How do you know if you need a premarital agreement? If any of the following apply to you or your fiancée, it would be wise to discuss a prenup.

1. There are Significant Assets

If you or your fiancée possess substantial assets (401K or investment accounts or cars, boats, or real estate) going into a marriage, it is wise to consider a prenuptial agreement to ensure that those assets and any income derived from those assets remain separate from the marital estate.

It is very easy to commingle these assets and/or the income from them. When they are mixed, a judge is allowed to include them in the marital estate and divide it. Counsel and a well drafted agreement will ensure you new family operates to keep separate property separate.

2. You or Your Spouse Have Significant Securities

While stocks and bonds are financial assets, they are worth mentioning on their own. If you or your spouse have significant holdings, it is possible that in the event of a divorce, the other party may have a claim to all or part of your stocks and bonds and/or the income they generate.

A prenuptial agreement is necessary to protect your investments and any income they generate from being taken or divided during a divorce. Without one, you risk losing a significant amount of money and future income.

3. Your Income is Lopsided

People that make significantly more than their spouse during the marriage may (read almost certainly) be required to pay alimony upon the dissolution of the marriage. The circumstances of your marriage and separation will determine whether you pay alimony and if so, how much you will be responsible for (and if you are the lower-earning spouse, how much you will receive.)

In general, the longer you are married, and the more you earn, the higher your risk for significant alimony payments. You are facing the risk of making alimony payments for a very long time, as alimony awards can be “permanent,” meaning they are paid until you or your spouse enter a court order to stop or change it.

4. Either of You Have Children From a Prior Relationship

If either of you has children from a prior marriage or relationship, you should consider a prenuptial agreement.

Child custody and child support cannot be addressed in any valid prenuptial agreement. This is because the state takes the best interest of the children in these cases very seriously; custody and support can only be determined using the circumstances at the time of the separation. There are, however, provision that can be included in a prenuptial agreement that can protect your children. 

Like What?

Prenuptial agreements can be drafted to preserve property and future income for your children. This property or income might otherwise be included in the marital estate and would thereby be subject to division. A premarital agreement helps ensure that children do not have their inheritance or future support caught up in divorce proceedings.

5. One Party Plans to Be a Stay-at-Home Parent

When one party pauses or gives up their career to raise their children, it can be difficult or impossible to rebuild their career or financial footing in the event of a divorce. A prenuptial agreement allows stay-at-home parents to protect their interest in the marital assets and ensures there is a court record to document these agreements in the event the marriage ends and their career is still on hold.

6. You or Your Spouse Are Business Owners

You may not think of your business as having much to do with your marriage but in the event of a divorce, they can quickly become tangled. Even if you started your business before you got married, your spouse is entitled to at least half of any appreciation in value your company experiences during your marriage.

For example, if you started a company before your marriage, grew it into a $1 million company, and over the course of your marriage, grew it into a $2 million company, your spouse would be eligible for at least $1 million if you were to divorce. A loss of 50% can devastate a business, which will ripple out to impact your employees and your personal finances. If the business was started during the marriage, or your spouse contributed to the business over the course of the marriage, it may also be considered marital property, and therefore subject to distribution. And if it's a family business, you risk hurting family members financially. 

Don't put your business, your financial future, or your family's and employees' finances on the line.

7. Your Spouse Has Significant Debt

If your soon-to-be husband or wife is in debt, a prenuptial agreement is an absolute necessity.

While it is true that debt that existed before your marriage typically remains separate after the marriage, problems often arise as the resources shift around. Paying off your spouse's student loans with an equity line or a loan from your retirement may make perfect financial sense at the time, it can cause your finances to suffer greatly, and you'll be left feeling cheated. If debts taken out during the marriage aren't paid during the marriage, debtors may seek payment from you, even if the debts were taken out by the other person, in their name.

Clarifying the existence, nature, and future responsibilities of debt in a premarital agreement is the best way to protect yourself.

8. Strong Personalities

It's easy to fall in love with a strong-willed person, but it can be very hard to fight with them.

If your soon-to-be spouse is stubborn, vengeful, or difficult, you should strongly consider handling these touchy financial issues in a prenuptial agreement. Be honest with yourself and consider how your new love has acted in previous relationships or marriages.

If you can see yourself spending your married years trying to avoid your beloved's bad side, you know you will have a difficult time in the event of a divorce. Trust your instincts and have a premarital agreement drafted.

Call or make an appointment to discuss the details of a nuptial agreement with us.

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