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S.T.E.P.S. - Smart, Tailored, Event-Driven, Packaged Solutions
provided by Women's Financial Network at Siebert
Legal Issues -- Part IV
The legal implications of being husband and wife extend far beyond your marriage license. Prenuptial and postnuptial agreements are among those that affect your finances and other assets the most. In this section we will discuss each in some detail, from how they can protect you to when it's most advisable to enter into one.
Prenuptial and postnuptial agreements
With the startling reality that almost one out of two marriages
in the U.S. ends in divorce, the increase in the number of
prenuptial agreements is not surprising. A prenuptial contract
is an agreement between a future married couple detailing
how their financial affairs are to be handled and how they
will divide their assets in the event of divorce. This is
not to imply that prenuptial agreements signify divorce. In
fact, you always have the option of dissolving the prenuptial
contract. But because a woman's standard of living typically
declines after divorce, it is important to take the preventative
measures you feel are necessary to protect your financial
security.
When is a prenuptial worth thinking about?
In today's world you do not have to be a billionaire to have a prenuptial agreement. It is legally advisable to create a prenuptial agreement if you have several hundred thousand dollars in assets, a house, a stock portfolio, or even a boat. In short, a prenuptial is worth thinking about when:
- You own a company
- You have children from previous relationships
- You have large future liabilities
- One partner earns significantly more than the other
- You have a brand name in your industry and/or high likelihood of fame/success
- You have lasting familial obligations
- You expect to inherit wealth
How to divide your assets?
There are many different ways to divide your assets, and there is no one right answer -- you and your partner need to determine which feels right for you both. Here are a few things to keep in mind:
- Premarital values of assets remain separate and include appreciation; but all income on the assets is shared or split pro-rata.
- All assets and income are combined, and future income and appreciation are divided, according to predetermined ratios.
- Anything you owned before the marriage (including income and appreciation) stays yours.
Know too that if you establish no agreement prior to the marriage, assets are divided by a divorce court according to the laws in the state in which you live. It is important to note that a prenuptial agreement can be fought and ruled invalid if it is deemed unfair in distributing assets. Or, if a prenup is signed on the wedding night, either spouse can claim it was signed under duress. Lastly, if you or your spouse are not represented by an attorney when you enter into the agreement, it can be overturned depending on your state.
Postnuptial agreements
If a prenuptial agreement does not fit into your plans before you are married, you might want to consider a postnuptial agreement. A postnuptial agreement is set up after you are married and, like a pre-nup, lays out the terms of a divorce. These are typically created when one partner acquires new wealth and wants to protect it.
Continue to: Part V: Banking basics and credit.
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