Do You Need a Prenuptial Agreement?

$100 and Wedding Rings - Prenuptial AgreementIf you’re planning to get married, congratulations! There are a lot of decisions to make in the coming weeks and months: how you want to celebrate, whom to invite to your wedding, where to go on a honeymoon. In the midst of all these happy choices, you may not want to think about the possibility of conflict with your future spouse. However, planning for the possibility of disagreement can, ironically, help you to avoid disputes down the road and help keep your happy beginning alive. Although it might not be what you want to think about now, it’s worth asking yourself (and your intended) if you need a prenuptial agreement.

Many people think that getting a prenuptial agreement means you are already planning for what happens if you later divorce. While it’s true that having a prenup can make a divorce easier if you do need one, it is also true that starting your marriage in agreement about important issues can help you prevent conflict that could lead to divorce.

A prenuptial agreement can cover much more than how property will be divided in the event of a divorce. It can clarify what property is considered marital and what is considered separate (not subject to division in divorce),

How a Prenup Can Prevent Disputes

Imagine you were starting a business partnership. You would never say, “Well, I like my business partner a lot and enjoy the time we spend together. I don’t know what his finances are like or how he feels about taking on financial risk, but darn it, he’s a great guy! Let’s form this partnership—I’m all in!” Of course, a marriage is different in many respects from a business partnership, but it also has similarities. You are pooling financial resources and sharing responsibilities. If you haven’t talked about how you’re planning to do this, you are leaving an awful lot to chance.

Discussing these important issues doesn’t mean that you need to have a prenuptial agreement. But the process of working out a prenuptial agreement necessarily means that you need to discuss matters in detail. We won’t lie: some people learn things in the process that lead them to conclude they shouldn’t marry. This is sad, to be sure, but not nearly as sad or disruptive as making the same discovery after having married and had children.

Much more often, though, the process of deciding what should be in the prenuptial agreement serves a much more productive purpose: it gets couples to discuss their values, reach agreements, and practice resolving differences before conflicts arise. Not only does this get them on the same page regarding important issues, but it helps them practice communication skills that will serve them well in their marriage.

Who Benefits Most From a Prenup?

As discussed above, any couple can benefit from the process of creating a prenup, but having an agreement is more beneficial for some than for others. Who benefits most from having a prenup?

There are two circumstances in which a prenuptial agreement can be especially helpful. The first is when one party to the marriage has significant assets or debt. The parties should address responsibility for any debt and confirm whether certain assets will be treated as separate property, not subject to division in the event of divorce. While assets owned by one party prior to the marriage are typically treated as separate property in a divorce, if the property appreciates or is added to during the marriage, or is commingled with marital assets, its status as separate property becomes less clear.

When the assets one party brings into the marriage include an interest in a business, a prenuptial is highly recommended. No one wants their ex-spouse to become (or remain) a partner in their family business. While such an occurrence isn’t common, why leave it to chance? Specify at the outset of your marriage what outcomes are desired and which are unacceptable.

Many people who consider prenups do so because of a financial imbalance between the parties. But there is another group of people for whom prenuptial agreements can preserve harmony—not just between the couple, but among their families. Blended families, especially those with adult children, can really benefit from a prenuptial agreement. This is because a prenup can determine not only who gets what in the event of a divorce, but who will inherit when one member of the couple dies before the other.

Absent a prenup, this is a common scenario: John and Jane marry. It is the second marriage for both, and both have adult children. Both are comfortably well off, and both have family heirlooms they hope to pass on to their children. If John dies before Jane, and doesn’t have a prenup or estate plan, she will inherit the vast majority of his property. This includes family heirlooms that would mean more to his children, but which ultimately may end up in the hands of her children.

Why not just prevent this outcome with an estate plan? This is another reasonable option. But couples may not get around to creating an estate plan right away, and many put it off too long. Also, adult children may be suspicious of the motives of their parent’s second spouse, and this suspicion can create tension in the relationship. With a prenuptial agreement, the parties can agree at the outset of the marriage as to the disposition of their property when one of them dies. They can privately communicate their agreement to their children, and everyone can relax about what the future holds.

If you are wondering whether you and your future spouse should consider a prenuptial agreement, we invite you to contact our law office to discuss your situation and whether a prenup might be right for you.

You may also be interested in: