Love, Relationships and Finance: Prenuptual Agreements pt. 1

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What exactly is a prenuptial agreement?

A prenuptial -- or premarital or antemarital -- agreement is a legal contract entered into before marriage that specifies how a couple’s assets and debts are to be divided in case of a divorce. A pre-nup can also delineate certain expectations partners bring to the marriage, i.e., which partner will work, which partner will stay at home with the children, and various inheritance rights. Think of it as the best way to ensure your financial security in the future.

I thought pre-nups were just for rich people?

You are not alone. Years ago, pre-nups were primarily used by people who had considerable wealth that they wanted to protect. Even now, the pre-nups we tend to hear or read about are those signed by movie stars or others with many assets. Yet these days, pre-nups ate very common among people of ordinary means. Most women and men have assets they wish to protect—or the prospect of future assets they want to make secure plans for. In fact, people with very few current as sets may enter into a pre-nup in order to protect future earnings or inheritances, or shield against future debts incurred by a spouse who may prove to be financially irresponsible. Ultimately, a well- written pre-nup can protect you no matter what financial circumstances arise.

I’m still not convinced I need a pre-nup. Can you give me some examples of situations in which someone would want to have one?

Yes. Here are some scenarios in which pre-nups would be useful. You and your spouse-to-be both work, and you decide you want to keep future earnings or stock options separate. You put that in the pre-nup. One of you has previously been through a bitter divorce, and you know how painful, divisive, and expensive wrangling over marital property can be, so you determine any divisions beforehand and record it in a pre-nup. You’ve inherited an extensive portfolio from your parents, a portfolio that may take you -- and possibly your spouse -- a lot of time and effort to manage. You will both reap the rewards during your marriage. Even so, you want to make sure that this portfolio and its growth remain in your name alone should the marriage dissolve. That, too, goes in a pre-nup.

I know that one day I’m going to inherit my parents’ vacation home. Since my folks no longer use it very much, my fiancé and I have begun spending weekends there and are full of plans to fix it up together. Still, this house has been in my family for several generations, and I want to make sure it remains in my family. Is this something a pre-nup can cover?

It certainly is, and it’s a perfect example of the protection a pre-nup can provide. A pre-nup is a good idea whenever you want to ensure that an asset -- whether property, an equity stake in property, securities, valuables, or a retirement plan -- is protected.

Isn’t it kind of insensitive to tell the guy/woman … if we’re going to marry, we should get a pre-nup? Won’t she or he think that I don’t have much confidence in our future together?

That’s a common worry, but if the safety, happiness, and general welfare of both partners is a clear priority for each partner, negotiating a pre-nup will be seen as a mark of respect for yourself, your partner, and the financial future you will have together. Moreover, it’s an opportunity to express your most intimate concerns about money, security, child-rearing, and other issues -- and to do so before marriage’s normal challenges and problems cause emotions to run high. In our experience, talking honestly about money and the future brings partners closer together. If this is important to you, my advice is to let your beloved know how you feel. Chances are that he will want you to be protected and to feel safe, just as you want him to be.


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Sunday, December 21, 2008 17:10