The excitement of planning a wedding can be all-consuming. There are guests to invite and a ceremony and festivities to plan. During such an exciting time, the last thing anyone wants to think about is signing a prenuptial or premarital agreement (colloquially called a “prenup”).
While it’s true that signing a prenup isn’t very romantic, it is a smart thing to do. This is especially true if you are entering into a marriage where you and your partner have considerable wealth and assets. It is also an important tool for couples who may be entering a second marriage and already have financial obligations to former spouses (such as spousal support), or financial goals for their children (such as paying for their college). You may not want to think about your upcoming marriage ending in divorce. However, if it does, having a clear plan in place about the identification, valuation, and division of your finances can give you peace of mind.
Signing a prenup is smart
Creating and signing a prenup allows you and your partner to be completely transparent with each other. Discussing your finances before you get married can strengthen your communication skills. Being honest about your finances now can also make it easier to discuss money matters later. Having these discussions also opens the door to set expectations about how you two plan to save, if someone will remain at home, and if you two plan to purchase property together.
For example; you may be a business owner. In the event of divorce, a well-crafted prenup can do anything from having your spouse preemptively waive all interest in that business — however valuable it may be at the time of divorce — to preemptively determine how to value the business at the time of future divorce, so you and your spouse know what share of the value maybe be awarded to your spouse in consideration of other assets or undertakings.
In addition to addressing the assets you bring to the table, you can set a bigger plan for your life together in motion. Topics may include:
- A timeline for buying a home
- Saving money
- Setting up a college fund for your present or future children
- Whether or not you will be a stay-at-home parent and if so, how spousal support comes into play
- How to best invest your money
- How to handle unexpected expenses
- Whether to create any trusts or how to award assets in your will(s)
- Whether there is an “end date” on your prenup (also known as a “sunset clause”).
Learning more about prenups can help you decide whether to make one before your marriage.