Question of the week:Our daughter recently got engaged and will be married this winter. We have been wondering about when a prenuptial agreement might be called for. Any guidance on this issue? --Miami Dad
A prenuptial agreement defines the financial obligations and responsibilities of two people about to get married. Its primary intent is to reduce heartache and conflict later on if the marriage doesn't work out. Given that, according to the Census Bureau, about half of all marriages end in divorce, a prenuptial agreement can definitely be useful for many couples.
When we asked members of the Armchair Millionaire community their thoughts about prenups, the comments we heard showed how much it depends on each couple:
Burned once. "I did not have one but would have been more than willing to sign one if my husband wanted. He had been in a bad divorce before I met him which consumed his assets, including an inheritance from his grandmother." --Jennifer
Just common sense. "We didn't have a prenup when we got married--we were young and had nothing to fight over, except a little debt. I think prenups make sense for people who go into their marriage with sizeable assets, or for second or third marriages. It might take away the romance, but it's common sense!" --Gina
People most often think that prenuptial agreements are needed when one party has substantially greater assets than the other. While that certainly the case, there are actually many other circumstances when a prenup might be in order. Here are some examples:
- If one or both parties have children from a prior marriage. In this case, a prenuptial agreement can ensure that certain assets go to the children in the event of their parent's death.
- If one or both parties own their own businesses, and don't want the business assets to be part of any divorce proceeding.
- If one party will be giving up their career once married, or will be supporting the other through graduate school. In such a case, a prenup can define the spousal support (alimony) this partner would receive in the event of divorce.
If you think your daughter might benefit from having a prenuptial agreement going into her marriage, my guide will help her get started.
The Armchair Millionaire Guide to Drafting Prenuptial Agreements
- Ensure that it's needed. Sit down with your spouse-to-be and outline exactly what each of you would want to accomplish with a prenuptial agreement. State laws already cover how property is divided during divorce, so it usually only makes sense to have a prenuptial when both parties want a different outcome.
- Get legal assistance. Prenuptial agreements are legal, enforceable contracts and the laws governing them vary from state to state, so this is one time you should not try to do it yourself. To ensure an agreement that addresses your particular needs and is fair to everyone, each party should consult with their own family lawyer.
- Make full disclosure. Both sides need to disclose all of the assets and liabilities they are bringing to the marriage. Failing to so will usually void the agreement.
- Keep it strictly financial. Courts will only uphold agreements that are monetary in nature. So don't try to sneak in anything about requiring your future spouse to take out the trash every week.
- Plan ahead. While there's nothing to stop you from drafting this kind of agreement after you're already married, I recommend doing it before--when you're madly in love and have your partner's best interests at heart.
THE BOTTOM LINE: Drafting a prenuptial agreement certainly isn't romantic, but in some cases it can be very wise and extremely practical.