Before making a prenuptial agreement, it is crucial on your part to have a better understanding of this type of contract along with its pros and cons.
What Is A Prenup Agreement?
Also called premarital agreement, a prenup agreement (short for prenuptial agreement) is a contract that couple makes before getting married. It is liable for controlling what happens to each party’s property should their marriage ever end.
The prenup’s content varies but mostly comprises of terms on how the assets or properties, as well as future incomes, will be handled and managed in the marriage, plus the division of child and spousal support or properties in the event of death or divorce.
A prenup agreement is more than just staying rich or ensuring your spouse doesn’t get a dime if they leave you. It is also about protecting yourself and your assets from potential bankruptcy or protecting assets, businesses, and funds that were solely yours before you were married or even met your spouse.
How it Works
Prenups work similar to other contracts. You and your partner discuss the several issues you want the prenup to cover. You will then come to an agreement regarding those issues you’ve talked about. The agreement will be written in a formal legal document. You and your spouse will need to sign it.
The process may be simple as it looks, but there are some strict legal rules you need to adhere to in order to make the document valid. Consulting with a lawyer is suggested before signing a prenup agreement. This way, you know what the boundaries set within the prenuptial agreement are all about.
Why Do You Need a Prenup?
As opposed to popular opinion, a prenup agreement is not only for the wealthy people. Aside from protecting the assets and properties of a rich fiancé, the agreement is also used for protecting and achieving other personal purposes.
Keeping property in the family: You can ask for a prenup if you own or are expected to receive property from family, be it a share in your family business (including its potential earnings) or a family treasure. This may even include the property you are expecting to receive as a future heirloom.
Keep finances separate: A premarital agreement can be done if you don’t want all or some of your own accumulations in marriage divided up by a court.
Get solid protection from debts: Prenup agreements can be used as well to protect each other’s assets from potential debts. This includes credit card debt, personal loans, and school loans.
Provide assets for children from a prior marriage: Blended families are quite common these days and it is important to ensure all your children are protected. In case either of you has children from another relationship or want to ensure those children get their share of your assets and/or properties, a prenup agreement is helpful.
Avoid fights in case of divorce: Some spouses argue on how their properties will be divided when marriage comes to an end. To avoid a similar situation, a prenup can be essential. Since the decision on how to divide personal and marital assets (or debts) have already been pre-agreed upon, it saves time during the divorce proceedings (should your marriage ever come to that).
What is Included
- Family property (heirlooms, real estate, business shares, etc.)
- Spending and saving strategies
- Marital and separate property
- Children from a previous relationship
- Estate plans
- Financial responsibilities during the marriage
- Debt liability
- Spousal or alimony support
- Distribution of property in a divorce proceeding
- State laws prevailing the agreement
What is NOT Included
- Child support
- Child custody
- Rules regarding personal matters
- Alimony right forfeiture
- Anything considered to be unfair or illegal
Prenup agreement is a smart move because it offers various benefits, including:
- Facilitates efficient communication between the involved parties.
- Keep financial stability. Gives you a peace of mind knowing all the assets or belongings you’ve worked hard for will be retained.
- Safeguard assets for your children from a previous marriage. Without an agreement, your spouse may be the one to receive the assets you intended your kids to have.
- Protection against debts. A prenup determines how liability for debts will be disseminated between partners. It can help protect both parties from issues with creditors.
- Special provisions that are unique to the couple’s situation.
- Limit your obligation to pay for the attorney fees for your spouse if you divorce
- Limit the amount you need to pay your partner in alimony if divorce occurs
- No financial secrets since the agreement is a full disclosure of liabilities, assets, and earnings by both partners.
The agreement also provides a share of disadvantages, including:
- Uncomfortable and unromantic
- Trust issues leave the couple open to the probability of divorce or separation
- Might be completely unnecessary
- Child support and custody issues cannot be included. The court still has the final say in calculating the child support or time sharing agreement.
While prenups may seem unromantic, some experts believe it is just careful financial planning. It guarantees that the financial matters of both parties are handled according to their wishes. To know whether a prenup agreement is right for you or not is a very personal decision that should establish after a serious conversation with your fiancé.