Who Needs A Prenup
More and more couples are opting for prenuptial agreements with good reason. A prenuptial agreement is a contract signed by couples before they enter into a marriage. It addresses the property and financial rights of each party in the event of a divorce.
Whether to enter a prenuptial agreement is a personal decision, and each couple is different. Below is a list of four situations where a prenuptial agreement might make sense.
1. If there is a disparity in income and wealth.
Sometimes a prenup is necessary for asset protection purposes when one spouse in the marriage is significantly wealthier. Property division is one of the most expensive aspects of divorce litigation. A prenup allows both partners to reasonably agree to property division and alimony while they are on good terms.
2. If one of you owns a business.
Prenuptial agreements can be used to safeguard your business, especially if you established your business prior to the marriage. It can ensure your practice or business is not divided and subject to the control of your former spouse upon divorce. For instance, in January 2019 Jeff Bezos (founder, chairman, CEO, and president of Amazon) and his wife MacKenzie Bezos were seeking a divorce. An area of major concern was the future of Amazon. Because there was no prenuptial agreement in place (this was not an option since they were married before Amazon was founded), Jeff Bezos could have lost voting control of his $143 billion stake in Amazon.
3. If you have children from a previous marriage.
Prenups are helpful for couples who come into the marriage with children. You may have certain assets you want to make sure your children will get in the event of your death or divorce. A prenup will make your future spouse aware of your assets, what your children will receive, and the financial situation going into the marriage.
4. If one of you has significant debt.
Marriage means combining of financial interests. This means creditors can seize your property for unpaid debt, even if it is your spouse’s debt. For example, if your future spouse enters the marriage with credit card debt and fails to pay, creditors might take money out of your joint bank account to satisfy the debt. A prenup will allow you to specify whose property will be used to pay off the debt.
Here is a quick checklist. If you or your spouse answers ‘yes’ to one or more of the following questions, you should consider entering into a prenuptial agreement.
- Do you own real estate?
- Do you have children from a prior relationship?
- Do you own any part of a business?
- Do you have greater than $50,000 in assets (including but not limited to retirement accounts, stocks, bonds, or employment benefits)?
- Do you have an income greater than $100,000?
- Do you have significant debts and outstanding loans?
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