First comes love, then comes marriage. Somewhere in between the two should come a prenuptial agreement. So says Leanna Johannes, senior wealth strategist at PNC Bank Wealth Management Group.
“The purpose of the prenup is to determine what each party would have to pay or give up in the event of a divorce,” she says. “Without it, the property is divided according to the law of the state that you live. It basically makes those laws not apply to the couple. They instead substitute the terms of the couple’s prenup. This way you can agree in advance what makes sense to both of you.”
Johannes says prenuptial agreements have become more common in recent years especially for couples marrying for the second time, people with blended families or those who want to protect a business they started before marriage. Despite being necessary, she says the stigma associated with prenuptial agreements are hard for many people to overcome. Some fear presenting their future spouse with a prenup will make them more likely to divorce. Others fear blowback from their partner or family members. Some worry about embarrassing revelations such as bankruptcies or debt.
Johannes says couples need to look beyond those concerns. She stresses that a prenuptial agreement can give you and your partner a jumpstart on your shared finances and teach you both about communication and compromise. Johannes highlights six specific reasons couples might want to consider getting a prenuptial agreement:
One person has more assets than the other
If you managed to save a lot of assets or have inherited assets, you might be worried about what will happen if the marriage comes to an end. Usually the things you owned before marriage will still be yours after the divorce. However, Johannes says there are exceptions. If you plan ahead on how to deal with specific properties, that can save you time and money.
If one person earns more than the other
If you make less money than your partner, Johannes says it’s wise to make sure you’ll have support in the future. By agreeing ahead of time on the amount, duration and type of alimony, the prenuptial agreement can help secure your financial future.
If you or your partner own a business
Johannes says owning a business before getting married should be reason enough for drafting a prenuptial agreement. If the marriage fails, a person could find themselves forced into giving up their business to their soon-to-be ex-spouse. Without an agreement, business owners could also find themselves being partners with someone they don't want.
Raising the kids
It’s not that uncommon that one partner will stop working outside the home to focus on raising the children. If divorce happens, the stay-at-home parent can find it difficult to jump back into the business and work world. While the custodial parent will probably get some form of child support, the assistance will end when the children are 18. Johannes says a prenuptial agreement can help lay out what financial responsibilities one person has to the other.
Drowning in debt
If your partner has a lot of debt or has bad spending habits, you could find yourself responsible for debts you didn’t know existed. Johannes says signing a prenuptial agreement can help protect you and your assets.
Custody of pets
People love their pets and often look at them as surrogate children. So what will happen to Kitty and Fido if your relationship ends? Johannes says as the divorce rate climbs, pet prenups are becoming more popular. If you divorce your spouse, the agreement will state who gets custody of the family pet.
Once you decide if a prenuptial agreement is right for both of you, Johannes says two requirements need to be met in order for the documents to be valid. The first is that each person needs to secure their own separate lawyer. The second is that both parties are required to fully disclose all of their financial assets.
“The institution of marriage was founded as a business partnership between two people,” she says. “Think Romeo and Juliet. Culturally, we focus on the romance of the marriage, but it’s still very much a business arrangement. It’s important to go into it with open eyes. Signing a prenup isn’t a foreboding of a rocky end. It is learning to negotiate with your partner at the beginning and looking forward to a long healthy relationship.”
Linda Bell joined FOX Business Network (FBN) in 2014 as an assignment editor. She is an award-winning writer of business and financial content. You can follow her on Twitter @lindanbell.