It’s June. Wedding season is upon us. It is a good time to think about prenuptial agreements. If you are engaged to be married, should you have a prenuptial agreement? At the minimum, you should at least consider the implications of marriage with or without such an agreement.
A prenuptial agreement is an agreement between the two parties which sets out the obligations each would have to the other in the event of the death of one of the parties, or on divorce. Without such an agreement, state law would dictate what happens upon death or divorce. In the same way that parties execute Wills to dictate what happens with their assets on death, rather than relying on state intestacy law, some parties use agreements to set out their obligations to their spouses on death. It is similar with divorce. Without a prenuptial agreement , state law would divide your assets and set out your obligations toward each other. This may not be in accordance with your wishes.
Prenuptial agreements may be particularly pivotal in some situations. Practitioners agree that, if you are entering into a second marriage, and you have children from your first marriage, you should have an agreement to protect your children from your first marriage.
Such agreements may be less obvious, but should be considered for parties who are going to marry who have very disparate assets (where one party is far wealthier than the other or owns his or her own business) or disparate incomes (where one party earns far more than the other) or disparate debt (where one party may have significant debt from student loan, owed taxes, business startup). It might make sense as well in a case where one of the parties is planning on leaving a job to run the house or raise the children.
Prenuptial agreements can protect both the richer and the more impoverished party. To be effective in most states, each of the parties must be represented by his or her own counsel and the parties must make full and complete financial disclosure to the other. Like other contractual relationships, there should be no duress. It is a good idea to negotiate a premarital agreement with sufficient time before the wedding.
At a minimum, considering what you would want to happen to your assets on your death of unfortunate divorce is a good starting place. Talking to your future spouse about your finances, what you have and don’t have, in terms of assets and liabilities, is a good exercise even if you opt not to have a prenuptial agreement.