Pros and Cons of Prenuptial Agreements
Is a Prenuptial Agreement Right for You?
It used to be that most people associated prenuptial agreements with the very wealthy. However, as the benefits of prenuptial agreements become more well-known, more and more people from all walks of life are using them. But, does this mean that a prenup is a good idea?
Before you make the decision to get a prenup, you should do your research and gain a good understanding of what a prenup can and cannot do, as well as the pros and cons. To help you with this, this blog goes over some of the most important aspects of prenups, as well as the benefits and potential drawbacks.
What is a Prenup?
A prenuptial agreement aims to help future spouses protect their property, clearly outline their finances before marriage, and plan for the future. When drafting a prenup, both parties must have their own legal representation to ensure that the prenuptial agreement is mutually beneficial and doesn't overwhelming advantage one spouse over the other.
Things that can be included in a prenup are:
- Assets each party brings to the marriage
- Any debt that has been accrued
- Property that you wish to remain separate
- Family assets and property
- Business interests
- Provisions for assets to be set aside for children from previous relationships
These are just a few things that may be included in a prenup. You may also wish to include provisions regarding marital responsibilities and financial expectations. Finally, many people also use prenuptial agreements to begin the estate planning process, including information on how certain assets should be handled if one spouse dies.
What Cannot Be Included in a Prenup?
As you can see, many things can be included in a prenuptial agreement. However, a couple of important issues cannot be included, and if you make provisions for them in the prenup, the courts will not honor them.
The following cannot be included in a prenup:
Both of these issues must be handled during the divorce process.
Keep reading to learn more about the pros and cons of prenuptial agreements.
Pro: A Prenup Will Protect Your Wealth
Perhaps the greatest benefit of establishing a prenuptial agreement is how a prenup can help you, and your future spouse protect your wealth. Many people assume that this means protecting your wealth from each other, but this is not the case. A prenuptial agreement allows you and your future spouse to work together to protect both the individual wealth you bring to the marriage and the money you will gain throughout your marriage.
A prenuptial agreement can achieve this double-duty wealth protection because it requires both parties to be open and honest about the assets and debts they bring to the marriage. Furthermore, establishing a prenuptial agreement also requires the couple to discuss their financial expectations regarding these assets and any future assets they acquire as a couple.
When it comes to managing wealth, a prenup allows a couple to:
- Designate what property should remain separate and what will be shared
- Outline the responsibilities of each partner regarding how the couple's property and finances will be handled
- Identify each spouse's right's to manage or control any individual assets or separate property
- Develop a plan for addressing any debt that is brought to the marriage as well as any future debt
- Decide if and under what conditions a spouse will pay alimony to the other in the event of a divorce
- Discuss and decide how important property holdings (such as real estate) will be divided if the couple divorces
- Review what will happen with expected inheritances
As you can see, a prenuptial agreement can serve many functions regarding wealth protection and is not simply limited to divorce planning.
Con: Prenups Don't Always Hold Up in Court
It is true that prenuptial agreements are not always ironclad, and just because you have one in place does not obligate the courts to abide by it. A strong, well-drafted prenuptial agreement will be one that is mutually beneficial to both parties. It will not significantly disadvantage one party over another. Additionally, if a prenuptial agreement contains clauses or provisions that violate the law, it will not be upheld by the courts.
To help ensure that your prenup will hold up in court, you must work with an experienced attorney when drafting. For example, the attorneys at the Law Office of Alexandra White, PC have helped hundreds of clients draft prenups that were not only beneficial to both parties involved but which were honored in court. Additionally, you should avoid using prenup templates you find online or drafting a prenup without the help of legal counsel.
Pro: Makes Future Legal Processes Smoother
As mentioned earlier, a prenup is not only used when a couple separates or divorces. While yes, a prenuptial agreement can make the divorce process much smoother and less stressful, it can also make your end-of-life planning and estate planning easier. In particular, a prenuptial agreement can be used to provide an inheritance for your children and, in some ways, gives you more options to do so than a traditional will.
Because many states, Colorado included, have very strong inheritance laws, a will doesn't always allow people the flexibility they'd like when making decisions about who they want to leave their property to. However, with a prenuptial agreement (or postnuptial agreement), the couple can make these decisions together and, in some ways, bypass the state's inheritance laws.
This is just one way that a prenuptial agreement can help make future legal issues clearer and easier to deal with. To learn more about this and to find out how a prenuptial agreement could help you and your family, reach out to our law team.
Con: Suggests a Distrust in the Relationship
This is more of a myth than a true con to prenuptial agreements. Unfortunately, prenuptial agreements have gotten a bad reputation. Many people erroneously believe that they are unromantic and represent a fundamental lack of faith in the relationship. While preparing a legal document may not be the most romantic thing you can do, they do not demonstrate distrust or a lack of faith that the relationship will not stand the test of time.
Instead, quite to the contrary, a prenuptial agreement can help bring a couple closer together, encourage open communication, and help them prepare for the future. This all enables the couple to enter their marriage on a strong, equal footing. In fact, for many couples, a prenuptial agreement actually made them feel more secure in their relationship as it removed any worry over future arguments about finances.
How to Get Started With a Prenuptial Agreement
Generally speaking, most people can benefit from establishing a prenuptial agreement with their fiancé/e. Even if you do not have a large estate, you should consider establishing a prenup before marriage. If you are already married and wish you had a prenup, you do have the option to draft a postnuptial agreement (also called marital agreements).
To get started on your prenup, simply send our law firm a message online, or call our office at (303) 647-4245.