To Prenup or Not to Prenup?

To Prenup or Not to Prenup?

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Most everyone is familiar with a prenuptial agreement. However, most everyone is not familiar with the benefits of a prenuptial agreement. My favorite analogy for a prenuptial agreement is to think of it as insurance. For the sake of it we’ll call it flood insurance. You hope and pray that a flood never happens, but in the instance that it does, the insurance was a one time cost that ending up saving you a lot of money and stress in the long run. You also have the piece of mind that should a flood ever happen, you’ll be covered. Unfortunately, in today’s society, divorces are much more common than floods.

A prenuptial agreement can be used to shape the financial consequences of marriage in a number of different ways. To name a few:

It can be used to limit the amount of spousal support that is payable upon divorce.

It can also ensure that when you pass away, your assets are distributed according to your wishes. For instance, assets will go to your children from a previous marriage.

If you own a business and your marriage ends, your spouse could gain an interest in the business if no prenuptial is in place.

It can even ensure that the spouse who is in a financially weaker position is protected.

One of the reasons I hear people stay away from prenuptial agreements is that they are costly. The term “costly” is relative. In relation to the attorneys fees related to a divorce or today’s average wedding cost, it’s quite a deal. Perhaps register for it as your engagement gift.

While basically anything relating to finances can be addressed in a prenuptial, it does have its limitations. Anything relating to child custody and visitation or child support cannot be placed in a prenuptial agreement.