March 18, 2010

Everything you need to know about prenuptial agreements

Posted in Prenuptial Agreement tagged at 5:55 pm by demetriagraves

Nothing can kill romance faster than the word prenup. But with about one in three of all first marriages ending in divorce, and 50 percent of second or third ones bombing out, a prenup is smart financial planning.

Marriage is always considered as a long-term bonding and a social and legal association of two people who intend to stay together for the rest of their lives. Unforeseen circumstances, conflict of interests, and other situations or conditions leads to extreme decisions like divorce and separation. To overcome the odds of divorce or separation, the legal system has devised outcomes that may arise, in order to protect the interest of both the parties, when legal separation happens. One such agreement is commonly known as prenuptial agreement, also widely known as antenuptial or premarital agreement.

Marriage is not just an emotional and physical union — it’s also a financial union. A prenup and the discussions that go with it can help ensure the financial well-being of the marriage.

A prenuptial agreement is a contract made between two people before the marriage or civil union that outlines how assets will be distributed in the event of a divorce or death. Such agreements have existed for thousands of years in some form or another, particularly in European and Far Eastern cultures, where royal families have always made provisions for protecting their wealth and many marriages, especially those of the wealthy which primarily were financial transactions.

A prenuptial agreement typically has many clauses but it commonly includes provisions for spousal support and division of property when a couple files for divorce. Some other important terms may include forfeiture of assets when a divorce happens on the grounds of adultery; terms related to guardianship are also included. A Pre-nup has some crucial points that form an important part of this agreement, like voluntary execution of agreement (should not be forcibly done); the agreement must be in writing (oral pre-nup not considered), complete and fair disclosure at the time of execution, moral sense should be maintained, and should be executed by both the parties, not their attorneys, in presence of a notary public.

You don’t have to be a Rockefeller or Trump to need a premarital agreement. A person who has managed to save $30,000 may be more protective of their little nest egg than someone who has millions.

You should consider having a prenup if you fall into any of the following categories:

You have assets such as a home, stock or retirement funds
Own all or part of a business
You may be receiving an inheritance
You have children and/or grandchildren from a previous marriage
One of you is much wealthier than the other
One of you will be supporting the other through college
You have loved ones who need to be taken care of, such as elderly parents
You have or are pursuing a degree or license in a potentially lucrative profession such as medicine
You could see a big increase in income because your business is taking off, or that garage band you play in has just gotten a contract with a big record company.

So how does one broach this touchy subject? First, do it as early as possible. The mention of a prenup shouldn’t come as a surprise if you and your sweetheart have been open with each other as the relationship became serious.  Let your intended know you believe these agreements are important and that you’d like to go over the topic. You have to be real candid about why you want the agreement. It’s not very romantic, but it’s also important to appreciate what the other party’s concerns are.

If you have questions, or would like more information about prenups, please contact me for a complimentary initial consultation. I’m also able to give advice if you’ve been asked to sign a prenup and you’re not sure about the conditions of the agreement.