Whether a Prenuptial (or Antenuptial) Agreement (a “Prenup”) is appropriate or necessary is dependent on a variety of factors. There are a few main reasons that a person should consider a Prenup before a marriage:
Potential Inheritance
If one or both parties stand to inherit funds from family members, whether directly or through trusts and/or real estate, a Prenup is a way to ensure those funds remain as separate property to the recipient. Without a clear Prenup outlining the terms of the inheritance, inheritance received during the marriage and future inheritance may be considered a divisible asset in a divorce or a factor in how the marital estate is equitably divided.
Family Business(es)
When one party works for a family business, or owns a business prior to the marriage, it can lead to complications in the divorce. Planning ahead regarding how to handle the valuation or growth of such a business can limit litigation and fees in the event of a divorce. Parties can also contract through a Prenup how the non-owner spouse will benefit in death, limiting family strife during a difficult time.
Children From a Prior Relationship
Often times in second or later in life marriages, one or both parties may have children from prior relationships. One party may seek to utilize a Prenup to protect assets or wealth, in the event of divorce or death, to benefit those children.
Greatly Disparate Wealth Prior to the Marriage
If one party enters the marriage with significantly more wealth than the other, he or she may want to protect those premarital assets. Often this applies to real estate or retirement assets. A carefully drafted Prenup can assist in providing a predictable outcome in the event of divorce, or the protection of assets for the benefit of other family members in the case of death of the wealthy party.
Ultimately a Prenup will be looked at twice – at the time of drafting to ensure it is fair and reasonable based on the circumstances then, and at the time of enforcement to ensure it is not unconscionable based on the circumstances at that time. There also needs to be full disclosure of all assets, liabilities, income and future inheritance (if that is what is included). These agreements are scrutinized heavily by the court and having knowledgeable counsel for both parties will limit the exposure of the court finding a prenup is unenforceable.
