Is A Prenup A Good Idea?

Prior to tying the knot, there can be lots of legal documents to prepare and sign, including a prenuptial agreement, if the spouses elect to do so. Let’s look at certain circumstances where these agreements are a good idea for married couples.

What Is A Prenuptial Agreement?

In the state of Arizona, two people can voluntarily join in a prenuptial agreement prior to getting married. Prenuptial agreements are also commonly referred to as premarital agreements or antenuptial agreements.

These agreements set forth the spouses’ rights and responsibilities within the marriage and if the marriage ultimately ends in a divorce or one spouse’s death. All prenup contracts must be finalized before the couple enters into the marriage. If the wedding happens to be called off, then the contract is invalid and unenforceable.

If the prenuptial agreement is completed correctly, it offers many benefits to the eventual spouses. This proactive plan going into marriage provides a clear course of action on the occurrence of nearly any contingency. Prenuptial agreements are put in place to offer certainty in the event of a divorce, disability, or death.

What Does A Prenup Protect?

When coming up with a thorough prenup agreement, there will undoubtedly be a lot of ground to cover. The following items are protected in a prenup.

Alimony

Alimony, also referred to as spousal support, should be the first thing a woman looks to include in a prenup. This is the financial compensation you’ll receive from your spouse following a divorce. Depending on your situation, you may include a few different spousal maintenance scenarios that benefit you most within the prenup.

For example, you could include stipulations that guarantee you either receive a minimum amount of alimony, a variable amount depending on set conditions, or you can specify that neither spouse owes alimony in the event of a divorce.

Premarital And Marital Property

Make sure to discuss with your spouse which assets will be separate or community property. The courts define assets a spouse acquires prior to marriage as separate or premarital property. Any assets gained after marriage are viewed as community property.

An agreement made by both spouses on which property belongs in each category can help save time and discussion during a divorce process. Unless you specify something like a house as separate property in a prenup, the judge will have to consider it marital property.

Financial Responsibilities

Thinking about financial responsibilities is crucial prior to any prenup agreement. As spouses, you may have differing attitudes toward your finances or responsibilities, overall.

Consider having a conversation regarding finances that involve the following talking points:

• How much will each spouse put away toward savings?
• Will you have separate or joint bank accounts?
• Who will handle the majority of living expenses?
• Who is responsible for making major financial decisions?

Estate Plan Protection

You might want to determine how you’d like to distribute your estate when you either divorce or pass away. Determining a preference is typical for people entering their second marriage or coming into a marriage with significant assets.

For instance, you may wish to ensure that your children from a previous marriage inherit your property rather than your spouse. Without a prenup in place, it will be up to the court to divide your estate according to state laws.

Infidelity Clause

An infidelity clause will detail provisions should one spouse prove to be unfaithful to the other. Infidelity clauses are particularly helpful in states with no-fault divorce. This clause can specify infidelity consequences, including a set amount of money the unfaithful spouse must pay the other.

Dependents’ Interests

Married couples with children or dependents from a previous marriage can protect all parties in the event of a divorce with a prenup. Specifically, prenups can set aside pieces of property or assets that are intended to go to existing dependents. This property or other assets will then not be considered marital property.

Life Insurance

Prenups can contain provisions outlining the handling of life insurance plans. A spouse or someone else can be named the beneficiary in the policies.

Prenups can be used to require that your partner also get a life insurance policy to ensure you are taken care of in the unfortunate event of their death.

Inheritances

A prenup is a great way to protect future assets from becoming shared marital property for individuals expecting to receive an inheritance.

Will And Trust Considerations

The courts typically favor prenups over a will in order to determine how marital properly will be divided post-death.

Specific State

The laws regarding prenups can greatly vary state to state. Due to this, many prenups will specify which state’s laws should be used to govern or arbitrate this agreement.

When Is A Prenup A Good Idea?

There are several justifiable circumstances where a married couple may wish to sign a prenup. Here are a few examples below.

One Spouse Is Wealthier

Prenuptial agreements are commonly chosen when there’s a disparity in wealth between the two partners. Someone who marries into money may have a significantly improved lifestyle. This agreement can create rights for spousal support and property division if the marriage falls apart.

In general, the spouse with the higher income or more property will likely ask for this agreement. In some cases, the other spouse may accumulate a lot of wealth during the marriage, which means the agreement can also end up protecting them.

There Are Children Involved

Oftentimes, a spouse or both spouses will want to protect the financial interests of any children from a previous marriage. A premarital agreement can help ensure that assets do remain separate property to allow the spouse(s) to create a will or living trust for their children in the event of death.

Having this agreement in place may also prevent a fight over a will if one parent dies. In New York, for example, you must leave your spouse something, not matter what is stated in your will.

One Or Both Spouses Have Been Previously Married

Spouses who have been previously married and suffered through a tumultuous divorce process may not be willing to marry again without an agreement in place. These individuals, unfortunately, are aware of what can occur during the divorce process and do not wish to repeat this scenario.

This is especially true for individuals who may feel their spouse treated them unfairly during the divorce. Additionally, a previous divorce can affect any future rights and obligations pursuant to a judgement or divorce decree.

One Or Both Own A Business

If either spouse owns a business when entering into a marriage, a prenuptial agreement can protect said business in the event of a divorce. Plus, if you own the business with other individuals, their portion of the business could also be impacted by a divorce.

Having this agreement in place can allow the spouse to have full discretion over how to manage the business in the present and future.

One Spouse Has More Debt

Premarital debts are usually the responsibility of the individual who incurred them. However, debts acquired during the marriage are often allocated to both spouses.

If one spouse tends to overspend, and the other does not want to be held responsible, it’s wise to consider a prenup.

Protection Of Inheritance

Generational wealth and any potential future inheritance are common reasons why a prenup may be sought after.

The best way to avoid any unintentional transmutation of inheritance is to maintain said inheritance in a separate account featuring only one party’s name.

Privacy

Prenuptial agreements recognize the right to privacy. Oftentimes, there will be confidentiality clauses in these agreements.

These clauses will prevent any social media posts or tell-all books, for example. The parties can also contract to have disputes handled by arbitration, which will keep everything out of the public eye.

Source: “Prenuptial Agreements: What They Can And Cannot Protect” Legal Zoom https://www.legalzoom.com/articles/prenuptial-agreements-what-they-can-and-cannot-protect