Deciding on a Prenuptial Agreement

Deciding on a Prenuptial Agreement

Your state government has created a plan for how your property will be divided in the event of divorce or death. Ask yourself if you are satisfied with the state's plan or if you want your own plan. Think about all of the laws your state legislature has passed. Then, ask yourself if you like any plan the legislature came up with on any subject.

Most state laws regarding the distribution of property after death or in the event of divorce leave plenty of room for a judge' s interpretation. Therefore, you can never be sure what a judge will decide is really your property after a marriage. The only way to possibly avoid this is with a prenuptial agreement.

The need to have a prenuptial agreement often does not become apparent until there is a divorce or a death, which is when problems you never thought of tend to emerge. Divorce is more common than most want to believe. Some statistics suggest the divorce rate is even higher in second marriages than in first marriages. Do not forget that prenuptial agreements can be useful in the event of death, which is a subject even fewer people seem comfortable thinking about.

Most people think that a prenuptial agreement is what rich people use to protect their property in the event of divorce from their less wealthy spouse. Actually, there are many more reasons to use a prenuptial agreement.

First Marriages

Even if you and your partner are a young couple with no significant property and typical jobs, and this is the first marriage for both of you, there is some evidence to indicate that prenuptial agreements actually promote stability in a marriage. This is because preparing one gives you a chance to carefully think about the significance of marriage, to clearly understand each other's financial situation, and to consider how you see your financial futures (individually and together). Discussing a prenuptial agreement, even if one is never finalized, will make you realize that by getting married, you are entering into a legally binding contract with financial rights and obligations. This side of marriage is usually totally overshadowed by the romantic and religious aspects, and by the ceremony and honeymoon planning.

Many spouses do not know any of the details of the other's finances. Since one of the requirements of a prenuptial agreement is fully disclosing each party's financial situation, preparing one will help the couple get a clearer understanding of their total financial health. This can be very helpful in making financial decisions. 

It is also good for a couple to share common dreams and goals. Focusing on a prenuptial agreement can help the couple discuss their career and economic goals in life. Especially with the common two-career couple, it is important to share thoughts on where each person intends his or her career to head. If each person is intent on developing his or her career, it might be a good idea for the couple to sign a prenuptial agreement giving up rights in each other's income or business (especially if they have a fairly equivalent earning potential and they are just starting out in their careers). On the other hand, if they are in business together, a prenuptial agreement could outline how the business will be divided in the event of divorce. This document could avoid expensive attorneys' fees later, and prevent a fight over the business in the divorce proceeding.

Children of Prior Marriages

One of the main circumstances for a prenuptial agreement is when one or both of the parties have children from a prior marriage or relationship. In such cases, a prenuptial agreement may be the one way to assure that the children are protected in the event of divorce or death. Otherwise, all of your property may go to your second spouse, with your children getting nothing.

Example: Rob and Rita are married and have no children together, but Rob has two adult children from his former marriage. If Rob dies without leaving a will, under the laws of their state, all of Rob's property goes to Rita. Rob's children will receive nothing.

A prenuptial agreement can help assure that children from a prior marriage will be provided for as intended by their parent. Your future spouse should have no objection to you wanting to take care of your children.

Business or Investment Partners

If you have business partners, you should have a prenuptial agreement to prevent disruption of the business in the event of divorce or death. Otherwise, you or your partners may end up with your spouse as a business partner, and that can cause all kinds of problems.

This caution also applies if the business is a privately held corporation. Many problems have occurred when a spouse inherits stock as part of a divorce judgment.

Example: Mark and his brother Jim each hold 50% of the stock in a small restaurant business started by their father. Mark married Jane, and several years later Mark died, leaving Jane his half of the stock. Jane was then the business partner of her brother-in-law. Jane then married Fred. When she and Fred divorced two years later, she gave Fred the stock in the restaurant as part of the property settlement. Now Jim has Fred for a partner. Is this what Mark would have wanted? Is this what Mark and Jim's father intended to happen to his family business?

Suppose Mark and Jane had divorced. A judge might have divided the stock between them. Now Jim would have 50%, and Mark and Jane would each have 25% percent. Now Mark has his ex-wife as a business partner.

Deciding on a Prenuptial Agreement

Your state government has created a plan for how your property will be divided in the event of divorce or death. Ask yourself if you are satisfied with the state's plan or if you want your own plan. Think about all of the laws your state legislature has passed. Then, ask yourself if you like any plan the legislature came up with on any subject.

Most state laws regarding the distribution of property after death or in the event of divorce leave plenty of room for a judge' s interpretation. Therefore, you can never be sure what a judge will decide is really your property after a marriage. The only way to possibly avoid this is with a prenuptial agreement.

The need to have a prenuptial agreement often does not become apparent until there is a divorce or a death, which is when problems you never thought of tend to emerge. Divorce is more common than most want to believe. Some statistics suggest the divorce rate is even higher in second marriages than in first marriages. Do not forget that prenuptial agreements can be useful in the event of death, which is a subject even fewer people seem comfortable thinking about.

Most people think that a prenuptial agreement is what rich people use to protect their property in the event of divorce from their less wealthy spouse. Actually, there are many more reasons to use a prenuptial agreement.

  • Definition of a Prenuptial Agreement
    A prenuptial agreement is entered into before marriage. This agreement can set forth what will happen to your and your spouse's assets and income in the unfortunate event of divorce, separation or death. Most importantly, a prenuptial agreement can preserve the nature of property in the...
    read more
  • Benefits of Prenuptials
    The benefits of a prenuptial agreement cannot be overstated. Although many divorces do not end up in court, they can still be extremely costly. Most people overlook the fact that marriage is a communion of property. Deciding who receives what property can be a painstaking process requiring a lot...
    read more
  • Validity of Prenuptials
    The courts typically uphold prenuptial agreements unless one person shows:
    read more
  • Community Property and Equitable Distribution in a Prenuptial Agreement
    To understand what a prenuptial agreement can do, it is important to understand community and separate property. Community property is observed in the following states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. All other states follow equitable...
    read more
  • Separate Property in a Prenuptial Agreement
    The rules of community property and equitable distribution only apply to income and assets earned or acquired during the marriage. Separate property is everything a husband and wife own separately. In most cases, separate property includes:
    read more
  • Child Support and Spousal Support in Prenuptial Agreements
    No state allows limitations on child support payment amounts in a prenuptial agreement. Child support payments are defined by state guidelines. On the other hand, spousal support waivers vary from state to state. States which follow the Uniform Pre-Marital Agreement Act permit the waiver of...
    read more