By: Investor Solutions, Inc.
There is no better way to kill the romance than by asking your better half to sign off his/her rights to your assets. After all, the general misconception is that a prenuptial agreement really means “honey, I don’t trust you”.
The “prenup” is no longer just for the rich and famous. More and more men and women are warming up to the idea of pre-marital agreements. Let’s face it, one out of two marriages end in divorce (the statistics are even higher for second marriages). The number one cause of the split is money. A prenup is an important consideration when planning your financial affairs. As difficult as it is to address and as unromantic as this piece of paper might seem, the benefits far outweigh the disadvantages.
What is a prenuptial agreement?
A prenuptial agreement is a contract entered into by two people prior to marriage. The contract commonly defines how property is divided and describes the rights to spousal support in the event of a divorce or death. The scope of a premarital agreement can be as broad or as limited as the situation dictates or the parties desire. It can deal with just one asset or it can fix all of the parties’ rights arising out of the marital relationship. Without a pre-marital agreement, state law will specify how your property will be divided. And the results may not please either of you. This agreement provides greater control over the division of property from the marital pool and avoid lengthy court battles over assets.
The pre-marital agreement must be fair and reasonable in order to hold in court. Provisions within the contract that would incite divorce, limit rights of custody/visitation, child support and/or spousal support could render the agreement invalid. Some rules relating to non-financial matters are not enforceable in a prenuptial agreement. Such rules include but are not limited to: responsibility for household chores, how the children will be raised, whether to have pets or not.
As with any legal matter, it is highly recommended that you seek the counsel of a competent attorney who specializes in this particular area.
Candidates for Prenuptial-agreements
The predominant reason for a prenuptial agreement is to preserve, in the event of a divorce or death, control over the distribution of assets accumulated prior to and during the marriage. You should be particularly interested in this contract:
- If this is not your first marriage and you have assets set aside for the education, health and maintenance of children from previous marriages
- If a considerable amount of funds has already been accumulated for retirement
- If other assets such as real estate or/and business interest are at stake
- If you have an inheritance that you wish to keep in the family
- If either or both of you have accumulated debt. Without a pre-marital agreement, creditors can sometimes turn to marital or community property to satisfy the debts of just one spouse. A prenup can limit your liability to each other’s debt.
Let’s face it, the topic of money is not an easy topic to bring up. Most of the time, a discussion about money leads to a disagreement that couples would rather avoid. A prenup is a way of dealing with the problematic subject of finances in a marriage. It forces you to iron out these difficult issues and come to an agreement on how you want to handle your marital life. What happens to the primary child care giver if he/she gives up on a career? Who will pay the household bills and how? Are you going file jointly or separately? How are you going to proceed with large purchases? How are you going to handle debt? A prenup might be the key to a honest and lasting relationship.
As much as we all wish to make it to “until death to us part”, the reality is that half of us will not. A prenuptial agreement can help avoid the potential financial uncertainty of a marital split early on in the process.