When you hear the phrase “Prenuptial Agreement,” you may immediately think of Hollywood weddings gone wrong. The idea that Prenuptial Agreements (or “Prenups”) are only important for high net worth individuals is, however, a common misconception. Prenuptial Agreements can serve an important role for any couple preparing for marriage.
When to Consider a Prenuptial Agreement
While contemplating a future divorce may not feel natural to two individuals preparing for marriage, it is an important consideration. A prenup can be a valuable tool for any couple, regardless of the value of their assets. When a couple is deciding whether a prenup makes sense, the following should be taken into consideration:
- In the unfortunate situation of a divorce, fighting over assets can be avoided with a well-drafted prenup. A prenup allows a couple to think through financial implications with a clear head rather than fighting about them down the road when emotions may be more charged.
- Separate Assets. Do you or your fiancé have assets you would like to carve out from your community property? One common example is if one person has children from a prior marriage. A prenup can specify which assets are earmarked for these children.
- Debt Protection. Couples may enter a marriage with vastly different financial pictures, including varying amounts of debt. A prenup allows you to allocate debt as separate or marital, ensuring that the more financially stable party won’t be responsible for certain debt in case of divorce.
Important Prenup Considerations
Some considerations when drafting a prenup include:
- Any real property owned by either party;
- Consideration of all assets;
- Analysis of any debts, including possible future debts;
- Ownership interests in any businesses;
- Retirement accounts and benefits; and
- Any other possible beneficiaries of certain property