“Prenuptial agreements allow individuals to protect themselves financially with a prearranged, legally binding agreement between spouses. It can designate certain current and future assets as individually owned (i.e. separate), rather than marital property that can be subject to division upon divorce.”
While most couples are optimistic about their marriage, statistics show that about half of all marriages in the U.S. end in divorce.
Forbes’ recent article, “Pre-Nuptial Agreements: A Hedge For Happily Ever After,” notes that for young couples, the financial future may be uncertain. Without significant family money, young couples may be more hesitant to have this type of discussion.
Although there are two types of laws dealing with the ownership of marital property (common law and community property), typically if one spouse enters a marriage with significant assets and would like to keep these assets separate, a prenuptial agreement can provide him or her with protection, if the marriage ends in divorce.
For example, although inherited assets have traditionally been considered separate assets, these assets can easily become marital property. It’s possible for these inherited assets to remain as separate property through careful segregation. It’s also common for a couple to unintentionally comingle these assets, making them marital assets.
Depositing inherited assets into a joint account or using separate assets to purchase a jointly owned residence that benefits both spouses, are frequently seen examples of comingling that can create marital property. Even when a couple attempts to keep assets separate, depending on state law, an inheritance (or the appreciation) may still become marital property.
In some instances, a trust with a prenuptial agreement may give a person the best protection against the inadvertent conversion of separate property into marital property.
Prenuptial agreements can be quite important to protect children in high-net worth families. These agreements create a clear structure that will help to avoid uncertainty of a divorce settlement and make certain that the intended beneficiaries receive the appropriate family assets.
While the subject of prenuptial agreements isn’t romantic, having the conversation may be necessary and pragmatic.
In cases of family or personal wealth and children from prior marriages, the conversation may be critically important.
Reference: Forbes (July 30, 2018) “Pre-Nuptial Agreements: A Hedge For Happily Ever After”