When engaged couples envision marriage, they often daydream about enchanting wedding venues, romantic getaways, and years spent with their future spouse. While these fantasies are beautiful, they overlook marriage’s more pragmatic aspects. After all, marriage is fundamentally a legal agreement. Merging lives with someone doesn’t just involve sharing a closet and compromising on furniture. It also means intertwining your financial destinies. That’s where prenuptial agreements come in.
Though not the most exciting, a prenup outlines financial plans for the marriage and, if necessary, divorce. While not crucial for everyone, prenups are still a wise decision. So, are you wondering, “Should I sign a prenup?”
Here’s what to know.
A prenuptial agreement, also called a premarital agreement or prenup, is a legally binding contract between future spouses signed before marriage or a civil partnership. It defines financial expectations within the marriage, addressing matters like joint bank accounts and the repayment of student loans while also safeguarding both parties in the event of divorce.
A postnuptial agreement is a legal document signed after a couple marries. Similar to a prenuptial agreement, it outlines financial arrangements during the marriage and after separation, divorce, or death.
Postnups and prenups serve the same purpose, but the key difference lies in the timing; postnups are signed months or even years into the marriage.
Postnups are often necessary if the couple has not planned ahead of their marriage or sorted out the proper prenup paperwork. Alternatively, couples might opt for a postnup due to changes in circumstances, such as one partner receiving a significant inheritance or founding a successful business after the wedding.
A prenuptial agreement is a legally binding contract, so understand exactly what it entails before you sign one. Here are some things to keep in mind.
Like any legal agreement, prenups take time to organize. Give yourself several months to discuss it, collect documents, and hire legal representation (a family law attorney) to draft it. (Both you and your partner will need separate lawyers.) Additionally, keep in mind that you must get a prenup at least 30 days before the wedding.
Before you sign, closely read the document to make sure it matches what you and your partner have discussed. If anything is confusing, ask questions. Your own lawyer or legal counsel can assist with any concerns.
Even if one spouse has substantially more assets, if the marriage ends, assets must be divided to ensure each party’s well-being. If the prenup does not allow for this, a judge may declare it invalid.
A prenuptial agreement keeps your finances separate in a divorce. To ensure it works as intended, openly share all assets and debts. While it might be uncomfortable to disclose your financial details, not doing so could result in a court invalidating your prenup.
You can change a prenup as many times as you want. This is particularly helpful when one or both parties obtain new assets or liabilities.
In most states, a prenup addresses only matters such as spousal support, property division (both premarital property and postmarital), debt allocation, and inheritances. Any additional provisions mentioned in the document aren’t legally binding and could invalidate the entire agreement.
While a prenup cannot dictate child support or child custody arrangements, you can still outline financial considerations for children from previous relationships. If you don’t, they may not receive assets intended for them.
People who have been married before are often aware of the challenges that can arise during a divorce and usually want to take steps to avoid a similar situation. This desire becomes even stronger if they feel their ex-partner took advantage of them or got a better deal. But, most importantly, a past divorce can influence a person’s future rights and responsibilities in a new marriage.
Signing a prenup allows parents to protect the financial interests of their children from a previous marriage by ensuring that certain assets remain separate property. Moreover, premarital agreements can prevent conflicts over a will if a parent dies.
Without a prenuptial agreement, the wealthier party may end up paying substantial spousal support, and marital assets could be divided equally in case of divorce. By signing the agreement, the asking party decides which assets to keep. But the benefits aren’t one-sided. The other party enters the marriage knowing exactly what their financial future holds in case of divorce.
Unless otherwise specified, debts brought into the marriage are the responsibility of the person who incurred them. On the other hand, debts incurred during the marriage are usually divided equally, putting the non-debtor at a disadvantage. A premarital agreement helps avoid this by clearly stating who is responsible for repayment and by protecting funds from the marital estate, ensuring they aren’t used to settle debts.
If you own a business before getting married, a prenuptial agreement is practical. Not only does it allow you to control how much ownership or interest your spouse can claim following a divorce, but it also protects your business partners from being affected by the outcome.
Inheritances are typically considered non-marital property. Nevertheless, a prenuptial agreement can explicitly address this in the event of a dispute.
Choosing to parent full-time means forgoing career and financial opportunities, putting the stay-at-home parent at a disadvantage in case of divorce. A prenuptial agreement addresses this by outlining solutions such as splitting money into joint accounts, purchasing life insurance policies, or contributing to a retirement account for the other spouse.
Without a prenup in place, state law determines a divorce’s outcome. Each state has its own laws, generally falling into two categories: equitable distribution or community property.
Most states follow the principle of equitable distribution. That means assets are divided fairly, considering the couple’s assets, debts, and needs. “Fair” doesn’t always mean an equal split. Equitable distribution also takes into account financial contributions, the length of the marriage, and future earning potential.
On the other hand, nine states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin — follow community property rules. In these states, assets and liabilities accumulated during the marriage are divided equally, while individual assets brought into the marriage remain separate.
While many people view signing a prenup as a precursor to divorce, that’s rarely the case. In fact, addressing financial matters early on is essential for a healthy relationship, especially when you consider that 20% to 40% of divorces result from money issues. Rather than viewing a prenuptial agreement as a bad omen for your marriage, see it as an insurance policy that helps you avoid unwelcome surprises down the road.
With all that said, whether or not you decide to sign a prenup is a personal decision. Spend plenty of time thinking and discussing it, and make the decision that’s right for you.
Because prenuptial agreements aren’t in the public record, it’s impossible to know exactly what percentage of marriages have a prenup. Draft My Legal Docs estimates the percentage is around 10%, while a Harris Poll of a thousand respondents found the percentage closer to 15%.
Prenuptial agreements aren’t just for the rich and famous. They’re a sound financial decision for engaged couples trying to decide how to manage their money, pay off debt, and negotiate assets in case of divorce.
Although prenuptial agreements tend to help, rather than harm, marriages, it’s still your right to refuse one. If you and your partner have different opinions about signing one, consider speaking to a mediator or counselor to find a resolution.
Discussing the potential financial aspects of a divorce might not be the cheeriest topic, but a moment of discomfort now can save you from more significant challenges later. Once you’ve tackled the tougher conversations, you can shift your focus back to more enjoyable things, like planning your dream destination wedding and crafting a memorable wedding toast.
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