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Prenuptial Agreements
Difficult as it may be to talk about money before marriage, doing so can save heartache and hassles in the long run. A prenup can minimize the financial and emotional toll of a divorce. Couples without one will have their assets distributed for them by the state if the marriage ends and they disagree about who should get what.
Without a prenup, assets could end up in the hands of your spouse's children from a previous marriage instead of your own kids, or they could go to a slothful mate who did nothing while you toiled away at a business or book that eventually became a big success.
"If you don't want a divorce court to make the final decision about how your assets will be divided, a prenuptial can protect you," says Nancy Dunnan, a New York City financial adviser and author. "Without a prenup you're letting your financial future be determined by a third party."
In a community property state such as California, the law says property accumulated during the marriage will be divided equally.
Zwack says premarital agreements are a personal decision, but without one couples relinquish not only power over their assets but privacy as well.
"[The courts] shouldn't have to step in and interfere with a husband and wife's private financial affairs," he says.
"Think of it as a business arrangement or as an insurance policy to help remove some of the emotion that's naturally involved," says Nancy Dunnan, a New York City financial adviser and author. "Marriage is not just an emotional and physical union -- it's also a financial union. A prenup and the discussions that go with it can help ensure the financial well-being of the marriage."
A prenuptial accord is a contract between two people about to wed that spells out how assets will be distributed in the event of divorce or death. Such agreements have existed for thousands of years in some form or another, particularly in European and Far Eastern cultures, where royal families have always made provisions for protecting their wealth.
You don't have to be a Rockefeller or Trump to need a premarital agreement. A person who has managed to save $30,000 may be more protective of their little nest egg than someone who has millions.
"Those are sometimes the most jealously guarded assets because it has taken a lot of hard work to accumulate a small amount," says Joseph P. Zwack, an Iowa lawyer and author of a best-selling handbook Premarital Agreements: When, Why and How to Write Them.
You should consider having a prenup if you fall into any of the following categories:
- You have assets such as a home, stock or retirement funds
- Own all or part of a business
- You may be receiving an inheritance
- You have children and/or grandchildren from a previous marriage
- One of you is much wealthier than the other
- One of you will be supporting the other through college
- You have loved ones who need to be taken care of, such as elderly parents
- You have or are pursuing a degree or license in a potentially lucrative profession such as medicine
- You could see a big increase in income because your business is taking off, or that garage band you play in has just gotten a contract with a big record company.
Perhaps the most important ingredient of a solid prenuptial agreement is honesty. Both parties must FULLY disclose their assets. If it turns out either person has hidden something, a judge can toss out the contract.
An ironclad agreement also must be signed well in advance of the wedding. You can't present your honey with a prenup two days before the big day and say, "Uh, by the way, I need your signature on this."
The document should be signed as early before the nuptials as possible to avoid the appearance of coercion, another key reason why some agreements are rendered null and void.
Before you hire anyone to prepare a prenuptial agreement for you, ask them how long the mandatory waiting period is between presentment and signing. If they don't know, don't use them!
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