As you prepare for marriage, one topic that is likely uncomfortable for you and your future spouse is the idea of a premarital (or prenuptial) agreement. Few people want to think about the possibility of divorce before they’re even married, but preparing for the possible reality that the marriage may end one day can be prudent for both you and your future spouse.
It may remove underlying concerns about what each spouse contributes to the marriage, the effect of your new marriage on children from previous relationships, etc. Premarital agreements can be an estate planning tool as well. A prenup may not be right for you, but there are a few factors you should consider first.
Are you or your spouse bringing property into the marriage?
In many states, everything owned by either party before and during the marriage is considered marital property for purposes of division at the time of a divorce. Some states will delineate between separate property and community property, but if those assets become commingled during the marriage, it may be hard to argue that the once separate property did not become community or marital property.
A prenup can outline what each of you brought into the marriage, and allow you both to agree that you each keep what you brought into the relationship. It can save attorney’s fees and arguments in a divorce process to outline this distinction and agree to it up front, when you’re not dealing with the high emotional turmoil of a divorce.
A premarital agreement like this can also remove concerns that one of you is just “marrying for money.” For example, if your family members are hesitant to embrace your impending marriage, a prenup can put those whispers to rest if that is a concern for you and your future spouse.
Do you have children from prior relationships?
Another common reason to obtain a premarital agreement is if you want to make sure property you had intended to reserve for your children from a prior relationship is not included in the marital estate, and thus subject to division. This can also be accomplished by certain estate planning tools, but a prenup preventing certain property from being included in the marital estate can help to alleviate concerns that your new marriage will take away funds from your children from a previous relationship.
Some states, such as Indiana, give a spouse a statutory right to a certain percentage of a marital estate, even if a will is in existence. A prenup can address this issue and waive the “right to take against the Will.”
Do you anticipate receiving a substantial inheritance or gift from your family?
Some states allow a party to set aside property received by inheritance or gift during the marriage, but if the gift or inheritance is not awarded to you properly during the marriage, your spouse could try to make the argument that it is her property as well. The easiest way to avoid this issue is to execute a prenup prior to the marriage addressing this property and your wishes for setting such property away from the marital estate.
Do you own a business?
If you enter the marriage as a business owner, you may want a prenup to:
1) Establish the value of the business at the time of marriage and that this is your separate property, and
2) Delineate that you would continue to have control of the business even in the event of a divorce.
This can prevent arguments that the entirety of the business’ value is marital property by establishing that it had worth at the time of marriage and that the business will continue to be your separate property and not able to be claimed by your spouse. This can also put to rest concerns your co-owners may have regarding how your upcoming marriage could affect your business’ structure in the event of a divorce.
You may not feel that a prenup is necessary in your circumstances, but it is advisable to think over the above factors before dismissing the idea. Even if you don’t currently have a substantial amount of property, a premarital agreement can still be in your best interest.