When planning to spend the rest of your life with someone, the last thing you may want to bring up is how to protect your assets in case you break up. Young love rarely sees the possibility of a breakup happening. Besides, who would dare bring up a prenup after pouring their heart out over nuptials?
While broaching the subject of a prenup or a premarital agreement may not seem like something someone in love would do, experts say, “Why not?” If you’ve been thinking about bringing up the “forbidden” word before marriage, here are some things you should know.
What Is a Prenup?
A prenup or a prenuptial agreement is a written agreement a couple signs off on before marriage that states their rights and responsibilities regarding their assets and debts prior to marriage and what should happen in the event of a divorce.
What’s the Benefit of Having a Prenup?
While many people view prenups as a way to bring demise to the relationship, experts say that prenups can be a wise investment because they can actually help avert a costly and contentious divorce. How is it possible? With a prenup, both parties must disclose specific financial details about themselves, force couples to communicate their financial goals, and have that hard-to-have conversation about money before they marry. And since money issues are one of the leading causes of divorce, the prenup actually initiates the conversation that most couples never have.
Believe it or not, when a couple goes into a marriage with a better understanding of each other’s financial goals and financial situation, it helps to build the foundation for a stronger and long-lasting marriage.
Who Needs a Prenup?
If you’ve thought that only the wealthy need prenups, think again. Any couple can have a prenup. If you’re an individual with debts and assets, you can have an interest in having a prenup agreement before marriage. A prenup is most effective when both parties agree that it’s in both their best interests. If only one of the individuals sees the benefit and the other doesn’t, that’s when the prenup becomes an issue.
Here are some justifiable reasons to have a prenup:
If at least one of you has already been married: If one of you has already suffered a bitter divorce, you may want to use lessons learned to prevent that type of nasty outcome again. You may feel that your ex-spouse got the better end of the deal and want to ensure the outcome is more equitable.
If at least one of you has children: If one of you had children from a previous marriage or relationship, it might be your desire to protect the interest of your child’s financial future. It could even serve as a will or last wish in the event of a parent’s death.
If one of you is wealthier: This is why most people need a prenup — to protect what is already theirs.
If one of you is severely in debt: A survey recently showed that 27% of millennials keep the fact that they have significant credit card debt from their significant other. Needless to say, this could be an indication of more problems to come during the marriage if one has a problem with spending. A prenup can help protect the spouse who’s in less debt from having to incur the premarital debt of the other.
If one of you owns a business: Should a business collapse, it’s already detrimental for other partners involved. It’s one less worry if a prenup agreement lays out what happens to the demise of a business created before the marriage.
If one of you has an inheritance: Generational wealth is real for many people. To protect what’s already in the family, it may be essential to have an agreement in place, especially if it impacts other members of the family.
What Should Be Included in the Prenup?
For the best outcome, a prenup should include:
Premarital assets: In addition to the premarital assets, the prenup agreement can also outline if any of those assets will remain separate property or become assets of both parties after the marriage.
Premarital debts: Use the prenup to outline which debt will remain with the individual and which debts both parties will be responsible for.
Spousal support/alimony: Should the marriage end in divorce, the last thing you want is a judge deciding this factor. A prenup makes it significantly easier for both parties to walk away from the marriage in agreement.
Financial responsibilities: This can be good to know for a couple working together as one. Use the prenup to outline who’s responsible for what.
Provisions for stepchildren: If children from other relationships will exist in this union, it can be beneficial to have provisions outlined for them. Sometimes couples don’t realize until after they’ve gotten married that they are on two completely different pages when it comes to their stepchildren. A prenup can outline assets for children from previous relationships or past marriages so everyone’s in the know.
Business Earnings: If significant growth exists in a business before the marriage, you may want the prenup to outline whether profits are separate or marital property.
What Happens if I Don’t Use a Prenup?
Marriages that end in divorce that don’t have a prenup in place risk a judge’s brutal and harsh judgment. That means the gloves come off, lawyers get involved, and things could get complicated. It’s likely that by the time the divorce is over, neither party will talk to the other. A prenup can prevent that and cause the divorce to be less costly and more civil.
The Bottom Line
A prenup isn’t as bad a word as people make it out to be. About a third of all relationships end over disputes about money. If a prenuptial agreement can help remedy that, it may be worth considering after all.
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