A prenuptial agreement, or prenup, is a legal agreement signed by both spouses prior to their marriage. Most people think of prenups as being a necessity for celebrities and the super wealthy but many average individuals fail to realize how such an agreement could benefit them. In general, prenups are used to protect the assets of one party in case the marriage ends in divorce and the assets would otherwise be considered marital property. But there are other reasons for signing a prenuptial agreement and they may be signed by either or both parties entering into a marriage.
Keeping the Family Business in the Family
Some family businesses are passed down through the generations, bringing a reputation for quality products or services to the name. The birthright of one spouse could end up being a part of the division of marital property if the marriage ends in divorce and there has been no prenuptial agreement signed beforehand that would allow the rightful owner to retain the entire share of the business.
Protecting One Spouse from the Other Spouse’s Debt
Just as one spouse may enter into a marriage with significantly more assets than the other; some spouses bring a lot of debt with them. During a divorce, debt is often divided with each spouse taking responsibility for a portion of the total debts. A prenuptial agreement protects the other spouse from being left with the responsibility of the other spouse’s debt if the marriage is not successful.
Before the Will
Most of us recognize the importance of leaving a will to determine how our assets are distributed among heirs or beneficiaries after death. What many people fail to realize is that marital property is usually passed to the spouse upon death regardless of the wishes of the deceased as they are stated in their will. When the remaining spouse has signed a prenup in which they forfeit the property in the event that the other spouse precedes them in death.
Err on the Side of Caution
It isn’t unusual for some people to resist signing a prenup, feeling that it means the other spouse doesn’t trust them or feel confident in their future. The fact is that a large portion of marriages end in divorce and even those that seem the most secure in the beginning are at risk of coming apart.
A prenuptial agreement takes the argument out of property division in the event that the unthinkable happens. It can be created and signed at a time when there is no hostility between the two parties so that cooler heads can prevail and the terms are more likely to be fair to both sides.
The Validity of a Prenuptial Agreement
Under some conditions, a prenuptial agreement may be deemed invalid. It must be created according to the specifics of the law and signed by the spouse willingly, without duress. The party must be aware of the type of document they are signing and understand the conditions of the document. In order for a prenup to be valid, it must be a willing action on the part of the signee.