When you are in love and contemplating marriage, entering into a contract negotiation with your betrothed may be the last thing on your mind. Wedding details, the guest list and the honeymoon may be all you can see.
Or you may be thinking, "I'm not going to be getting divorced. Why should I have a prenup?"
Or maybe people have told you that you need a prenup, but you don't know how to broach the subject with your soon-to-be spouse.
Or maybe you think that prenups are only for the super wealthy, and if you don't have a lot of money you don't need a prenuptial agreement.
All of those ideas (and more) keep people from signing what could be the most important document of their life. Here are 5 reasons you SHOULD SIGN A PRENUPTIAL agreement before you get married:
1. PROTECT SEPARATE PROPERTY
I live and practice in a community property law state. In community property states, property owned prior to marriage OR property acquired during the marriage by gift, devise or descent (inheritance included) is the separate property of the person who acquired it.
Property you own prior to marriage does NOT become community property (joint property) simply by virtue of marriage. If you keep your property separate (i.e. don't put it in a joint bank account or put your spouse's name on the title or account), then the separate property remains separate.
But what about earnings, interest, dividends and such? Do earnings or increases in value during the marriage remain separate property?
In some states the answer is no.
Creating a prenuptial agreement is THE WAY to ensure that your separate property remains separate, regardless of where you live in the future. When you enter into a prenuptial agreement, you and your betrothed disclose all assets, debts and income. The property and debts (and the values) are included in the agreement setting a baseline for each spouse. The Prenuptial Agreement clearly defines each spouse's separate property and you can state in your agreement that all income, earnings, increases in value, etc. will remain separate property. In the event of a divorce or death, your prenup can be invaluable in proving your claims to your separate property.
2. IF YOU HAVE CHILDREN FROM A PRIOR RELATIONSHIP
If either of you have children from a prior relationship, you need a prenup. In this situation more than any other - regardless of your net worth - a prenup is invaluable. Why?
Because you can clearly delineate financial responsibility and expectations regarding support of minor and/or college-aged children.
Because you can clearly delineate your separate property. And this is extremely important in the event of your death. If you pre-decease your new spouse, chances are good that you want all or a portion of your estate to go to your children. You need a will (I can't stress that enough!), but you should also have a prenup. These two documents, used in conjunction with each other, will protect the rights of your children in the event of your death.
If you are contemplating marriage and have children from a prior relationship, you absolutely should have a consultation with a lawyer who drafts prenuptials about whether or not you need a prenup.
3. IMPROVED MARITAL RELATIONSHIP
I know this one is hard to believe, but if you sit down with your intended and discuss the areas to be covered in a prenup, you may very well improve your future marriage.
Many couples do not discuss issues such as monthly budgets, net worth, debts or other financial issues before they get married. If your spouse is coming into the marriage saddled with significant consumer debt, don't you think you should know? If your spouse is a penny pincher who keeps track of every dime coming in and going out on a spreadsheet or handwritten ledger (I've seen both in my divorce practice), and you are a free-spirited spend what you want without a care person, don't you want to know that? You need to know each spouse's attitudes about money and spending/saving styles BEFORE you enter into this important LEGAL relationship.
The disclosure required for a prenuptial is, in itself, worth the process. Additionally, discussing your intentions and expectations regarding money can set the tone for a more open and honest relationship about money in your marriage.
There are other issues you can and should discuss as well, such as issues about having children an raising them, and spousal maintenance (alimony) in the event of a divorce. These conversations can be very revealing.
4. PROTECTION OF YOUR INCOME AND ASSETS FROM DEBT OF YOUR SPOUSE
In Arizona (check in your own state if different), debts incurred during the marriage are community debt (meanign both spouses are jointly and severally liable) -- EVEN IF YOU DIDN'T SIGN FOR IT OR DIDN'T EVEN KNOW ABOUT IT! This comes as a shock to a lot of people when they get divorced. "But I didn't even know he had that credit card," she may say, or "She ran that up without my knowledge," he may say.
When your estate gets divided (upon divorce or death), ALL debts incurred during the marriage are divided equally -- period.1 How can you prevent yourself from being liable for your spouse's spending?
A prenuptial agreement may be the only way. In Arizona, the court's have held, for example, that a spouse was not liable for his wife's nursing home care since the spouse's had a prenuptial and the husband did not sign as a responsible party for the debt.
The key is to put potential creditors "on notice" of your prenuptial. Discuss with an attorney how you can protect yourself by putting future creditors "on notice."
This is an extremely important aspect of prenuptial agreements. With a prenup, you may be able to protect yourself from being responsible for debt that you did not specifically agree to.
5. KNOW WHAT YOU'RE GETTING INTO BEFORE YOU TIE THE KNOT
While you're still in the swoon of love, you may not be thinking about the fact that you are entering into an important legal relationship - one that carries significant legal and financial consequences. You should be informed about the laws and how marriage affects you legally and financially BEFORE you get married.
Before you say "I do," know what you're saying "I do" to! If you own a house prior to marriage, how will getting married affect the title and/or equity in the house? What about taxes - what are the tax consequences of getting married? Will you be responsible for your spouse's pre-marital debt? Will you be responsible for financial support of your spouse's children after marriage?
These are just a few of the questions you should be asking - and getting answers to - before getting married.
After consultation with a prenup lawyer, you may decide that you don't want a prenup. That's okay - at least your decision will be an informed one. But take the time to at least talk with a lawyer about the legal consequences to you of your marriage.
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