Marriage requires lots of important planning in addition to the wedding. It should include consideration of what would happen if the couple split up. Engaged couples can enter a prenuptial agreement, a type of divorce contingency planning that hopefully is not used, to safeguard their assets and address other matters.
The basics
A prenuptial agreement, also known as a prenup, is a legal contract that a couple executes before their marriage. In these family law agreements, the couple agrees to terms that will govern the allocation of their assets if they ever divorce or die. Couples can change these agreements after they marry or cancel them.
Any couple, besides the wealthy, may benefit from these agreements. These typically address:
- Spousal support or alimony.
- Allocation of property and assets to children from a prior marriage or relationship.
- Designating separate property from marital property that could be allocated in a divorce.
- Drafting wills and trusts to carry out the agreement.
- Home ownership
- Pet custody and care.
- Business ownership and evaluation.
- Liability for debts.
- Financial obligations.
Prenuptial agreements cannot govern child custody and support issues. Courts decide these issues based upon the best interests of the child.
Spouses who benefit from a prenup
Couples can benefit from these agreements for many reasons. But a prenuptial agreement has advantages for couples dealing with these issues:
- Business owners who may want to protect their business and their ownership and to set forth a way to evaluate the business’ value.
- Children from another marriage or relationship may receive assets following their parent’s divorce or death under a prenuptial agreement.
- Entering the marriage with significant assets or who expect an inheritance can set forth whether these assets can be divided.
Advantages
Negotiating a prenuptial agreement requires transparency and a full and candid discussion of finances before marriage. This can help couples plan their financial futures.
These agreements also allow couples to take time to prepare for the worst. Addressing these issues during divorce or after death is stressful and restricts the ability to make sound decisions.
Spouses can protect their assets. Prenuptial agreements may also provide protection against debt acquired by a spouse or certain legal liabilities.
Disadvantages
A partner may be offended when asked to enter a contract before their marriage. Thinking about the worst at the beginning of marriage may be depressing.
It is important that couples are transparent when negotiating these agreements and that they are not entered under duress. Certain formalities are also required for execution of prenuptial agreements. Each partner should also have their own attorney assist and advise them with negotiating and preparing these documents.