Premarital agreements—customarily associated with celebrities and the super wealthy—are not only for the rich and famous but also can provide numerous benefits to anyone with personal assets, liabilities, property or children from a previous relationship. Premarital agreements, also known as prenuptial agreements, are legally binding contracts that predetermine how assets and financial responsibilities will be divided among spouses in the event of a divorce and upon death.
As family structures in modern society continue to become more complex and diverse, premarital agreements become an increasingly important planning technique that should be considered by spouses prior to marriage.
In considering whether or not to enter a premarital agreement, spouses should weigh the advantages and disadvantages associated with such agreements.
Advantages of premarital agreements.
• Clarification of financial responsibilities. Premarital agreements provide clarification of the financial rights and responsibilities of each party during and after a marriage. Specifically, couples can determine what qualifies as marital property and what qualifies as separate property. By dealing with these matters in advance of the marriage, unreasonable expectations can be better managed and/or eliminated, subsequently reducing the likelihood of future financial conflict. Additionally, family heirlooms or separate property can be maintained and distributed accordingly in the event of divorce.
• Creditor and debt protection. Marriage not only results in blending family, but also finances, assets and, more-often-then-not, each spouse’s debts and liabilities. Premarital agreements can provide financial protection from the unwanted debts of the other spouse, which can include student loan debt, taxes and credit card debt.
• Control of spousal support. Family law is highly unpredictable in determining spousal support and maintenance in the event of a divorce; however, premarital agreements provide spouses the opportunity to eliminate this uncertainty. Through the use of premarital agreements, spouses have the opportunity to agree upon an amount of spousal maintenance or eliminate it all together.
• Decreased litigation expenses. Divorce can be expensive and lengthy. Premarital agreements allow spouses the ability to address the most common legal hurdles in divorce, which can bring a quicker resolution to the process and avoid a potentially lengthy court battle.
Disadvantages of premarital agreements.
• Inability to address child support. Although premarital agreements enable spouses to come to an agreement regarding spousal maintenance, premarital agreements cannot be used to set future parenting time and legal decision-making or child support. Child-related matters are determined by the best interests of the child by a court of competent jurisdiction.
• Difficult topics to discuss. Although marriage is a partnership that goes beyond romance and includes serious issues such as property and finances, for some couples, discussing these matters might put a blemish on this exciting time. Often discussing the topics of marital property, financial obligations and pre-marital debts can be difficult, stressful and cause conflict between couples.