What is a prenup?
Contrary to popular opinion, prenuptial agreements are not only for celebrities and the very rich. Also called premarital contract or “prenup,” this document is essentially an insurance policy meant for any couple - whether previously married or not.
This legal document defines your financial responsibilities as a couple and describes how you and your fiancé’s individual assets will be divided, should divorce or death occur. Usually negotiated months before the wedding day, this document troubleshoots future conflicts and financial issues that may arise.
Generally, if you fall into any of these categories, you might want to get a prenup:
- You have children or grandchildren from a previous relationship
- You have substantial assets (inheritance, house, retirement funds)
- You own a business
- One of you has debt
- One of you has potential of income increase over the duration of your marriage
Unfortunately, prenup agreements do not cover every single circumstance involving a marriage. However, they can help you if you have one or more of these goals:
1. Keep your assets separate
If one party has an investment account, home property, or will be receiving inheritance while coming into a marriage, a prenup can spell out whether the assets will be kept separate or not. Same goes if the couple would want marital property (assets accumulated over the course of marriage) kept individually and not divided between themselves,
2. Protect each other from debt
Some come into marriage with assets, while others come into it with debt. Without a prenup agreement, creditors can turn to marital property to pay the debt of just one spouse. Prenups can limit your financial liability for each other’s debt
3. Keep property in the birth family
If you have something you want to keep in your birth family, a prenuptial agreement can specify what items will remain in your family. This can include an heirloom, a business share, or a future inheritance.
4. Provides property interests of children from previous marriages
A prenup is helpful for couples with children from previous relationships. It will ensure that they will still inherit their share of your property in case of death.
5. Clarify financial responsibilities within the marriage
In addition to those mentioned above, a prenup can also set parameters on financial responsibilities: Who will pay the household bills? Will you have joint accounts? How will you manage them? Who will handle credit card charges? Will you agree to set money aside for savings? Will you hire a mediator to settle future disagreements? The circumstances are countless.
Consult a competent attorney
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