What is a Prenuptial Agreement?

Although getting married is a romantic and exciting time in a couple's life, there are important decisions that have to be made before the wedding ceremony. Although it can be a highly uncomfortable issue, each couple must think about what would happen if the marriage were to dissolve. Statistics show that about 50% of marriage end in divorce. It is important to protect yourself because we do not know what the future will bring. One way couples can protect themselves is by entering into a Prenuptial Agreement.

So, what is a prenuptial agreement? A Prenuptial Agreement, or Prenup, is a legal contract between two people planning to get married. This contract involves making an agreed upon document for the distribution of assets if the marriage dissolves resulting in divorce. Distribution of assets can include: property and financial assets such as stocks, bonds...etc. Forms of prenups have existed for thousands of years, especially where royal families needed to protect their valuables and wealth. Although it is a difficult topic to talk about, especially when you are excited about the marriage and future, it should be part of a couples financial planning.

Experts recommend couples get a prenup for the following situations: one partner has, or is planning to acquire a home, stock investments, or retirement funds, one partner owns all or part of a business, one partner will be receiving an inheritance, one partner has children from a previous marriage, one of the partners has substantially more wealth, one partner is paying for the other's tuition or investing in the other's business, there are relatives that one is responsible for caring for, one partner owns a copyright or trademark, one is expected to see a dramatic increase in income in the next few years, and if one partner has won a lottery.

Approaching the subject of a prenuptial agreement can be tricky; however, it is important to remember that marriage is an emotional and financial union. Experts recommend bringing up the subject as early as possible in the relationship, particularly before they become engaged. It is important to be open and honest and listen to the other person's concerns to avoid causing upset.

There are often times when a prenup may be contested during a divorce. This is often due to changing circumstances such as child support issues or one person may have violated the agreement such as hiding assets when the prenup was created. Many volatile divorces will include challenges of prenuptial agreements so it is important not to hide anything as it may come back to take a big bite out of your bank account.

Obviously prenuptial agreements are not romantic and can be awkward to talk about; however, because there is such a high rate of divorce, it is important to consider a prenup before you get engaged. Remember, in order to be considered a legal document, a prenup must be written, signed by both parties, and notarized. It just makes financial sense to get a prenup and then move forward and enjoy your marriage.