If you think prenups are only for older, affluent and/or celebrity couples, think again. Prenups are becoming increasingly common –especially now that many people enter marriage at a later age with significant assets, such as cars, 401Ks, real estate, etc. Long considered stuffy, stodgy and decidedly unromantic, the prenup is beginning to win favor as a reasonable, practical and smart sign of trust between a woman and her fiancé.
So before you dismiss the possibility, let’s review the basics to help you decide if a prenup is right for you.
A prenup can help protect your property rights and financial interests.
A prenup (short for “prenuptial agreement”) is a contract signed by both parties before their wedding. By using a prenup, both the husband-to-be and the wife-to-be can decide certain financial issues in advance. For example, a prenup can specify:
- what property will be considered separate property,
- what property will be considered marital property,
- how any marital property should be divided,
- particulars about estate planning and inheritances, and even
- how much alimony will be paid and for how long if there’s a break-up down the road.
In short, the prenup details what the couple’s property rights and expectations would be upon divorce. If done correctly, a prenup can be an excellent way to supersede your state’s marital laws; however, in order for it to be “done correctly,” both the husband-to-be and the wife-to-be must be represented by their own separate attorney. In addition, the agreement:
- must be in writing.
- must provide full disclosure (no hiding of assets and/or liabilities).
- must be executed voluntarily and without coercion.
- must be executed by both parties, preferably in front of witnesses.
- cannot be unconscionable, meaning that it cannot be completely lopsided giving one party so much more than the other.
- should be in a recordable format.
And of course, just to reiterate, the prenup must be executed before the wedding!
Many women find even the idea of a prenup awkward and unromantic. That’s unfortunate. In reality, a prenup underscores a couple’s mature level of commitment and trust. Since the agreement requires full disclosure about personal assets and candid discussions about potential financial concerns, a prenup can actually serve to bring a couple closer together. With a prenup in place, the marriage can begin on a firm foundation with clear and consensual expectations.
You may want to seriously consider a prenup if you:
- Have considerable assets such as a home, real estate investments, stock (including stock options) or retirement funds that make you (or have the potential to make you) much wealthier than your fiancé
- Own all or part of a business or professional practice
- Have children and/or grandchildren
- Have loved ones, such as elderly parents, who need care
- Are expecting an inheritance
- Have (or are pursuing) a degree or license in a potentially lucrative profession
Of course, a prenup is not the only way a bride-to-be can protect her property rights and financial interests before the wedding. For instance, you can establish a Domestic or Foreign Asset Protection Trustor pursue other options that do not require your fiancé’s approval.
In fact, if you’re a business owner looking to protect your business interests before you get married, aDomestic or Foreign Asset Protection Trust can be particularly useful. A financial vehicle like this transfers the ownership of your separate property (including your company) into the trust, and it can work for most entities — C Corporations, Limited Liability Companies, Limited Partnerships–but not necessarily for an S Corporation. Only certain types of trusts can own S Corporation stock, so this is something that you would need to discuss with a trust attorney who is experienced with asset protection trusts.