When you mention the phrase “prenuptial agreement," you’re not likely to get a neutral response. Few aspects of law have been as stereotyped, maligned and misunderstood as this tool of premarital planning. Done properly, however, prenuptial agreements can be fair, practical and as necessary as a will.
Disclosure
Prenuptial agreements can include and address as much or as little as you want them to, but they may not be enforceable if full disclosure is not made. This means that you have to honestly and completely tell your future spouse in writing within the agreement about everything you own and every debt you’re bringing into the marriage. You can’t hide anything, because people can’t know what they are agreeing to, if pieces of the puzzle are missing.
Protecting Premarital Property
When couples marry later in life, they may enter into the marriage with assets they have worked hard toward accumulating for two or three decades. The often have children from previous relationships. A prenuptial agreement can ensure that your children won't lose those assets to your ex-spouse in the event of divorce or your death. Divorce laws in most states protect premarital property from distribution in a divorce, but those laws can be vulnerable to shifting legislation and there are loopholes. Estate laws frequently will award everything to a surviving spouse if you die without a will. Jacqueline Rickard, author of "Complete Premarital Contracting: Loving Communication for Today's Couples," says that a prenuptial agreement makes for good estate planning because it can supersede estate laws. Without one, it's possible that your estate will pass to your spouse rather than to your children upon your death, even if you never get divorced.
Addressing Marital Property
Many premarital assets, such as retirement benefits and real estate, can increase in value during the marriage. In the case of retirement accounts, contributions can be made while you’re married. Real estate can appreciate. A good prenuptial agreement will address these contingencies. A dollar value can be set to such assets at the date of the marriage, and the disposition of any appreciation or gain after that time can be decided. A prenuptial agreement can also address major purchases made–or debts incurred–during the marriage and state in advance how you want to deal with them if you part ways.
Earnings and Living Expenses
In addition to assets and debts that existed prior to the marriage, a prenuptial agreement should also disclose each partner’s earnings and compensation. It can lay out what financial contributions each spouse is going to make to the household. Money problems can become a source of stress and arguments in a marriage. That can be avoided when issues of spending are decided in advance.
Alimony
A common aspect of prenuptial agreements is the issue of alimony, especially when one spouse earns significantly more than the other. A spouse can waive the right to receive support, or alimony can be provided for on a sliding scale, increasing with the duration of the marriage and taking into consideration nontangible benefits that the underearning spouse may have brought to the marriage during that time.
