Top Reasons Why You Need a Prenup

Prenuptial agreements can serve many important functions and serve as a powerful tool to protect financial interests. While protecting a person’s wealth is one important reason for a prenuptial agreement, prenups are not only for the rich. Some of the top reasons to get a prenup include:

Pass Separate Property to Children from Previous Relationships
Many families today are blended with spouses bringing children from previous marriages and relationships into the new marriage. Spouses may have conflicting interests between protecting their new spouse and children who were born prior to the marriage. The prenuptial agreement may specify what happens to the spouse’s separate property when he or she dies. Without a prenuptial agreement, a surviving spouse may have a claim to a larger portion of the deceased spouse’s property.

Keep Certain Property Separate
When a couple gets married, the property that they accumulate after marriage is usually considered marital property, subject to certain exceptions. This marital property may be divided if the couple gets divorced. However, individual may want to keep certain property separate and prevent it from being split up in case of divorce, such as:

  • Retirement benefits
  • Funds in accounts held before marriage
  • A business interest or professional practice
  • Real property purchased before the marriage
  • Assets purchased with separate property
  • Earnings made during the marriage
  • Employment benefits like stock options or profit sharing
  • Inheritance proceeds

Provide Protection from Debts
A prenuptial agreement can be used to protect a spouse from the other’s debt.

Create Clear Expectations and Duties
A prenuptial agreement may provide clear guidelines regarding how the parties will handle finances and property. The prenuptial agreement may designate expectations regarding some of the following financial matters:

  • How the couple will invest
  • How the couple will file tax returns
  • How household bills and expenses will be managed
  • Whether the spouses will have separate financial accounts, joint accounts or a combination of them and how these accounts will be managed
  • How debts will be prioritized and managed
  • How savings will be managed
  • Whether the spouses will pursue higher education and how it will be paid for
  • Whether funds will be used to care for a disabled child, elderly parents or other loved one in need

Provide for the Future
Prenuptial agreements are often developed for couples in which there are disparate incomes or assets. However, in some cases, the spouses may have similar incomes, but there may be a wider gap in the future. For example, a spouse may anticipate coming into a greater amount of money because he or she is pursuing a potentially profitable profession like law or medicine, has recently made a substantial investment or has recently established a startup business. The spouse may want to protect these future earnings and may do so by including appropriate provisions in the prenuptial agreement.