Many people think that a prenuptial agreement is solely a financial contract. However, this agreement can be about much more than just money.
The truth is that prenuptial agreements (which are called “premarital agreements” in some jurisdictions) can also address other important matters – including stating who will be responsible for what tasks during the marriage, keeping family heirlooms in the family, and providing for children from a previous relationship. For some, these aspects of a prenup can be more important than just defining property division or spousal support after a divorce. Learning what a prenuptial agreement can and cannot do is an important factor in your decision of whether or not to get one.
Here are four important reasons to sign a prenuptial agreement before walking down the aisle.
1. You are Marrying Someone with Significant Debt
One spouse bringing a lot of debt into the marriage is a quite common situation these days. Sometimes, the other spouse doesn’t even know about the debt until after the marriage has taken place. This is a crucial topic to discuss before marriage; of course, if the marriage ends, the other spouse doesn’t want to inherit their ex-spouse’s debt. A prenuptial agreement can limit the non-debtor spouse’s liability and prevent creditors from going after marital property to repay the debt.
2. You Wish to Protect Your Assets
A prenuptial agreement can be used to bypass laws governing property division and spousal support in some states and provinces (ask your family lawyer if this is the case where you live). The agreement can specify exactly how certain marital and non-marital assets will be allocated in the case of divorce. A good prenup can also support your estate plan. Experienced divorce lawyers claim that asset distribution is much less tricky with a valid prenuptial agreement, so save yourself from potentially problematic situations later on by signing one before marriage.
3. You Want to Ensure Financial Security for Both Parties
Needless to say, a prenuptial agreement undoubtedly brings a sense of financial security – especially in the case where one spouse is much wealthier than the other. The wealthy spouse wants to protect their assets and limit the amount and duration of spousal support in the event of divorce. On the other hand, the spouse who doesn’t have as many assets wants a promise of financial security or financial assistance if their marriage ends. The end result should be a reasonable agreement that offers protection to both parties according to their specific needs.
4. You Want to Protect Your Business
It goes without saying that most business owners will want to protect their business in case of divorce – both financially and against interference from their ex-spouse (and their ex-spouse’s lawyer). Without a prenup, the marital portion of the business could be quite substantial, and the non-owner spouse could end up with a significant share of or claim to that business. This means that the business owner may either have to buy out their ex-spouse’s share (which could have a severe impact on the business’ cash flow) or put up with a potentially vindictive ex interfering in their business’ decision-making process. Signing a detailed prenuptial agreement is of the utmost importance for business owners; it helps avoid the kind of conflict or misunderstanding that could put a modestly-profitable business out of business.
These are just four of the many reasons for creating a prenuptial agreement (or a post-nuptial agreement if you’re already married). Once the agreement is completed, you can rest assured that you’ve done your best to protect yourself and your spouse in case of future divorce.
Leila Dorari is an entrepreneur and freelance writer from Sydney, currently working with some of the most experienced family lawyers Sydney area offers. She believes that the quality of our relationships determines the quality of our lives. You can usually find her blogging from the comfort of her room or hiking with her furry four-legged friend.