Any couple with personal or business assets can benefit from a prenuptial agreement. In the event of a divorce or death of a spouse, a prenup ensures property remains in the possession of its original owner – versus being left to the decision of the state. Prenuptial agreements are also helpful for specifying any future income or assets accrued through inheritance you don’t want to be shared with your spouse if the marriage were to end.
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Increasingly more couples are signing prenuptial agreements before making their way down the aisle. It’s especially popular with those remarrying for the second time. Prenups aren’t just for the wealthy or those dealing with a financial equality. Though most people associate it with divorce, the main purpose of a prenup is to protect each spouse’s financial interests.
A prenuptial agreement may not be the most romantic way to celebrate an upcoming marriage. However, having this honest discussion upfront can be a positive experience and even help couples better navigate financial issues down the road. In today’s blog, we’ll explore five key reasons engaged couples should consider a prenuptial agreement and how to get started.
Establishing Yours, Mine and Ours
While prenuptial agreements address and protect assets acquired before a marriage, it can also outline how marital property will be distributed in the case of divorce or death. Other areas a prenup may cover are spousal support, death benefit and family inheritances.
In addition to a prenup, there are other ways for couples to keep their assets separate. For example, a revocable living trust ensures that certain property or income is directed to someone other than your spouse.
You also have the option of retaining separate bank accounts and keeping real estate under its dedicated owners. When people get married, they often change the title to include both names. While this doesn’t hurt, you including your spouse on the deed may give a judge the impression you gifted them half – deeming it joint property.
Contrary to popular belief, a prenuptial agreement doesn’t determine the fate of marriage. In fact, discussing these matters upfront can help couples work together more effectively moving forward. If you or your spouse has considered a prenup, here are some other benefits to consider with filing.
5 Reasons to Consider a Prenuptial Agreement
1. It helps you confront money issues early.
A prenup often gives couples the push they need to address financial matters before saying, “I do.” This discussion should include the fair split of wealth related to savings, investments, potential alimony and debt. Confronting these issues not only puts the cards on the table but helps steer your financial decisions moving forward – like taking out or co-signing student loans.
2. It provides a sense of security or insurance.
A prenuptial agreement also minimizes the risk of a peaceful divorce turning into a bloodbath. Rarely does a spouse get reckless with the other’s financials. However, it happens enough to warrant the safety net of a prenup. Sitting down together and lining out assets with full transparency is the best way to ensure a partner can’t leave with the incentive of claiming the other’s property.
3. It establishes debt right out the gate.
Debt is one of the most difficult (and destructive) financial struggles. A prenuptial agreement creates an honest, open space to discuss past and current debts. While the assets you bring into the marriage is often viewed as separate, any debt accumulated during the marriage can be viewed by the court as community property. In other words, both parties are now responsible for paying it off. In a prenup, you can offset this by establishing ownership of specific credit lines.
4. It secures inheritances and heirlooms.
As we mentioned earlier, a prenuptial agreement can be especially beneficial for those who’ve been married before and have children. It can outline various estate planning activities and help family members on both sides of the marriage feel secure in their inheritances. A prenup also helps spouses feel confident that his or her post-death wishes will be followed.
5. It overrides most state laws.
Whether it’s used to protect assets post-divorce or death, a prenuptial agreement puts the power into the hands of the couple rather than leaving the divvying to the state court. When you get married, you’re agreeing to the state’s marital laws that may not benefit you or your spouse. To avoid a cookie-cutter separation and help reduce the cost of litigating a divorce (since financial terms have already been outlined), you can proceed with activities stated in the prenup outside child support, custody and visitation.
We’ll be honest; discussing money with a partner is rarely pleasant (especially when it’s a prenup). During the conversation, make sure your loved one understands that it isn’t a judgment of their character or behavior, but a practical conversation about your financial future. We recommend starting financial conversations early as a couple and transitioning into wealth management, debt and alimony later on.
A prenuptial agreement doesn’t increase your chances of divorce. It’s an effective way to establish your own rules instead of relying on the legal system to ensure a fair distribution of assets. To learn more about prenuptial agreements, feel free to reach out to our trusted team of attorneys today at (405) 701-6376.