Today’s post comes as a reponse from a reader request to learn more about prenuptial agreements. And, since this is sort of a taboo subject that involves and good bit of controversy between couples, I figured that it sounds like a perfect thing to write about!
So, let’s get started.
What exactly is a prenuptial (I just found out it is not spelled with a -ual on the end – amazing!) agreement?
Well, as you may or may not know, marriages are not only emotional and physical unions, but financial unions as well. Prenuptial agreements are contracts between the marrying couple spelling out exacting what happens to the assets in the event of divorce or death of one of the parties.
Why should I think about getting a prenuptial agreement?
According to the article at the link below from Bankrate.com, 33% of first marriages end up in divorce, and 50% of second and third marriages end in divorce. These are difficult odds!
And, if you live in one of the nation’s nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), the law says property accumulated during the marriage will be divided equally. In all other “equitable distribution states,” assets are divided according to what the court deems appropriate. Prenuptial agreements are a way to keep the court out of the decision about how the marriages’ assets are divided! Seems to make senese right?
Who should think about getting a prenuptial agreement?
As it turns out, prenuptial agreements are not just something for the rich. You should also consider drafting a prenup if you fall in to one of the following categories:
- You have IRA, 401K, mutual fund, or stock assets from before you were married that you feel should be yours in the event of getting divorce.
- Either the woman/man is much more wealthy than the other.
- You are currently taking classes to earn a lucrative degree, such as training to be a lawyer or a doctor.
- You have children from a previous marriage.
Setting Up and Maintaining a Proper Prenuptial Agreement
The key here is to approach the subject early on in the relationship, preferably before you get engaged. Once both parties decide that it is all right, sit down to generate a list of your assets and talk about general ideas of how the assets would be divided if a separation were to occur.
Once you both have a general idea of how you want to proceed, you have to make it legal by hiring separate lawyers in order to ensure an enforceable agreement.
After the prenuptial agreement has been created and made official, you will want to make sure that it is maintained on a fairly frequent basis so that it captures the current financial state of the marriage assets.
I hope this helps to shed some light on a somewhat “sensitive” subject. As always, please let me know if there are any questions, and keep up the post requests!
Keep on learning!
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