Prenuptial Agreements: A Worthwhile Consideration for a Modern Couple

A prenuptial agreement is a legally binding contract – brokered by a lawyer or legal counsellor – that outlines each individual’s property (and debt) rights prior to marriage, and how these assets would be divided if the couple divorces.

Suppose you’ve amassed a sizeable net worth for yourself and earn over six figures a year, all before entering a serious relationship. Or maybe you have purchased a home, or own or co-own a business with a colleague. If any of these ring true to you, you should probably consider a prenuptial agreement.

Prenuptial agreements aren’t only for established millionaires but also young people at the start of their professional lives.

Negotiating a prenuptial agreement prior to tying the knot, or a marriage contract for those who have already married, might seem like an act of self-sabotage, but rather, it’s a way to set mutually beneficial terms should things sour in your marriage.

When you’re in the throes of a divorce or separation, emotions run high. The last thing you might want to do is sit down and talk about who gets what. So, if you’ve already outlined a marriage contract prior to this unfortunate outcome, then you two can merely cite it and eliminate any guesswork or unpleasant negotiations.

When composing a prenuptial agreement, legal counsel will ask for the involved parties to outline marital property and individual property. Marital property is typically an asset purchased together, like a house or property, monies invested into a joint account, etc. Individual property accounts for things like a car, collector’s items, family heirlooms from one’s family, etc.

Hashing these details out before saying ‘I do’ can minimize any unpleasantries that could arise if your match is not made in heaven.

Now, how about accounting for financial changes that occur during the marriage? Well, if either party anticipates any financial windfalls, like an inheritance or major promotion, you can account for this in the marriage contract. You can stipulate that any significant assets acquired after the issuing of the marriage license remain in the sole possession of the owner, rather than opting for the typical 50/50 split.

As for assets appreciating in value over time, this would typically be covered in a marriage contract, as well. A marital item, like property, will commonly appreciate with time, so the capital made on the sale of the item would be divided according to the marriage contract, regardless of how much or little it appreciates in value. Marital items are often purchased after marriage and would likely be subject to a 50/50 split.

The appreciation of individual property cannot be touched by a spouse, even if its value increased dramatically over the course of the marriage.

Less popularly, these legally binding contracts may also protect you from taking on debt that your spouse may amass during your marriage. If you both have personal debts through credit cards or individual lines of credit, outlining in your prenuptial agreement that the other will not take on these debts after divorce could protect you from unflattering fees.

For second or third marriages, prenuptial agreements might protect the finances the spouses intend for their child or children from a previous marriage. For example, if an individual is remarrying, they may wish to stipulate in the marriage contract that should they go through another divorce, the estate remains untouched by the new spouse because it is intended for their child(ren).

If this isn’t outlined prior to the marriage in a prenuptial agreement, the new spouse could argue that for any savings the other might have had put aside, regardless of what they might have intended it for, the new spouse is entitled.

Additionally, often spousal support is outlined in prenuptial agreements too. To make sure amounts – if any – sent from one party to another as support post-divorce are fair, these terms can be met prior with the assistance of legal counsel.