Should You Consider A Prenuptial Agreement

It is an unfortunate reality that one in three first-marriages are now ending in divorce, with an even higher rate of one in two second-marriages dissolving. With Boomers and older couples entering 2nd or 3rd marriages in their later years, a prenup is often considered a wise form of financial planning. It is one way to protect real estate, heirlooms, financial assets, and even the family business to pass on to children from an earlier marriage.

A prenuptial agreement is essentially a contract between two people, headed for the altar that specifically defines how the assets will be distributed in the event of not only a divorce, but also a death. Formerly considered a necessity for the wealthy, it is more realistic for someone with less than millions to be mindful of how to protect what they have.

Who should have a prenup? You may just want to make sure you won't lose your house (again?) or fear having to pay (more?) alimony. But, even with a prenup you will not escape paying support for children from the new marriage.

Particularly, if you fall into any of these categories you should seriously consider a prenup:

  • You have children from a previous marriage. Without a prenup, in most states a surviving spouse will likely inherit one-third to one-half of your estate.
  • You own all or part of a business; the prenup can prevent the business from being split up or controlled by your spouse
  • You anticipate receiving an inheritance
  • One of you is much wealthier than the other
  • You have, or anticipate having loved ones who will require care, such a disabled adult child or elderly parents
  • You anticipate a big increase in your income or a windfall
  • You are concerned about being strapped with your spouse's debt that incurred before our marriage
  • Or, just if you have financial assets you want to protect such as your home, stock, retirement funds.

A valid prenup is one that consists of both parties honestly and fully disclosing all of their assets. If one party hides even one thing, it is grounds for a judge to toss out the contract in its entirety. In order to avoid suspicion of coercion, an "ironclad" agreement should always be agreed upon and signed months in advance of the actual wedding day. A valid prenup is also considered to be "fair" and not leave either participating party in any kind of situation where they may be destitute. The state will always make sure that someone is not being unfairly taken advantage of financially.

Prenuptial agreements can also include agreements that do not involve money as long as the demands are considered reasonable. Expectations like requiring that your spouse take out the trash every other day or that they quit drinking are not considered appropriate. However, agreements such as what religion any children may be brought up are considered important and serious.

Legally, you must use a lawyer to ensure your agreement is ironclad. This lawyer should be a matrimonial lawyer who is familiar with the laws in your state regarding prenuptial agreements. It is important that you understand that your spouse's will does not, and cannot, supersede the prenuptial agreement if your spouse passes away first. However, a will can be significantly more generous, leaving the spouse more than what was agreed upon in the prenup. In the event that your partner is incapacitated the agreement stands as signed.

That being understood, make sure that not only is the contract in writing, but that it is signed and witnessed by your lawyer. There should be three original copies, one going to the bride, one for the groom and one to be kept in a safety deposit box by either your lawyer or CPA. Most lawyers suggest the prenup be updated every 10 years of marriage. As uncomfortable as this subject may be to bring up to your partner, the prenuptial agreement has the ability to save both parties emotional and financial turmoil.