly family law, the best way to ensure that you and your soon‐to‐be spouse completely understand what you are agreeing to in a prenuptial agreement is to seek legal counsel.