A prenuptial agreement is simply a legal document that describes how property and assets brought into and acquired during a marriage will be treated if there's a divorce. It is estimated that roughly 40 percent of marriages fail so there's nothing disloyal or cold-hearted about preparing for contingencies. Awareness of prenuptial agreements has grown recently because of high-profile celebrity divorces, yet, it remains a sensitive subject for couples to discuss.
Here are seven situations in which a prenup is advisable:
- When significant assets are involved, such as a home, stock or retirement funds. Both sides need protection from the consequences of any breakdown of the marriage in this instance.
- When there are children from previous marriages. Any time children are involved, there's an extra incentive to protect their interests. Most states will give the surviving spouse up to half of an estate, leaving the children no say. That could be at least partially avoided by using a prenup.
- When one partner owns all or part of a business. In a breakup, the attorney for the other partner will likely go after a share of the "family" business.
- When one partner is much wealthier than the other. A one-sided money situation can easily be cause for jealousy or, later, legal dispute.
- When one spouse-to-be is much older. The older partner may not be able to recover to provide for his or her retirement if assets are split 50-50.
- When one partner will be supporting the other while he or she pursues a degree. A $100,000 debt for grad school could easily outlast the marriage.
- When an inheritance is expected.
