Prenuptial agreements, or "prenups," are contracts two people create before they get married. Also sometimes called a premarital agreement, the prenup lists your assets and debts, and describes what the ownership of those will be after you get married. It can also spell out what would happen to those assets if you divorce.
Often considered a romance-killer, prenuptial agreements can actually help preserve a strong relationship by deciding many financial matters before the marriage begins.
Prenuptial agreements-not just for the wealthy
While prenuptial agreements do protect the wealthy from losing much of their assets in a divorce, they can be useful for married couples of modest means as well. Among the reasons to draw up a prenup are the following:
- Protect yourself from your partner's debts
- Spell out who will get what if you divorce later
- Set aside property for children from previous marriages
- Define your financial roles
- Allow you to keep your finances separate
Consider making a prenup if you have any substantial assets-for example, if you own a business, retirement accounts, and/or real estate. If you earn a high salary or plan to stay home while your spouse works, a prenup may also be useful in defining your rights and financial responsibilities in the marriage.
Drawing up a prenuptial agreement
Here are the basic steps involved in drawing up a prenup:
- Discuss it with your partner. Make sure you're both in agreement about why you want a prenup.
- Make a list of everything you own and everything you owe. Write down all the assets and debts you'll be bringing into the marriage.
- Show your lists to each other. Discuss your debts and determine if you're willing to share responsibility for your partner's.
- See a lawyer. You should each have your own lawyer to represent you.
- Create the prenup. Your lawyers will know the details of marriage laws in your state and will help you create a prenup that will pass state scrutiny and stand up in court if it's challenged later.
- Sign the prenup. If everyone agrees to the terms spelled out in the prenup, all parties involved, including the lawyers, should sign it.
If you don't get a prenuptial agreement
If you get married without a prenup, your assets will be owned during the marriage-and, in the case of a divorce, distributed-according to the law in your state. Usually, getting married gives your spouse the right to shared ownership and shared control of any property you acquire during the marriage. You are also generally obligated for debts your spouse racks up during the marriage. Depending on your state, the law may also dictate ownership of some assets you had before you got married.
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