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The Pre-Nuptial Agreement
by Kathryn Lemmon, Wedding Zone Staff Writer
Although nobody likes to enter a marriage thinking about potential problems, nevertheless, they happen. If you're getting married you may want to explore prenuptial agreements. Chances are you won't need one, but finding out more about them will give you insight into your own relationship. And, depending on your individual circumstances, maybe you should consider one. Moral issues aside, these agreements can be useful financial planning tools.
The concept of prenuptial agreements is relatively new. This arrangement (often shortened to prenup) is a binding contract between two individuals who are deciding prior to their marriage what their legal relationship will be in the event of divorce. The emphasis is on the word "binding." That basically means the agreement will not be set aside unless a challenging party can show fraud or duress. Hence, this is not something you enter into lightly.
Eliminating uncertainty, a prenup allows the couple to decide how their marital and separate property will be defined before they tie the knot. This arrangement can also help the couple avoid an expensive legal battle if they do divorce some day.
How can you make sure a prenup is legally solid? Begin by hiring two lawyers, one for each of you. This is not as obvious as it sounds, as many couples share a lawyer. But the spouse without a lawyer can later wiggle out of a prenup, by suggesting he/she didn't know his rights or was somehow coerced. Pick independent lawyers. One judge threw out a prenup in part because the husband, a lawyer himself, selected and paid for his future wife's legal counsel. Then an appeals court overturned the decision. The purpose of a prenup is to keep things straightforward and simple, and clearly in this case it didn't work.
Perhaps most frequently, prenups are made by individuals who have children or grandchildren from a prior marriage. In this case, a partner may use a premarital agreement to ensure that, upon his or her death, the bulk of his or her property passes to the children or grandchildren, rather than the spouse. This could easily be the case if one partner has considerable income or a share in a family business, for example.
Without a prenup, lots of problems can occur over property or businesses owned by a spouse before the marriage. It's a separate property, but any appreciation during the marriage could become marital property - subject to your spouse's claim. A prenup spells out the spouse's stake, if any, to that property or business, avoiding messy litigation.
Another advantage of a prenup is it can open the lines of communication about important issues which you might not discuss otherwise.
These days, an advanced degree, such as an MBA could justify getting a prenup. Over the long run, MBA's are worth a great deal of money. Or, for example, if you're a doctor and you become a specialist that has added value. In addition to your license, your practice is valuable, and it will appreciate during the marriage, which makes it marital property. If you are planning to go to school during the marriage, and your spouse will help you pay for it, that counts as marital property as well.
But courts won't uphold prenups of a non-monetary nature. For instance, you can't sue your spouse for failure to do the dishes, even if your agreement says that he or she will do them every night.
Finally, don't wait until the last minute before doing a prenup. It could be seen as pressuring a spouse into an agreement and at a minimum will cause undue stress close to the wedding day. Also a prenup must be signed in the presence of a notary public, and verbal agreements probably won't hold up. Any agreement should be in plain English, defining the division of assets specifically and clearly.
Prenups may not be very romantic, but neither is divorce.
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