The prenup. That dirty little word. In all honesty, before I went to law school, I had the same reaction. “Why are people getting married if they’re preparing for divorce?” But if you think about it from a different perspective, it starts to make more sense. You don’t buy homeowner, car, or life insurance planning to need it. It’s there in case the unexpected happens. Just like estate planning, you hope you won’t need to utilize the documents (at least in the short term when it comes to estate planning). But being prepared can save the headache–and a hell of a lot of money–down the road. Unlike an estate plan, which everyone needs in some form, not everyone needs a prenup. So how do you know if it is right for you? Here are a few considerations.
First, a quick introduction. A prenuptial agreement is a contract written before marriage. It’s a legal agreement determining the division of assets in the event of divorce. Each state has different requirements and rules governing prenups, so it’s important to take a look at your state’s regulations. In California, for example, for the agreement to be valid, a minimum of seven days is required between when an agreement is presented and when it is signed. It’s designed to protect people from being forced into signing as they’re about to walk down the aisle.
When Do I Need a Prenup?
In theory, any couple could have a prenup. It’s basically a private agreement between you and your future spouse to divide assets based on your preferences rather than a complex system of laws that might not distribute assets in a way that is equitable to you. But there are a few cases when it is especially useful:
- If either of you owns significant assets before the marriage.
- If either of you owns or has a managing stake in a business.
- If either of you is a single parent.
- If either of you is the recipient of a trust fund or has an expected large inheritance.
There are a few requirements in California that must be met to be considered a valid prenup. It must be in writing, must be entered into voluntarily by both parties, cannot be unduly unfair or heavily lopsided toward one party. There must be proper financial disclosure (i.e. No hiding the $3 million trust fund. Or the $200,000 in student loan debt.) It must be understood by both parties and has to be signed at least seven days after presentation. Though it may seem costly, the absolute best way to get this done right is for each party to have his or her own attorney.
Entering into a prenup is a big decision that should be discussed at length. But think of it this way: this is an important financial discussion and frankly, all couples should be having these important conversations before walking down the aisle. The more openly you can communicate, the less likely you’ll need to reach for this agreement. But it sure is nice to have peace of mind in case you do need it.
Obligatory Disclaimer: Did you like what you just read? I’m glad! But please know this post is for information purposes only and is not considered legal advice, nor does this create an attorney-client relationship. Head over to my legal blog to check out other relevant information and contact me through there if you want to discuss your legal needs.