Asking for a prenuptial agreement can be awkward. Some people, however, convince themselves that they don’t need to worry about it because they don’t need a prenuptial agreement. Sometimes they are right, and other times, they are tragically wrong. Here’s everything you need to know about who needs a prenuptial agreement.
Who Needs A Prenuptial Agreement?
A prenup might not be necessary for a young couple, fresh out of college, but when complex assets are involved, clear definitions are needed to determine ownership shares. There are seven major scenarios where a Prenuptial Agreement (aka a “prenup”) is beneficial. Broadly speaking, it’s most important when the two partners have a notable disparity between income or assets.
People With Money
The agreement ensures that individually owned money doesn’t become shared money. Celebrity marriages are an oft-cited example.
People Who Might Inherit
A prenup defines ownership clearly, which eliminates later conflict over heirlooms and valuable estates with sentimental value.
People With Debt
Marriage means shared finances, the good and the bad. If one partner has significant debt, a prenup prevents the other from responsibility after a divorce.
Business ownership is complicated in its own right. Unless specified elsewhere, one partner’s business belongs to both partners through marriage. After a divorce, ex-spouses rarely want to do business together, which can put a company in an awkward position. If you own your own business, then it’s probably one of your most significant assets. If you don’t have a prenup, your spouse can potentially claim an interest in it, which can cost a lot of money. A fight over ownership could easily destroy all your years of hard work building the business.
When Income Is Likely To Rise Significantly
Marriage is a long-term commitment and lives change over that time. If one partner is in a lucrative field that will earn more than the other spouse, this protects the higher earner from a financial hit upon divorce.
Anyone With Children Outside Of Their Current Relationship
A prenuptial agreement isn’t just about protecting assets. It can also define the next in line for an asset if something happens. Often, children from a previous relationship are at the whim of a current spouse.
When One Of You Plans To Quit Working
One spouse choosing to quit their job to spend more time with the kids can sometimes leave the parent who decided to do so in a difficult situation during a divorce. A prenup can help specify how much alimony or child-support the income-earning spouse will need to pay in the case of a divorce.
Prenuptial agreements are thought of as “what’s in it for me” documents but, in truth, they provide complex protection for descendants, business partners, and others. The division of property is about far more than equal financial value for each partner. There are nuances to all kinds of property that require specific attention.