Prenuptial agreements might have a bad reputation from tabloid accounts of celebrity divorces, but these important legal arrangements are for more than the rich and famous. Nor are prenuptial agreements a statement that a couple plans to divorce or otherwise wants an exit strategy. When done right, a prenuptial agreement can help a couple take stock of their assets and set the stage for efficient and open communication about joint finances, thus strengthening the marriage.
In essence, a prenuptial agreement enumerates one or both of the partners’ assets and stipulates which of these assets will not become jointly held upon marriage but instead remain individual property.
While one of the most common reasons, and the most notorious in pop culture, is to protect an individual’s assets in case of divorce. This is especially important when a couple’s assets are imbalanced; if one partner makes or owns ten times the other’s worth, the assumption of each partner being entitled to half the property at divorce is not fair.
Prenuptial agreements, however, have many other uses and can serve the needs of many kinds of people. For instance, a prenuptial agreement can protect one spouse’s assets from the other’s liability. For example, if a woman is a doctor, and her husband owns his own business, they may have a prenuptial agreement as part of an asset protection plan. If the wife is sued for malpractice, her husband’s business is not counted as part of her property, limiting her potential payout amount and protecting his business holdings. The reverse is also true, if the husband should be sued for a slip-and-fall incident.
For people who are remarrying and have children from a previous marriage, a prenuptial agreement can make lines of inheritance clear. Whereas liquid assets or a family business would default to a surviving spouse, a prenuptial agreement can specify one’s biological children as the sole inheritors of part or all of one’s property.
With people marrying later and later in life, even relatively young people without great personal wealth still have hard-earned assets worth protecting. Millennials getting married might consider a prenuptial agreement to keep separate assets from each partner’s respective, established career or to protect assets from one partner’s considerable student debt.
Prenuptial agreements are as varied and individual as couples. If you have questions about a prenuptial agreement, call our office. I will be happy to discuss your particular situation and the options that may work best for you.