How Prenuptial Agreements Can Protect Your Wealth
Prenuptial agreements have a bad reputation for being the predictor for marital doom and just a way to limit the amount of wealth an ex-spouse can claim. However, pre-marriage financial planning can prove to be a smart move in the long run, especially for couples who marry later in life after building careers and making investments. A carefully crafted contract can be an asset to both parties, acting as a way to define and distribute wealth and responsibilities equitably. Learn more about what a prenuptial agreement entails and why you need one to protect your wealth.
What Is a Prenuptial Agreement?
A prenuptial agreement, or premarital agreement, is a private contract between a couple that’s finalized prior to getting married. In basic terms, it states what will happen to you and your spouse’s assets and income in the event of death, separation, or divorce. It helps ensure separate property can remain separate and avoid becoming subject to community property or equitable distribution laws down the road. Along with your debts, couples need to disclose all their assets within the contract, including:
- Business ownerships/interests
- Cash and bank accounts
- Real estate
- Life insurance
- Jewelry and collections
- Recreation/sports equipment
- And more…
Prenuptial agreements also address spousal support, expense payments, and other issues. Once the terms are agreed upon, the contract is signed by both parties. While each state has its own rules for this type of agreement, it’s rarely invalidated in court.
Does a Prenup Protect Your Money?
The need for a prenuptial agreement is largely up to the couple. In the event of a divorce, deciding how assets are divided can be a painstaking process. A prenuptial agreement can help make this process go much smoother, saving time, money, and undue stress. It’s not usually recommended that younger couples with fewer assets to bring to the table sign a prenuptial agreement. However, pre-marriage financial planning can prove to be vital if one or both parties hold a large estate and significant assets or expect to receive a sizable inheritance down the road.
Even if you’re young and don’t yet own a significant amount in concrete assets, your contract can protect your stock options and other strides you’ve made toward the all-important retirement nest egg. It also provides greater peace of mind in terms of the unknown wealth that may be gained after marriage in the future and helps protect ownership rights over a variety of areas, including:
- Income earned during the marriage
- Assets obtained during the marriage
- Unearned income in the form of a bequest or trust
Along with defending the wealth you currently have or may gain in the future, it can also help curb any claim to alimony from an ex-spouse. Alimony payments are court-ordered and awarded to a former spouse to provide financial support to the one with lesser or no income. A prenup can define the amount and duration (if any) of alimony upon divorce, protecting your wealth beyond your current marriage.
Make Pre-Marriage Planning Simple with a Professional
Just like an insurance policy for your home, pre-marriage financial planning protects both parties against the unknown — for better or for worse. Contact Park Place Financial in Bellaire, Texas, to take steps toward protecting your wealth today.