Is it yours, mine or ours?
Getting engaged is exciting! For most couples, their engagement is immediately followed by a long list of tasks for planning a successful wedding. And, while no newly engaged couple wants to think about it, in reality, misconceptions abound about what happens to a couple’s assets if there’s a divorce.
For example, many people believe if they owned a business before they got married, kept it solely in their name during marriage, and worked in it while their spouse did not, the business remains their separate property. But that’s not true. After the marriage, the business becomes a marital asset, and any increase in value during the marriage could be subject to division upon divorce.
Although it may seem counterintuitive, discussing a prenuptial agreement should be a routine part of every newly engaged couple’s checklist—on that list of tasks—when planning a successful marriage.
Here are two major benefits of preparing a prenuptial agreement that can actually help couples in their future marriages.
Disputes over finances can strain any marriage. A dispute becomes even more difficult if it’s caused by one spouse’s decision-making before the marriage, and next to impossible if the issue was never disclosed.
A pre-nup can help because every prenuptial agreement must contain an accurate, comprehensive financial disclosure by each party. This disclosure lists all assets, liabilities and other financial interests for each party, and it must be shared with the other before signing.
There’s no better way to gather a complete picture of your future spouse’s financial health than to go through the process of preparing a prenuptial agreement.
Most people believe it’s only fair that each person leaves the marriage with what each brought to it. But in reality, the nature of a pre-marital interest can change over time and convert to a marital interest—called “commingling”—even if one or both parties never intended for that to happen. For example, adding your spouse to your pre-marital bank account is frequently viewed as a deliberate decision to share all the funds.
With a pre-nup, the parties will each have a clear understanding of their respective rights to their pre-marital assets and will be able to make decisions accordingly. For example, consider the case where a wife waived any interest in her husband’s business as part of their pre-nuptial agreement, and she decides against allowing him to fund his business with an equity credit line for their jointly owned home. Although the husband may not be happy about his wife’s decision, he can clearly understand her position.
There are other circumstances when pre-nups are particularly helpful.
Second Marriages. When spouses marry later in life and have accrued significant wealth, they may want to keep their assets separate during and after the marriage.
Children From Prior Marriages. When one or both spouses have children from previous marriages, they may want to ensure their wealth goes to their children instead of their spouse if they die.
Disparities In Wealth. When one spouse is much wealthier than the other, it can be difficult to predict how much a court will award the less wealthy spouse in a divorce. Both parties can benefit from the certainty a pre-nup provides.
On Second Thought …
A postnuptial agreement is essentially a prenuptial agreement that’s signed after the wedding. For some couples, waiting to discuss terms and provisions is preferable because of timing—postnups can be drafted any time after the wedding, not just immediately afterward—or the desire to do so without the pressure of a pending wedding.
Planning a wedding is stressful enough—planning for the rest of your life together shouldn’t be. Meeting with an attorney before you get married is the best way to dispel myths and educate yourself about your property rights. For example, in Pennsylvania and Delaware you have the freedom to design your own financial rules for your marriage and divorce. You can tailor your property rights to fit the unique needs of you and your spouse. And that’s worth knowing.
The opinions expressed in this article are for general information purposes only and are not intended to provide specific legal advice or recommendations.
Marie I. Crossley and Jaime M. Jano handle a variety of divorce, custody, child support, alimony and other family law matters ranging from mediating small disputes to complex divorce and support litigation. Marie practices in Delaware, while Jaime practices in Chester, Montgomery, Delaware, Philadelphia and Bucks Counties. For more information, visit Macelree.com.