The Value of Prenuptial Agreements

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Last week’s article discussed the importance for engaged couples of having open conversations about money before the wedding. This week we’ll look at some reasons a couple might want to consider signing a formal prenuptial agreement.

Prenups, which establish how assets, debts, and financial responsibilities would be divided in the event of a divorce, are often thought to be the exclusive territory of older couples with wealth and those with children from previous marriages. Certainly, in those cases, the need for a prenup is clear. Anyone who has experienced a divorce painfully understands that even a marriage seemingly made in heaven can implode, with disastrous financial as well as emotional implications. One important aspect of a prenup is to ensure that children from a previous marriage will receive their fair share of the assets that were brought into the second marriage.

Outside of this scenario, it’s understandably easy to assume that prenups are not necessary for couples with minimal finances. However, even for partners without significant assets, prenups can offer valuable benefits. Here's why such a couple might still consider exploring a prenup.

One of the discoveries that can come out of a prenuptial discussion is the disclosure of significant debt. It isn’t unusual for a partner to not reveal the full amount of debt they carry, until being required to sign a legal agreement of full financial disclosure. Agreeing that the debts a partner brings into the marriage will continue to be their sole responsibility can prevent future emotional and financial conflicts.

Agreements on personal conduct, spending habits, and plans for investing may also be covered in a prenup for partners without current assets.