Statistics show many couples are getting married and remarrying later in life, which lead to more serious financial consequences should the marriage end in divorce.
Negotiating finances and other issues during an engagement may be easier than during the high-stress period associated with divorce.
A premarital agreement can promote trust and equality in a marriage. Because couples must fully disclose their assets and liabilities, it also encourages financial planning and presents the financial reality that couples face.
Prenups may be especially beneficial if there is substantial financial inequality in the relationship. Couples can resolve inequalities in these agreements.
Prenuptial agreements are helpful for addressing allocation of premarital and marital property. These assets typically become commingled over the length of a marriage and complicate division.
Premarital property is any property such as real estate, investment accounts and debt held before a marriage which typically goes to the spouse in a divorce. Marital or community property such as income earned, or assets obtained during the marriage may be divided.
A prenup can contain a listing of all assets and debts such as real estate, securities, cash and retirement accounts and jewelry. It may also describe the treatment of each spouse’s contributions to an asset as marital or separate property.
A prenuptial agreement for example, may state that a separate residence remains separate property despite appreciation and another spouse’s contribution to the property. Normally spouses would seek a claim against property because of contributions made during the marriage for upkeep and other costs.
Premarital agreements also address other issues such as a spouse’s claim to the other spouse’s business and the valuation of that business in a divorce. More recently, couples have addressed the custody and care of their pets.
These agreements have to be reasonable. Each party must be transparent about their financial situation, and couples cannot sign under duress. A prenuptial agreement needs to be negotiated well before the wedding date to avoid the appearance of duress.
Each person should have their attorney represent them during the negotiation and drafting of these agreements. This helps ensure that the agreements are fair and meet a person’s interests.