Marriage is in the air. It seems like every time I look at Facebook someone I know is getting married or engaged. There are engagement photos, pictures of the rings, rehearsal dinners, little ring bearers, flower girls, photos of the bride and groom, dancing at the reception, chocolate covered strawberries and of course cake … mmm I love cake. It takes a lot of planning and coordination to put on a wedding. Part of that planning should include discussions about premarital agreements. Recently, I have had multiple individuals and couples ask about premarital agreements or “prenups” in preparation for marriage. Therefore, I’m writing this blog to give a quick rundown of what a prenup is, how it works and who should get one.
What is a Premarital Agreement?
A premarital agreement is a written contract between two people before marriage. On the flip side, a postnuptial agreement is a written contract between two people that is entered into after marriage. However, both agreements set out the terms for the possession of assets, treatment of future earnings, control of property, and potential divisions of wealth, property, and assets if the marriage is later dissolved. Simply stated, the agreement, whether it is pre marriage or post marriage, dictates how money will be distributed during marriage and, in the worst case scenario, divorce. Without a prenup, state law will determine these matters. A prenup simply allows the couple to follow their own rules, in as much detail as they wish, rather than have state law apply to certain divorce issues.
What can a Premarital Agreement or Postmarital Agreement do for you?
Most people know that having a prenup can save substantial time, energy, and money by eliminating the need to dispute the division of wealth in court in case of divorce. However, a prenup has additional benefits.
- First, it can define who is responsible for different financial duties during the marriage and how those matters will be carried out.
- Secondly, if you or your spouse has significant debt, getting a prenup can keep you from having to take on the other’s debt.
- Third, a prenup can be used to keep finances separate, because in Texas all income earned during the marriage is considered community property. Therefore, any savings or money on deposit will be split 50/50 between the parties at the time of divorce.
- Fourth, a prenup can stipulate who will inherit your property.
- Fifth, a prenup can stipulate what will be done with money you or your spouse inherits.
Without a prenup, state law will determine these matters. A prenup simply allows the couple to follow their own rules, in as much detail as they wish, rather than have state law apply to certain divorce issues.
Who should get a Premarital Agreement?
A prenup and the discussions that go with it can help ensure the financial well-being of the marriage and, hence, the stability of the union. Think of it like an insurance policy that you hope you will never need. However, certain groups of people can particularly benefit from a prenup.
- If you have substantial assets, such as property, stock or retirement funds.
- If there is a large disparity in assets between you and your future/current spouse.
- If you expect to inherit money in the future.
- If you anticipate a large income increase, if you anticipate your business taking off or if you are pursuing a degree in a profitable career.
In the event of a divorce, a prenup typically helps eliminate some of the emotion and resultant disputes that are naturally involved.
What should be covered in a premarital agreement?
Areas that should be covered in a prenup:
- Prenups should define what will be considered separate property, meaning it will only belong to one spouse. This often includes assets acquired before marriage or is inherited.
- Dictate if a divorce does occur if spousal support will be paid.
- Determine how property acquired jointly, such as a house, will be divided in case of divorce.
- Define how child support will be paid or determined, if the couple has children together.
While you are planning for marriage, by discussing your current and future financial situation with your future partner, make sure you discuss the possibility of a prenuptial agreement. Divorce is unfortunately very common in the United States. In 2009, more than one out of every two married couples got divorced. That percentage goes up for second and third marriages. Divorce affects millions of families every year, including children of past and future relationships. A prenup is simply another prudent method to manage one’s financial affairs depending on potential future events, just like insurance or other financial planning tools. A prenup is not a sign of distrust or that one doesn’t believe the marriage will last. Rather, it is a sign of mature and wise management of one’s property and wealth. When coming to Bailey & Galyen to discuss a prenup, please bring cake, as our lawyers’ expertise extends to helping you decide the best cake to have at your wedding reception. With a prenuptial and/or postnuptial agreement, the success of your financial future will be secured with our expertise.