Yes, You Need A Prenup
With people living longer, the number of older people getting remarried has increased considerably. Even worse, the divorce rate has also increased significantly. In my opinion, EVERYONE getting married should have a prenuptial agreement (otherwise known as ‘Prenup’). This isn’t just limited to protecting your wealth. The following are reasons that, in my opinion, everyone getting married should have one:
- Either keep assets separately or identify which assets are marital assets and which are separate assets: Most people think that assets are split 50-50 upon a divorce. This isn’t necessarily true. If you keep your assets separate from that of your spouse, you can keep these assets upon divorce. This applies to both assets brought into the marriage as well as subsequent inheritances. However, you can also keep a larger share of marital assets by designating this in a well-written Prenup.
- A Prenup can limit liability for spouse’s debts: Sometimes creditors can seize marital property even if just one spouse is responsible for the debt. A Prenup can define who is responsible for specific debts incurred before the marriage
- Can be used to clarify inheritance issues: Upon death of a spouse, a Prenup can be crucial if you want your property to go to your children instead of your new spouse and vice versa.
- Right to your home: Many older couples live together to save money. One partner/spouse might move into a house owned by the other partner/spouse. In order to avoid being forced out of the home by the dying spouse’s/partner’s children, the Prenup can address how long the non owning partner/spouse can live in the house and under what circumstances they can live there, such as until they get a new partner etc.
- Clarifying rights of gifts to adult children: I have found that parents want to give (and sometimes need to give) money to their children. This can cause a lot of resentment to the other partner or spouse especially if they are put on a tight budget. A Prenup can limit the amount of gifts made to adult children during the marriage.
- Miscellaneous financial issues: A Prenup can address a host of other financial concerns such as whether the couple will be filing joint or separate returns, how debts, such as credit card debts are handled during the marriage and set responsibility for these debts, how house hold bills are to be paid and, of course, what happens to assets upon divorce.
Non financial issues might need to be considered. For example, if one spouse like to entertain a lot, the Prenup might limit the amount of monthly parties.
Bottom line: A Prenup helps avoid unnecessary surprises that could result in overly stressing the relationship. If you are not married but living with a partner, you might consider a similar agreement as a Prenup known as a “Cohabitation agreement,” which will be discussed in a future post.
Material derived from “Achieve Financial Freedom: Big Time.”
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