Why Create a Prenup?

The Business of Marriage

• Both spouses will be working full time.
• Both spouses will have their own insurance, retirement benefits, or investments.
• One or both spouses will have substantial amounts of debt.
• One or both spouses will have been married before, perhaps with children from the previous marriage.

• Share a home and living expenses
• Acquire assets jointly
• Support each other financially while one goes to school, cares for children, recovers from illness, etc.
• Plan for the future based on the combined assets and resources of both spouses

Benefits of a Prenup

• Clarify expectations and rights for the future: Broadly speaking, a prenuptial agreement can provide each spouse the security of knowing what he or she can expect in case the marriage falls apart or the other spouse dies. Each provision in a prenup—from a determination of who will own what, to a designation of which state’s laws will govern—should eliminate some element of uncertainty that might otherwise create a difficult, costly, and anxiety-producing headache down the road.
• Designate which assets are separate and which are community property: According to each state’s marriage laws, certain types of property acquired after marriage are considered marital or community property, to be divided between the spouses upon marriage or death. Other types of property, including property owned by each spouse prior to marriage (premarital assets), remain each spouse’s separate, individual property. A prenuptial agreement can override a state’s rules by establishing that certain assets, or certain categories of assets, are either separate or marital property. In addition, during a divorce, it can be hard to prove that one person owned certain property or assets before the marriage. With a prenup, there will be no questions about which assets are premarital or not.
• Resolve in advance any arguments over tough issues that could arise during a divorce: Though it might be awkward and unpleasant to consider the possibility of divorce just when you’ve decided to get married, there may be no better time to come up with a plan for dealing with some of the tougher issues that might arise if the marriage were to end in divorce. On the eve of marriage, your ability to communicate and willingness to collaborate will be infinitely greater than on the eve of divorce. Even in the best of circumstances, negotiating a divorce settlement that is fair to both parties can be extremely difficult, especially when marital assets, such as a house or a business, are tough to divide or value precisely. If you try to do this at a time when communication is at its lowest and you and your spouse feel adversarial or even hostile toward each other, the negotiation is likely to break down. Moreover, you’ll end up paying two different lawyers thousands of dollars to negotiate a result that neither of you will like (since any compromise will tend to feel like a loss). Thinking through a few tough issues early on can increase the likelihood that any divorce proceeding in the future will be fair and civil, thereby reducing the emotional and financial toll.
• Provide for children from previous marriages: State statutes govern the distribution of property after death and generally allow a surviving spouse to claim one-third or one-half of the deceased spouse’s estate, subject to waiver by the surviving spouse in a prenuptial agreement or otherwise. If one spouse already has children at the time of the marriage and wishes to pass more than one-half or one-third of his or her assets to those children, it may be essential that the new spouse waive his or her statutory share up front, perhaps in exchange for a different arrangement that is fair and agreeable to both spouses and included in a prenuptial agreement.
• Clarify financial rights and duties within the marriage: In addition to designating marital and nonmarital assets, a prenuptial agreement may be used to determine more specifically how assets will be treated as a matter of course during the marriage. For example, you may want to agree upon how you will treat each spouse’s earnings, how you will treat proceeds from a business one or both of you own, who will be responsible for repaying various types of debt that will be incurred during the marriage, whether to have joint bank accounts, and so on. The possibilities are endless and depend on your unique circumstances. Be careful, however, not to try to micromanage your affairs in your prenuptial agreement, as you will need considerable flexibility to try different approaches to managing your house and money. Focus instead on how you will treat different types of incoming assets (earnings, inheritances, business proceeds) and how you will treat different types of outgoing assets (who pays for which debts and expenses).
• Shield one spouse from liability for the other spouse’s preexisting debts: A prenup can (and often should) establish that neither spouse will be responsible for the other spouse’s premarital debts. This does not mean that your creditors won’t go after any property they can, or that you can use a prenuptial agree­ment deliberately to avoid paying a debt (which would not only be void, but could also land you in serious legal trouble). You can, however, shield your spouse from your own premarital financial woes by separating your debts from his or her separate assets, and by designating how and to what degree marital property may be used to pay off premarital debts.

Who Needs a Prenup?

• You own large assets: If you have large assets such as a home, retirement fund, or very expensive jewelry before you enter into marriage, having a prenup allows you to ensure that they remain fully yours in the event of a divorce.
• One of you is much wealthier than the other: In a divorce, the amount of money a couple has is generally divided up. A prenup can allow for the wealthier person to protect his or her wealth in the event of a divorce.
• You own all or part of a business: A business can be part of a settlement in a divorce, so if you want to protect your business from this possibility, think about getting a prenuptial agreement. In addition, a prenup can expressly dictate what should happen to ownership of the business in the event of a person’s death, which can prevent conflict over and disruption of the business.
• You may be receiving a large inheritance: If you anticipate receiving an inheritance, it can be wise to use a prenup to protect this money in the event of a divorce.
• You have children and/or grandchildren from a previous marriage: If you have children and/or grandchildren whom you wish to provide for in the event of divorce or death, you can do so using a prenup.
• One of you will be supporting the other through college or other school program: If you’ll be paying for a spouse’s education or supporting him or her financially during schooling (or vice versa), it can be wise to create a prenup to ensure that you get compensated (or your spouse gets compensated) if the marriage ends.
• You might have a large increase in income in the future: If you’re just starting out in a potentially lucrative profession or are contemplating a career change that would earn you a much higher salary, it may make sense to create a prenup to protect your high wages if your union ends.