A prenuptial agreement is essentially a written contract entered into by parties who plan to get married. In some jurisdictions, it is referred to as an antenuptial agreement. Typically, a prenuptial agreement addresses all the contingencies that might need to be resolved in the event the marriage does not last, usually focusing on the ownership and division of property.
When is a Prenuptial Agreement a Good Idea?
Historically, prenuptial agreements have been used almost exclusively by individuals with substantial net worth, in an effort to protect their estate during a divorce. However, prenuptial agreements can offer a number of benefits to individuals with a modest net worth:
- A prenuptial agreement can ensure that specific items of property go to designated people, including your children from a prior marriage.
- A prenuptial agreement may clarify financial rights during a marriage, such as access to certain property or financial accounts.
- A prenuptial agreement may shield you from liability for any debts your spouse brings into the marriage.
- A prenuptial agreement can simplify the divorce process, avoiding costly and protracted battles over debts and assets.
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The Consequences of Not Having a Prenuptial Agreement
Without a prenuptial agreement, if your marriage ends, you will have to either find a way to come to agreement on the division of debts and assets, or take the matter to court. Generally, spouses have priority claims to property brought into a marriage, but some state laws make all such property jointly owned. Furthermore, all debts incurred by either party to a marriage are typically shared equally upon divorce.
A Prenuptial Agreement Should Be Executed in Conjunction with an Estate Plan
A prenuptial agreement will typically only address what happens in the event of divorce or separation. What happens to your property when you die will be covered by your estate plan. Accordingly, when you enter into a prenuptial agreement, you should also execute an estate plan that clearly states how you want your property divided when you die.
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