Top 5 Prenuptial Agreement Considerations
As family law attorneys may tell you, a prenuptial agreement (sometimes referred to as a premarital agreement) can be highly beneficial in reducing the potential for future conflict. Having an honest, open discussion that sets expectations for the division of assets and debts should be on your to-do list before marrying. The agreements reached during such discussions can then be documented and ratified in a prenuptial agreement.
Here's a checklist of what you should consider before entering into a prenuptial agreement.
1. Premarital Assets and Debts
The assets and debts in your possession before your marriage to your partner are considered separate property and separate debt. You should make an exhaustive list of everything you own that you consider valuable. This includes real property (i.e. land, buildings, timeshares) and personal property, such as jewelry, fine art, furnishings, automobiles, bank and investment accounts, employee stock options and other stocks and bonds, and retirement funds and pensions. You should also document all your debts, such as mortgage loans, student loans, credit card balances, personal loans and other financial obligations.
With respect to these premarital assets and debts, you should consider:
- In the event of a divorce, how will you and your spouse divide or allocate premarital assets and debts?
- During your marriage, do you want your separate property to be commingled with your marital property, or keep it separate? If it is commingled, is it your intention that your previously separate property becomes marital property and subject to division so that your spouse receives a portion of such assets?
- Consider what happens if your separate property is used to pay your partner's debt or vice-versa. Will it be reimbursable or considered a gift? How will you handle property you co-own but which was paid for using one partner's separate property?
Your family law attorney will help you make sense of these considerations and other complex issues that can be addressed by way of a prenuptial agreement.
2. Marital Property
Marital property is considered to be any assets acquired during the course of the marriage (from the date of your marriage until the date of your separation), whether titled jointly or individually. A premarital agreement can address how you plan on handling such marital property including detailing the ownership plan and answering questions such as: Will you have equal claim to the property and will it be divided equally? Or will the property be divided in some other manner? What process will you follow to calculate the value and divide the property? The premarital agreement should also address how you will handle allocating and paying any debt incurred during the marriage.
3. Income and Asset Management
Consider that you may have diverging views regarding how you manage money. Your partner may be more of a spender while you like to save most of your money. Regardless of your money management habits, you should consider whether you want to include an asset management plan in your prenuptial agreement that is agreeable to both you and your spouse. Some of the income management aspects that a family law attorney will help you contemplate include:
- Will you open up a joint bank account, keep separate accounts or choose a mix of both?
- Will you each deposit all of your earnings into a joint account if established or just a portion of your earnings?
- Who will handle the financial decisions regarding spending and saving and how will the responsibility for paying marital bills be allocated?
- What are your long-term financial goals as a couple, and how do you plan on achieving them?
- What are your intentions for the marital property if you separate? Or if one of you dies prior to a marital separation? How will you manage your estate planning to reflect your intentions?
4. Spousal Support (Alimony)
In the event of a divorce, and if your intention is that spousal support should be waived by one or both parties, then your prenuptial agreement should state so clearly. A prenuptial agreement can be silent on the issue and allow a court to consider the issue without restriction down the road, or the amount and duration of spousal support can be stated if both parties agree to such terms or spousal support can be waived. Your family lawyer can help you consider the ramifications of each option. If you plan on having children, your lawyer can also help you consider whether agreements on child custody should be included or whether it is best to be silent on such issues. Keep in mind that it can be difficult to predict what will happen in the future and that an attorney may advise not to draft provisions for unborn children when you have no idea what the circumstances may be down the road.
5. Duration of the Prenuptial Agreement
Most prenuptial agreements will remain in effect unless and until voided. Some people, however, prefer to include a “sunset provision” where the prenuptial agreement will automatically become void if the marriage remains intact after a specified period of time (e.g. 10 years). If both parties agree, the prenuptial agreement can be amended or parties can enter into a post-marital agreement to address changes in circumstances.
Discussing all these considerations is an important step to complete before your marriage to avoid misunderstandings and ensure you are on the same page prior to beginning married life. It can also help grow the trust and commitment in your partnership. Family law attorneys can help you draft a comprehensive premarital agreement that addresses your specific situation and needs. Trusting in a best-case scenario doesn’t mean you should lack preparation in the event of a divorce, which is why premarital agreements can reduce future conflict and help avoid costly litigation. Contact Hite Kaminsky Family Law today to learn more about how you can benefit from prenuptial agreements.