A prenuptial agreement is a contract between two people before marriage that, among other things, documents premarital assets which will simplify property division in case of divorce.
Despite the drama associated with this document on television, it is a very practical matter that addresses a number of financial topics in advance.
1. Existing assets
People are getting married later in life, and as a result, each partner is likely to have already gained some wealth. This might include a house, a retirement account or an inheritance, for example. A prenuptial agreement separates each individual’s property from the marital property while it is still easy to identify.
Though it may seem like an unromantic topic, discussing financial matters in advance of marriage will help to open the lines of communication between spouses.
A prenuptial agreement can also protect people from their partner’s debts. If the marriage is short-lived, one partner won’t end up with the other’s pre-marriage liabilities.
4. Minimizes disputes
No one wants to enter a marriage planning for a divorce, but the truth is that roughly half of all marriages end that way. Should that happen, many of the financial decisions have already been made, which could reduce the cost of a long, drawn-out legal process.
5. Supports estate planning
The prenuptial agreement also supports estate planning. Much of the work is already done with regard to separating each party’s assets, which could minimize the court’s involvement in a probate proceeding.
Prenuptial agreements are not just for the rich. In case of divorce or the death of a spouse, they can provide a means to avoid family conflict and an understanding of each other’s wishes. It may not be romantic, but a prenuptial agreement can be very beneficial.