Deciding whether or not to enter into a prenuptial agreement is a very personal decision. Each person and relationship is unique. Take your decision after considering your unique circumstances.
Advantages of Prenuptial Agreements
The benefits of having a prenuptial agreement include:
Protection of inheritance rights of children and grandchildren from a prior marriage
Protection of business or professional interest from division or control or involvement of the former spouse in case of divorce
Protection from liability for the debts of the other spouse
Compensation in case of divorce for sacrifices to contribute to the marriage such as giving up a high paying job
Determination of the financial obligations of the spouses
Determination of the amount of spousal support in case of divorce
Protection of financial interest of older persons entering into a subsequent marriage or the financial interests of wealthy individuals
Most people think that discussing these issues with one’s partner can ruin the relationship. However it is better to discuss and sort out these issues at the beginning of the relationship. This will go a long way in ensuring that there isn’t much tension later. Even if you and your spouse decide not to have a prenuptial agreement, discussing these issues is a good idea.
Disadvantages of a Prenuptial Agreement
Prenuptial agreement has its own disadvantages. These include:
Your spouse can deprive you of your right to inherit his or her estate in case of his or her death.
You can be deprived your share in the increase in the value of your spouse’s business or profession even if you made any tangible or intangible contribution the growth and success of the business or profession
A Prenuptial Agreement can create a sense of mistrust – why would you or your spouse want to start the relationship with a contract setting forth what happens in case of death or divorce
Takes the wind out of emotional sails
It is difficult to predict the future. Any insignificant compromise you make now may appear as a major mistake later.
In case of a divorce, the spouse with lesser financial resources may find it difficult to sustain the lifestyle he or she had gotten accustomed to during the marriage when the agreement limits the amount of spousal support
Many terms are agreed to during the honeymoon phase of the relationship when the spouses are madly in love without knowing the consequences.
Your Specific Circumstances
Once you have understood the benefits and disadvantages of a prenuptial agreement, you must consider your specific circumstances.
Questions to Ask
Ask yourself these questions:
• Do you have any ownership rights in any form of real estate?
• Other than real estate do you own assets in excess of $50,000?
• Does your earned annual income exceed $100,000?
• Do you have any ownership rights in any business?
• Is your retirement benefit worth more than your requirement for one year?
• If employed do you have stock options and other such employment benefits?
• Will your partner or you attend school for obtaining an advanced degree while the other works?
• Do you have heirs other than your partner?
If the answer to any of these questions is a YES, you will need a prenuptial agreement. If your answers to all the questions are NO, you can still use a prenuptial agreement to protect you assets both current and future.
Important Property Issues
What to include in a prenuptial agreement will depend on the specific circumstances of you and your spouse but here are some common issues that are generally included in prenuptial agreements:
• Estate planning including providing for children from earlier marriages
• Separate business
• Distinguishing joint and separate property
• Retirement benefits
• Avoiding liability for debts of each other
• Alimony and asset distribution in case of divorce
• Tax returns
• Household bills
• Joint accounts, if any
• Major purchases
• Credit Cards
• Savings contributions
• Attending School
• Property distribution in case of death of one partner
• Dispute resolution mechanism
Your comfort level
Once you have decided on the issues to be included in your prenuptial agreement, you must evaluate your comfort level. Understanding the laws of your state can be helpful to know how you will be affected in case there is no prenup.
When discussing the issues with your partner is honest and upfront. You can use the services of a third party professional such as a counselor. Sometimes you may not want one but your partner may want one.
When you decide to make one, ensure that it is fair to your partner. The court will review your agreement to ensure that it is fair to your spouse as well. The agreement must be valid under the state law. Once you have discussed the issues with your spouse and have agreed on the terms, hire an experienced attorney to prepare the agreement.