When people marry, they often believe that their union will last forever, but many marriages end in divorce.
That’s why it’s important to consider protecting yourself with a prenuptial agreement. This legal document spells out how your assets will be divided if your marriage ends. It can also prevent lengthy and expensive court battles, in which the only winners are attorneys who bill by the hour.
Of course, this is not to say that everyone must get a prenup. Not every needs one, as Money Talks News founder Stacy Johnson details in “Should Everyone Have a Prenup?”
At the same time, many people stand to benefit from a prenup — whether the agreement is for their own marriage or that of an adult child.
What follows are several advantages of a prenuptial agreement to consider before determining whether you — or your offspring — should pursue one:
1. Avoid the state dividing your property
Each state has its own rules and regulations governing how property is divided in a divorce.
If you don’t have a prenup, it is likely that a judge would determine how to divide your assets based on the judge’s interpretation of state statues.
For example, as we report in “10 Hazards of Divorcing When You’re Older,” Washington state is one of several community property states. In states with community property laws, assets acquired during a marriage are generally divided 50/50 in the absence of a prenup.
Washington is also where Amazon is headquartered and where Amazon CEO Jeff Bezos owns a home. After he and his wife, MacKenzie S. Bezos, recently announced plans to divorce, it was reported that they did not have a prenup to govern what would happen to their estate valued at $137 billion.
2. Ensure family assets stay in the family
Even if you don’t need or want a prenup for yourself, you might benefit from an heir getting one.
Sometimes parents ask their adult children to sign prenups. Gabriel Cheong, a divorce and family law attorney in Boston, says that’s because the parents don’t want any of the money they plan to leave to their offspring going to a former son- or daughter-in-law.
3. Guarantee a fair distribution of assets
Jeff Bezos got married well before becoming the richest man in the world. But when someone marries a partner with significantly fewer assets, the wealthier spouse is at risk of losing much of their wealth in a divorce.
“If you’re coming into the marriage with a lot of assets and your partner is in a different situation, you may want to protect what you earned before marriage,” Cheong tells Money Talks News. “This is especially true if you’re older, retired or about to retire, because you simply don’t have the time to make that money back if there’s a divorce.”
4. Shield yourself from your spouse’s debts
A prenup can help shield a debt-free spouse from their partner’s financial liabilities in the event of a divorce.
This is especially important if you live in a community property state.
As we explain in “The 5 Best (Least Bad) Times to Get Divorced, Financially“:
“Community property laws vary by state but some states view debts as well as assets as community property, owned jointly by both spouses. So if your spouse has accumulated quite a bit of credit card debt during your marriage, you could be held legally responsible for these debts.”
5. Streamline the divorce process
No one wants to anticipate a divorce. However, if your marriage does end, a prenup will make the divorce less complicated, since the division of assets already has been negotiated and agreed upon by both parties.
“This doesn’t mean a prenup will prevent all litigation,” says Cheong. “There are, of course, situations where people might still litigate and fight, but it helps to eliminate a lot of issues if those issues were talked about and agreed upon in advance.”
6. Protect your children
If you remarry, it’s important to think about how your new marriage will affect the lives of your children from previous relationships.
Michele Lee Fine, president of Cornerstone Wealth Advisory in New York, tells Money Talks News that a prenup can ensure that the property rights of your children are protected and enforced. The agreement allows you to designate certain assets for your offspring.
7. Protect your business
You can designate your business as separate property in a prenup so you won’t have to liquidate it in a divorce, says Elysa Greenblatt, a matrimonial attorney in New York City.
Greenblatt says she often advises clients to sign a prenup if they own a business or an interest in a business, to make the business immune to distribution if the marriage ends.
“Valuing and dividing a business in a divorce can be very complicated and costly, so having a prenup can make a divorce much easier,” Greenblatt says.
How do you feel about prenups? Share your knowledge and experiences on our Facebook page.