Benefits of Prenuptial Agreements

Whether called prenuptial, antenuptial, or pre-marital agreements, these contracts can be seen as more pragmatic than romantic; however, they are becoming more commonplace and not just a tool of the rich and powerful.

Marriage is more than a romantic partnership. It is also a financial venture. It encompasses the sharing of wealth and assets, and in the case of spouses who owned a business or real estate prior to their nuptials, this sort of agreement may save time, frustration and money in the event of a divorce.

According to a February 2010 survey conducted by Harris Interactive, one-third of all single people would seek a prenuptial agreement from their significant others before marriage. Additionally, 15 percent of divorced couples regret not entering into a prenuptial agreement, and about 40 percent of these divorced individuals would seek a prenuptial agreement if they were to remarry.

While fairly dividing marital property can be difficult enough, discerning separate property that may have been the result of an inheritance, business venture or gift can create highly volatile situations. An estranged spouse’s claim to previously owned real estate or business property can result in contentious and expensive litigation. Prenuptial agreements can prevent these issues.

How a Prenuptial Agreement Works

A prenuptial agreement, also called a “prenup,” is a written contract signed by a couple prior to marriage that directs how assets are distributed if the marriage fails. The benefits of these agreements go beyond outlining asset distribution and financial expectations. They protect assets gained prior to marriage and can insulate a spouse from the other’s debts.

Prenuptial agreements also address how assets should be handled in the event of death, by protecting assets that may pass to children, siblings, or other family members. Prenups could help relationships by eliminating some uncertainty about debts, assets and the future.

Prenups have emotional and financial downsides. When considering the initial signing, a prenuptial can be taken as sign of distrust or lack of full commitment to the marriage. From a financial standpoint, mistakes or failures to fully disclose assets could invalidate the entire agreement.

The use of premarital agreements is on the rise. Many believe these agreements are smart financial moves that should be considered before any couple enters into a marriage.