Do you need a prenuptial?


Dalia Ramirez | NerdWallet

Personal Finance | advice

Prenuptial or prenuptial agreements, often called “prenuptials,” have a reputation as a tool used by wealthy people to protect their assets. But as marriages evolved, so did prenuptials, and they may have more uses than you think.

Prenups can give couples an opportunity to communicate their finances and create a clear framework for dividing assets and responsibilities in the event of a separation, divorce, or even distribution of one partner’s estate.

It is true that it is not very romantic to prepare for the worst while you are in a state of happiness before marriage. However, marriage is one of the most important contracts you can enter into, and legal proceedings such as divorce and wills can be so expensive and time-consuming that a prenup may be better to have and not need than to need and not have.

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Prenups can ensure that you, your partner, and even your children are in the best possible financial position no matter what happens. Here’s how to know if you need one, could benefit from one, or might want to consider a different option.

Not all marriages are equal

If you inherit a family business, have children from a previous marriage or enter into a marriage with significant debt, a prenuptial agreement can give both partners — and their families — peace of mind. These circumstances do not mean that the marriage is likely to end, they just mean that the risks are higher and more parties may be affected.

Prenups can make a more significant difference in states with community property laws. For example, in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, any assets acquired by either partner during the marriage are divided equally in the event of a divorce, which can cause problems with complex assets such as corporations.

“I think everyone can benefit from a prenuptial agreement; some more than others, depending on assets,” says Nicole DiGiacomo, managing attorney for her family and matrimonial law firms in Rockland and Westchester counties in New York. If your assets are complex or highly valuable, it may be worth considering a prenup in particular.

Prenuptial is not a death sentence

Some couples may be wary of prenup because it seems like they are planning for divorce before the marriage begins. However, protecting yourselves – and each other – in the event of a divorce does not mean you are aiming for it, just as writing a will does not mean you are hoping to end your life.

A prenup is “essentially a will to marry,” DiGiacomo says. “Most people want to have a will because they want to be able to decide what happens to their assets and not have a court decide.” Prenups allow you to agree on a fair division of property while things are looking good, so you can control what’s important in a worst-case scenario.

“I try to encourage people not to look at it as a bad omen or a sign of mistrust,” DiGiacomo says. “It’s just calculating a future possibility. No one wants to think about when they die, just as no one wants to think about the death of their marriage.”

Prenups can start important conversations

Prenups can give couples a space to communicate openly about their finances. Craig Harris, estate planning attorney at the law firms of Daniel A. Hunt in Sacramento, Calif., says a prenuptial agreement can be “a really useful tool at the beginning of (the marriage) to get a good understanding of where each party stands.”

According to Harris, a prenup can help some couples align their plans for handling day-to-day marital finances, such as contributing to a joint account or keeping retirement savings separate.

“It’s just a good way to reach agreements early, so it’s not a surprise,” Harris says.

“I’ve never had it get ugly,” DiGiacomo notes of the prenup. “It’s a very collaborative process.”

Prenups aren’t the only option

Although it can be a useful tool, it’s not the only way to agree with your future spouse on crucial financial decisions. It is equally important to have open communication about your assets and a clear, mutual understanding of “yours, ours, and ours.” In fact, some attorneys believe that a prenuptial period may not be necessary.

“If you’re getting married with money, you don’t need a prenuptial agreement to protect that money, as long as you keep it in your own account, in your name,” says Michael Doman, lead divorce attorney at the Law Offices of Michael P. Doman, Ltd.

Doman considers himself old-fashioned about marriage and does not personally advocate prenup. “I like to think that if you get married, you’ll be married forever, and if not, let the cards fall where they may,” he says. Although he formulates it to clients without judgment, Doman recommends that couples seriously consider their views on money and marriage before entering into a partnership, whether premarital or not.

For more personal finance tips, point your phone’s camera at this icon, then tap its link thepennywise.com.


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