Establishing a prenuptial agreement before marriage is smart financial planning. Contrary to what some believe, this legally-binding document does not look forward to a couple’s imminent divorce.
Instead, a prenup is a private contract that acts like an insurance policy. It outlines the decisions regarding each spouse’s property if they dissolve their marriage in the future.
If you do divorce and have a prenuptial agreement, you and your spouse won’t have to suffer through the emotional and financial costs of dividing every asset. Below is a breakdown of the major items a prenuptial agreement can protect and some of the things it cannot do.
What a Prenup Can Do
Set rules about marital assets: A prenuptial agreement protects spouses’ rights and obligations to their property. In other words, the document decides ahead of time which items are marital assets and which would be separate in the event of divorce.
For example, if one spouse owned a home before marriage, the document might state that he or she would have full ownership. That also includes full obligations to the financial costs associated with the house.
Protect one another from the other spouse’s debts: The document can limit each spouse’s debt liability. That way, creditors cannot go after all the marital property if one spouse accrues debt.
Protect children from previous relationships: Spouses with kids from previous relationships can entitle them to money and property.
Protect family property: Couples can note heirlooms, inheritances, business, and other family-owned property in the prenup. Doing so keeps their ownership within their birth families.
Simply put, prenups protect spouses’ property. A couple can typically include anything financial-related in the agreement.
What a Prenup Cannot Do
Personal obligations: Prenuptial agreements cannot split up chores, outline a parenting plan, or require the spouses to behave in a certain way.
Determine custody or child support: Spouses cannot include decisions about where their children (or future children) will live in the event of divorce. They also cannot predetermine how much a spouse would pay in child support.
Violate the law: A prenup cannot defy criminal law or public policy.
Alimony (in most cases): Very few states will enforce spousal support obligations in a prenuptial agreement.
Getting Started with Your Prenuptial Agreement
Before you get married, establishing a prenup will do more than protect your financial future. It can also start an important conversation about the assets you and your fiancé have and plan to have in the future.
Ready to write up an agreement? Use the below checklist to get started.
- List the property and assets you and your fiancé own separately.
- Identify the assets you bought together.
- List your separate debts and other liabilities.
- Note any inheritances you know you’ll each receive.
- Talk about your future financial goals.
- Write down important financial issues you would like to include.
As you discuss these items, be totally honest with one another. Share all information you feel might be important. Feel free to contact our firm when you are ready to make your agreement official. We can help with the next steps.