Marrying the person you believe to be your soulmate is an easy commitment to make, but it still requires adequate preparation. A big part of that adequate preparation involves understanding prenup pros and cons.
Take this opportunity to learn more about prenuptial agreements. Understand their pros and cons and determine if filing that agreement before saying “I do” makes sense for your specific situation. You can also use the knowledge you pick up here to open an in-depth conversation with your soon-to-be spouse regarding the matter.
Should you sign a prenuptial agreement? Come up with an answer to that question after reviewing the information in this article.
What Is a Prenuptial Agreement?
Before diving into the pros and cons of a prenup, let’s first define what that agreement is all about. A prenuptial or premarital agreement is a contract that two people enter before marriage. In New York State Law, it is also known as a contract in contemplation of marriage.
The purpose of the agreement is fairly straightforward. If the two people who signed the prenup get divorced, their assets will be divided based on the terms indicated in the contract. We will get into which assets are divided according to the prenup in a little bit.
Aside from clarifying the terms of asset division, a premarital agreement also details how spousal support will potentially be handled. You and your partner can also agree to terms regarding existing debt and how assets will be passed to your heirs.
The parties involved in a prenup can also include a clause that nullifies it after some time. Once the existing agreement is nullified, you and your spouse can proceed without one or draw up another document.
What Are the Assets Involved in Prenuptial Agreements?
Not all of your assets are accounted for in a premarital agreement. More specifically, prenups are concerned with community or marital property.
According to the Legal Information Institute, the term marital property covers the assets the couple acquired during their marriage. The site adds that any property purchased during that time is a joint asset regardless of whose name is on the title.
We should mention that certain assets acquired during a marriage do not automatically become marital property.
Let’s say your grandparents left you their beach house in their will. If that beach house officially becomes your property while you are still married, it does not become a joint asset. It remains your sole property unless you agree to share it with your partner.
Any assets the spouses individually owned before marriage are considered separate property. An example of a separate property would be the car you already owned before entering that union. That vehicle is yours alone, and your spouse has no claim to it. Once again, you must willingly share it with your partner for it to become marital property.
What Are the Pros of Signing a Prenup?
Now that we have defined the prenup and the assets typically involved, we can start discussing whether signing that contract makes sense for you. To do that, we will evaluate the prenup pros and cons. The advantages of entering a premarital agreement are highlighted in this section.
Ensure Your Assets Are Transferred to Your Children from Previous Relationships
Since finding your current partner, you believe that they are the one who will take care of you and your kids for the rest of your lives. It does not matter that they are your children from previous relationships because your partner has accepted them with no reservations.
You would like to think that your spouse will continue to keep their best interests in mind even in the event of your untimely passing. However, there is no way to guarantee that outcome. The way your spouse treats your children may change after your death, and you would be powerless to prevent that. Or at least you would be powerless if you did not sign a premarital agreement beforehand.
Reserve certain assets for your children via the prenup to ensure they have something to use if your former spouse abandons them. Grant them ownership of your separate assets and eliminate the possibility that they could plunge into poverty due to an unfortunate chain of events.
Protect Your Business Interests
Although running a business has always been your dream, your partner may feel differently. They may prefer the stability of their established career over the upside of being an entrepreneur.
Since planning a marriage is a lot of work, you decide to hold off on starting your business until after the wedding. A few months after exchanging your vows, you can launch your new venture using your savings. More months have passed, and the business has been a resounding success. Your spouse has remained supportive throughout the process, but they have also stayed out of your business dealings.
Technically, the business would be considered marital property because you started it during the marriage. You can ensure the label does not stick to your business by clarifying who owns it in your prenup. Note in the contract that the business you are starting would remain your sole property regardless of when it was established.
This would also be an instance where placing a renewal clause in your prenup makes sense because you can revisit the issue of who owns the business later when you have more time to establish it. At that point, your spouse could also change their tune and offer to invest further in your business in exchange for turning it into a marital property.
Whether you maintain sole ownership of your business or loop your spouse into it is your call. The premarital agreement is simply there to keep your options open.
Maintain Ownership of the Assets You Value Most
Everyone has hobbies. Some hobbies are more expensive than others. Your hobby may involve collecting expensive items such as cars, designer perfumes, or digital assets.
Inevitably, you will add more items to your collection throughout your marriage. Those assets are marital property because of when you acquired them. Those assets are considered joint property, even if your spouse knows little about them.
After investing so much time and money in your collection, the last thing you want is to lose parts of it due to an acrimonious divorce. You can prevent that from happening by crafting a detailed prenuptial agreement.
Clearly outline in the prenup that any items added to your collection after the marriage will remain your sole property in the event of a divorce. Since your spouse is not contributing financially to your collection and likely has little to no interest in it, they will probably have no issue with your proposal. They may even propose a similar provision for their collection.
Establish Financial Support Guidelines
The possibility of becoming parents is an important matter to discuss with your partner before getting married. Because of your living situation, you or your spouse must stop working because no one can watch the kids otherwise. Following further discussions, the two of you decide that you will be the one to stay home once children enter the picture.
Both you and your partner will be dealing with unique challenges moving forward, but you may have greater concerns regarding your future. Because you are the one putting your career on pause, an unexpected divorce could put you in a deep financial hole. You may have no means to sustain your current lifestyle because you have fallen behind career-wise.
The prospect of becoming financially compromised due to matters out of your control is concerning. If you will be a stay-at-home parent for a while, you must establish financial support guidelines in the prenup that will keep you afloat if a divorce occurs. Be as specific as possible while drafting these guidelines to remain financially secure. Run your financial guidelines by an estate planning attorney so they can determine if you are seeking something reasonable.
Prevent the Transfer of Debt
A prenuptial agreement can ensure that you will have financial support to lean on should your spouse suddenly divorce you. At the same time, that contract can also protect you from any debt your partner accrues during the marriage.
Your partner may accrue debt due to their poor spending habits or vices.
They may start piling up debts from their gambling activity. Eventually, their gambling losses may start to impact your marriage. If your partner has not changed their behavior despite things getting to that point, no one will blame you for seeking a divorce. Your prenup allows you to file for divorce without worrying about being saddled with your partner’s debt.
Speed Up Divorce Proceedings
Horror stories are common among those who are recently divorced. Those new divorcees may recount stories about how exhausting the process is because you need to fight your former spouse every step of the way. Even matters that seemed so trivial during the marriage may suddenly turn into huge points of contention during divorce proceedings.
We are not claiming that a prenuptial agreement will make divorce a pleasant experience. Still, a prenup can make the ordeal easier for both parties.
Review all the matters you can cover using a premarital agreement, and you will notice that they account for most potential points of contention. There is no need to have arguments about debts, financial support, and asset division because you already had those conversations long ago.
An ordeal that could have dragged out for several months may be finished in a few weeks because the prenuptial agreement has sorted matters out ahead of time. Both you and your spouse will have an easier time moving on because of your collective decision to get a prenup.
What Are the Cons of Signing a Prenup?
Prenups protect both parties involved in a marriage, but it would be naïve to claim signing one has no downsides. Discover the potential downsides of signing a premarital agreement below.
Engender Hard Feelings in Your Partner and Their Family
You adore your future spouse and have no issue committing your future to them. Still, you want to be responsible and ensure that an unexpected turn of events will not leave you emotionally and financially drained. To ease your worries, you propose the idea of a prenup to your partner.
Regardless of your motivation, there is a distinct chance that your partner will take offense to your proposal. They may see it as an indicator that you do not trust them completely. Even after explaining your reasoning, your partner may struggle to deny the hurt caused by your proposal.
Soon after that, their family may get involved. They may also start questioning your commitment and love for your partner because you saw the need to get a prenup. While your actions are reasonable, it is not hard to see why your partner and their family may react like they did.
Such an outcome is possible if you suggest signing a prenup to your partner. Then again, you can take their reaction as an indicator that you were less compatible than you originally assumed. It may help you decide if going through with the marriage is something you truly want to do.
Partners Consider Divorce Faster
No one should be forced to stay in a marriage that no longer brings them joy. That said, you would hope that a married couple would take the time to discuss their differences and potential solutions before jumping to divorce.
Because you have a prenup in place, your partner may decide to bail on the marriage as soon as they lose interest in you. They may express no desire to discuss matters further or enter counseling. They only want to end the marriage and let the prenup sort things out.
Seeing your partner treat your marriage that way is disheartening, but you may not be able to do much to change their mind.
Creating and signing a prenuptial agreement are not matters to be taken lightly. They require both partners to understand the document, or it could create unnecessary friction during the marriage.
Are you looking for an attorney who can help draft your prenuptial agreement? We at Alber Law Group would be happy to help with that task. Reach out to us today, and let’s start working on your comprehensive prenup.