Although nobody likes to enter a marriage thinking about potential problems,
nevertheless, they happen. If you're getting married you may want to explore
prenuptial agreements.
Chances
are you won't need one, but finding out more about them will give you insight
into your own relationship. And, depending on your individual circumstances,
maybe you should consider one. Moral issues aside, these agreements can be
useful financial planning tools.
The concept of prenuptial agreements is relatively new. This arrangement
(often shortened to pre-nup) is a binding contract between two individuals who
are deciding prior to their marriage what their legal relationship will be in
the event of divorce. The emphasis is on the word "binding." That
basically means the agreement will not be set aside unless a challenging party
can show fraud or duress. Hence, this is not something you enter into lightly.
Eliminating uncertainty, a pre-nup allows the couple to decide how their
marital and separate property will be defined before they tie the knot. This
arrangement can also help the couple avoid an expensive legal battle if they do
divorce some day.
How can you make sure a pre-nup is legally solid? Begin by hiring two
lawyers, one for each of you. This is not as obvious as it sounds, as many
couples share a lawyer. But the spouse without a lawyer can later wiggle out of
a pre-nup, by suggesting he/she didn't know his rights or was somehow coerced.
Pick independent lawyers. One judge threw out a pre-nup in part because the
husband, a lawyer himself, selected and paid for his future wife's legal
counsel. Then an appeals court overturned the decision. The purpose of a pre-nup
is to keep things straightforward and simple, and clearly in this case it didn't
work.
Perhaps most frequently, pre-nups are made by individuals who have children
or grandchildren from a prior marriage. In this case, a partner may use a
premarital agreement to ensure that, upon his or her death, the bulk of his or
her property passes to the children or grandchildren, rather than the spouse.
This could easily be the case if one partner has considerable income or a share
in a family business, for example.
Without a pre-nup, lots of problems can occur over property or businesses
owned by a spouse before the marriage. It's a separate property, but any
appreciation during the marriage could become marital property--subject to your
spouse's claim. A pre-nup spells out the spouse's stake, if any, to that
property or business, avoiding messy litigation.
Another advantage of a pre-nup is it can open the lines of communication
about important issues which you might not discuss otherwise.
These days, an advanced degree, such as an MBA could justify getting a pre-nup.
Over the long run, MBA's are worth a great deal of money. Or, for example, if
you're a doctor and you become a specialist that has added value. In addition to
your license, your practice is valuable, and it will appreciate during the
marriage, which makes it marital property. If you are planning to go to school
during the marriage, and your spouse will help you pay for it, that counts as
marital property as well.
But courts won't uphold pre-nups of a non-monetary nature. For instance, you
can't sue your spouse for failure to do the dishes, even if your agreement says
that he or she will do them every night.
Finally, don't wait until the last minute before doing a pre-nup. It could be
seen as pressuring a spouse into an agreement and at a minimum will cause undue
stress close to the wedding day. Also a pre-nup must be signed in the presence
of a notary public, and verbal agreements probably won't hold up. Any agreement
should be in plain English, defining the division of assets specifically and
clearly.
Pre-nups may not be very romantic, but neither is divorce.
