Prenuptual Agreements: Unthinkable or Good Idea?
Let’s face it, prenuptial agreements (also known as premarital agreements or “prenups” for short) have a bad reputation. Merely uttering the word “prenup” conjures up images of greed and mistrust. Is this reputation deserved?
The negative image of prenuptial agreements may, in fact, be deserved. These agreements have often been used in abusive ways. Premarital agreements can work to the serious disadvantage of one spouse when the parties enter into such agreements without equal bargaining power.
A person who enters into such an agreement can give up the right to share in the wealth accumulated during the marriage. They may find themselves divorced and unable to maintain the lifestyle that they are used to. If one spouse stays home or forgoes her or his own opportunities so that the other can seek higher education and get a high paying job, that spouse may find that she or he has nothing to show for her or his sacrifice and may have no right to share in the income that they helped to produce.
It is undeniable that prenuptial agreements can be abused, but that doesn’t mean that all prenups are bad. Many of the circumstances which have contributed to the rampant misuse of prenups have now changed. The wealth and power disparities between men and women are getting smaller. As men and women enter into these agreements with similar bargaining positions, opportunities to abuse the agreements go down.
A misconception that contributes to the bad reputation of prenups is that their sole purpose is to deprive one spouse of assets. In fact, prenups can accomplish a lot of different objectives including protecting one spouse from the liabilities of the other. Basically a prenuptial is an agreement between the parties about how they want certain property treated so that the courts or state laws will not determine the issue for them.
Property that is acquired during a marriage is “marital property” that the court may divide upon divorce. The way that the property is divided depends on the laws in your state. In the absence of an agreement, state law will decide how assets and liabilities are shared in the case of a divorce. Unless, of course, the couple can reach an acceptable property settlement without the intervention of the courts.
A couple key situations where you may find a prenuptial to be to your advantage is if you own a business or if you have children from a previous marriage. If you own a business, it is possible that your spouse could own a share of the business following a divorce. If you want to make sure that your spouse does not share in the ownership or management of the business, a prenup may be in order.
In the case of children from a previous marriage, you can use a prenup to make sure that your children will get a fair share of your estate when you die. Without a prenup most states laws tend to favor a surviving spouse over any children. Spouses usually get the bulk of the estate. Of course, a will could also be used to distribute your assets upon your death, but if your surviving spouse wanted, she or he could challenge the will and make an argument that she or he is entitled to a certain share of your estate despite what your will says. A prenuptial agreement is a way to make sure that your wishes are carried out. If there is certain real property that you want to pass down to your child, a prenup may be a good way to accomplish that goal.
Although the downsides of trying to discuss a prenup with your potential spouse are well known, there are some who argue that a prenup can be a positive thing for a relationship. They argue that discussing financial issues prior to the marriage can allow a couple to enter into the marriage with eyes wide open. Future conflicts might be avoided if the parties understand how financial matters will be handled.
Despite all the positive things that a prenuptial agreement can accomplish there is undeniably a stigma attached to such agreements. It is generally uncomfortable and frightening to broach the subject with your future spouse. It may put your future spouse at ease if she or he knows that each of you will have your own legal representative review the agreement when it is drafted. This will assure them that you do not intend to put them at a disadvantage. This is also a good idea to ensure that your agreement will be enforceable in the case of a divorce. An agreement that appears to be the result of unequal bargaining power may not be enforced. Some states even require that each person have her or his own attorney.
Ultimately, the decision to seek a prenup is up to you. You will have to decide if the problems that it may cause are worth the benefits. You may want to tell your spouse what you want to accomplish with an agreement before you say, “Honey, I want a prenup.” For example, you could say, “Honey, I want to make sure that my dad’s farm is passed down to my son. Can we make an arrangement for that before we get married?” Like many people in our society your future spouse may need to be educated about the positive side or prenuptial agreements.
Elements of a Valid Prenuptial Agreement
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