A person newly engaged may sometimes get intimidated by the idea of a pre-marital or a pre-nuptial agreement. But they need to understand that a prenup can be looked upon as an insurance policy. You hope not to use it, but glad it is in place in case you ever need it. The document is really an outline that clearly defines what will happen financially if the parties ever do get divorced.
Benefits of a Pre-nuptial Agreement
For a prenup to be valid, there must be full disclosure of all finances by both parties. They each must provide a list of their assets, liabilities, and income. This opens up a discussion between the two about their expectations about money and how they will handle savings accounts and retirement plans. What happens if one of them should die?
They make plans for their future at a time when they feel loving toward each other, which is better for both of them, instead of waiting for a divorce when they might be frustrated or have anger issues.
Working on a prenup reveals each party’s financial philosophy and how they handle money, which often is an overlooked subject during a courtship. Discussion about finances as they prepare their prenuptial agreement provides the couple a roadmap of what their financial situation is going to look like during the marriage as well as what it will look like in case of a divorce.
Parameters of a Pre-nuptial Agreement
A prenup can include any financial subject the parties want to include. For example:
- Identifying separate property owned by each party at the time of the marriage and how that property will remain separate property or become marital property if the parties choose.
- How will each party’s income be classified during the marriage? Separate or community property?
- How will the couple save money during the marriage and how will the savings be divided upon a divorce? Will each party save money in their own separate bank account or will each deposit a sum of money into a joint bank account and, if so, how will that be divided?
- What method will the couple use to trace separate property reimbursement rights?
- If they get divorced, who will pay attorneys’ fees?
- It can define spousal support including the amount to be paid and the duration of spousal support payments.
Advantage to the Collaborative Process for a Pre-Nup
Preparing a prenup can sometimes turn contentious. One party may feel overwhelmed and like the other may be taking advantage. The help of a professional financial counselor skilled in a collaborative process can provide important financial information and guide the couple to making decisions that are fair to both. Both can feel satisfied with the final prenup document.
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