The Need for Pre-Nups
A prenuptial agreement is a contract made between a couple before they get married that specifies the exactly disposition of all marital assets, debts, real property and other details in the case of an eventual divorce. Although prenuptial agreements have seen increasing use in the last decade, enforcing one can sometimes be tricky if the other party challenges it in court.
Even though it is obviously difficult to talk about divorce before a marriage has even taken place, it can be a good idea when one spouse has children from a prior marriage, or they might own a business and be much wealthier on their own than their future spouse is. Don’t think a prior agreement will override all situations though, as you can’t restrict child support, child custody or child visitation in a prenuptial agreement. The court will not allow you to make decisions that are not in the best interest of the children.
You can use the prenuptial agreement to predetermine financial decisions that might be made during the marriage involving bank accounts, income taxes, home purchases. In order for a prenuptial agreement to be legal and enforceable usually requires help from a lawyer. The laws governing prenuptial agreements vary from state-to-state and an attorney will need to write up and execute a prenuptial agreement if it is to have a chance of standing up later on. Some prenuptial agreements may also include what is known as a “sunset clause” that allows for changes or the termination of the agreement after a certain specified period of time.
The reality is that there are no “one-size-fits-all” rules when it comes to prenup agreements. You may want to consider entering into a prenuptial agreement before you get married if you fall into one of the following categories.
- You have substantial assets.
- You own a business.
- You own real estate.
- You already have children of your own.
- You have other considerable assets like stocks, CDs, bonds, cash, or retirement accounts.
- You expect to inherit money or property.
- You are marrying someone who has substantial debt.
Most states consider the property that one spouse acquires prior to marriage as the separate property of that individual and does not become marital or community property due to a marriage. A pre-nuptial agreement that lists all separate property is a good way to help ensure those assets remain separate property after a divorce.