Of all the legal tools associated with divorce, prenuptial agreements are among the best known. It's no surprise, given how often they are featured in high-profile divorce cases. However, despite their prominence, prenups remain widely misunderstood. Many individuals, even those who seek them, continue to hold misconceptions about what prenups can and cannot accomplish.

Prenuptial agreements are important tools, especially for high-net-worth individuals and the financial professionals who work with them. Below are seven tips to better understand their usage.

Every prenuptial agreement is unique. Often, clients come to me believing that prenuptial agreements are uniform — that they're boilerplate contracts that can be applied to just about any marriage. In reality, prenups are versatile tools that can be customized to meet specific needs. For instance, a high-net-worth individual might prefer not to include all assets in the agreement due to the emotional or psychological implications. Instead, they can focus on protecting key assets, such as income from a company they founded. This level of control allows prenups to be not only more effective but also more diplomatic.

No prenuptial agreement is "ironclad." I can't count the number of times clients have come to me ahead of a divorce confident that their prenuptial agreement is "bulletproof." These adjectives get thrown around a lot in the context of prenups, but they don't carry very much weight. Of course, everyone wants an "ironclad" prenuptial agreement, but the reality is such a document doesn't exist. No lawyer, no matter how talented or detailed, can see into the future. The events of a marriage and the financial circumstances that occur after a prenup is drafted will inevitably influence how it is interpreted. It's best to accept this reality, work within it, and move past the myth of a "perfect prenup." But I do agree with a former judge who once said, "A bad prenup is better than no prenup at all." Without a prenup, the court will divide assets in a way it deems equitable.

Part of that calculus is determined by the state in which the divorce occurs. In New York, for instance, the Equitable Distribution Law (N.Y. Dom. Rel. Law §236B) governs how property is divided. This means that assets aren't necessarily split evenly, with 50% allocated to each spouse. Instead, the division is based on several factors, such as the length of the marriage, the income and financial contributions of each individual, age and health, probable future financial needs, and other relevant circumstances. California, in contrast, follows a community property system, where assets acquired during the marriage are typically considered jointly owned and are divided equally in many cases.

In addition to state-specific nuances, each judge also has their own perspective and discretion that will influence asset division. It's better to have a prenup than to be at the mercy of those perspectives.

Spousal support and alimony should be addressed. A comprehensive prenup doesn't just protect specific assets — it also outlines how such arrangements as financial support for an ex-spouse will be handled. A well-constructed agreement will elaborate on these arrangements, from the amount and frequency of payments to their duration. Having these terms set in advance can help prevent arguments and disagreements should a divorce occur. A prenup should also account for any anticipated inheritances. In cases of second marriages later in life, where one spouse has children and significant wealth, such an agreement can ensure that wealth is preserved for the children or other heirs.

Think ahead. A prenuptial agreement shouldn't consider just current assets but future earnings, too. For example, one party may inherit significant wealth in the future due to the death of a relative. Or a high-ranking executive may anticipate even further career progression — say, from senior vice president at a Fortune 500 company to COO — unlocking a higher salary, bonuses, and stock holdings. Anticipating and preparing for these kinds of developments are crucial for attorneys drafting prenuptial agreements.

Consider potential debt and business interests. Prenuptial agreements can address not only assets but also liabilities. A well-drafted prenup can plan for and protect against various types of debts, including individual debt such as a spouse's loans or credit card bills. Prenups can also have stipulations for joint debts such as mortgages or loans incurred as part of a business venture.

In addition, a comprehensive prenuptial agreement should outline how business interests will be handled in the event of a divorce. This includes specifying which business assets are considered separate property and which are classified as marital property, ensuring clarity and protection for both parties.

Revisit and revise as necessary. Prenuptial agreements should be revisited regularly rather than left to collect dust. Many affluent individuals draft their prenuptial agreement only to leave it in a drawer, hoping it never needs to be revisited. For prenuptial agreements to be most effective, however, they should change over time — just as a marriage and financial circumstances change. While it may be an uncomfortable topic, it's prudent for lawyers, accountants, and other financial professionals to check in with their clients regularly to ensure any prenuptial agreements remain relevant. Events that may trigger the need to revisit a prenup include changes in estate documents, such as wills and trusts, or when a family member set to bequeath an inheritance falls ill.

Don't think of prenups as optional. While we all hope our marriages will last forever, it's important to recognize that life can be unpredictable. When speaking with high-net-worth clients, I always recommend establishing a prenuptial agreement. It's a practical way to ensure everyone is protected, and with the right approach, these agreements can be created with care and respect.

Each of these tips can help ensure a more thorough and effective prenuptial agreement. CPAs, in particular, should follow this essential advice: Maintain regular and open communication with your client and their legal team throughout the drafting process. As financial professionals, you often have a more comprehensive understanding of your client's assets than their attorneys. Sharing this insight is crucial to ensure that no assets or key details are overlooked, ultimately strengthening the agreement.

For more information, listen to the PFP Section podcast episode "How to Guide Clients Going Through Divorce." Members of the AICPA's PFP Section or Tax Section can download the client brochure "Tax and Financial Planning Tips: Marriage and Divorce."

— Gus Dimopoulos, Esq., is managing partner of Dimopoulos Law Firm PC, a matrimonial and family law firm based in New York City and Westchester County, N.Y., that specializes in high-net-worth divorces. To comment on this article or to suggest an idea for another article, contact Dave Strausfeld at David.Strausfeld@aicpa-cima.com.