A prenuptial agreement (sometimes called an antenuptial agreement, premarital agreement, or colloquially “prenup”) is a written contract entered into by a couple prior to getting married. The agreement enables them to select and control many of the legal rights they acquire upon marrying, and what happens when their marriage eventually ends (whether by death or divorce). Thus, it can be a powerful estate planning tool, if used properly.
By creating a prenuptial agreement, couples can supersede many of the default marital laws that would otherwise apply in the event of divorce (such as laws that govern the division of property, retirement benefits, savings, and the right to seek alimony). They may also waive a surviving spouse’s right to claim an elective share of the estate of the deceased spouse. In some circumstances, it can even protect some property during the marriage – for example, in the case of a bankruptcy.
Contrary to popular belief, prenups are not just for the rich. Here are four other circumstances in which a prenuptial agreement might be a good idea:
1. To pass separate property to children from prior relationships.
If you have children from a prior relationship, you can use a prenuptial agreement to ensure that the property you owned prior to getting married will pass to your children and not to your new spouse’s family.
2. To explain the financial rights and responsibilities of each person during the marriage.
For example, a prenuptial agreement can establish that there will be a joint bank account used by both spouses to spend on joint expenses, savings, and investments, and that each spouse will maintain their own separate account with some of their respective income for themselves to spend as they wish. By articulating this in advance, not only will there be less conflict about how money is being spent, each spouse also experiences financial autonomy during the marriage and the mutual goals of the marriage are achieved through the joint account.
3. To foster trust within the marriage.
For a prenuptial agreement to be valid, it must protect both spouses. For an agreement to be enforceable, it must be fair, be voluntarily signed by both spouses in the presence of their lawyers, not be one-sided on the date it is signed, and have complete honesty from both parties about their assets and debts.
4. To protect from debts.
A prenuptial agreement can also be used to protect spouses from each other’s debts, and can address a variety of other issues as well.
