Many people mistakenly believe that prenuptial agreements are only for those who believe their marriage may not work out. However, this is not the case. A prenuptial agreement doesn’t only safeguard assets in divorce or dissolution — it can also clarify financial expectations for the marriage, force partners to have conversations about their financial goals, and help protect business interests. It can begin preparing the partners to plan for a time when one of them passes away. Rather than create tension between partners, these agreements can often serve to strengthen the relationship between spouses.
There are several benefits of a prenuptial agreement, we describe several of them below:
Protect Assets in Divorce or Dissolution
Although they can be used for many more purposes, a major benefit of a prenuptial agreement is that it can offer asset protection in divorce or dissolution. These documents are contracts that can clearly define how property should be handled when a couple decides to terminate their marriage. Specifically, when properly drafted, a prenup can:
- Define what assets and property would be characterized as marital property
- Specify what would be considered separate property
- Provide clarity as to how debt would be divided in the event of divorce
- Protect any inheritances of either spouse or gifts to either spouse by classifying them as separate property in advance
- Limit the amount or duration of a spousal support (alimony) award in divorce
- Help spouses maintain privacy regarding their financial matters in divorce
A valid prenup can save spouses the time and expense that can come with dividing property in divorce — and make certain they have control over the process, rather than let a judge decide. This is especially important in high-asset marriages. Prenups can also help avoid the potential for lengthy litigation by ensuring any asset division issues are resolved before the spouses’ emotions run high during legal proceedings.
Wealth Protection When There is an Income Disparity
If there is a significant disparity in income, a prenuptial agreement can protect the higher-earning spouse’s assets — and prevent them from losing a substantial portion of their income in divorce. It can also ensure the lower-earning spouse is provided for financially, and that the terms for spousal support are fair if the marriage terminates. A prenup can prevent future legal battles over the length of time spousal support is awarded — as well as the amount. Additionally, these agreements can protect spouses from being held liable for each other’s debts.
Business Interest Protection
Business owners can greatly benefit from having a prenuptial agreement in place. It can define their business interests as separate property and safeguard them from division in divorce. A prenup can also prevent operational disruption to a company and preserve continuity in the event spouses go their separate ways. Drafting a provision regarding business interest protection in a prenup is particularly important if spouses own the business jointly and these assets would be divided between them should their marriage terminate.
Financial Transparency
One of the major benefits of a prenuptial agreement is that it requires financial transparency. Since a valid prenuptial agreement requires full financial disclosure, it encourages spouses to clarify their assets and debts, as well as economic expectations for the marriage. Importantly, the act of sharing financial information with each other can also build trust and set a foundation for future financial conversations between spouses.
Encouraged Communication Between Spouses
A prenup isn’t only prepared due to the possibility of divorce or dissolution. It can also encourage spouses to discuss their financial goals and objectives for the marriage. A prenuptial agreement can help to avoid misunderstandings and ensure both spouses are on the same page when it comes to their financial matters. It can specify how bills will be handled, expenses will be shared, and income will be distributed. Prenuptial agreements can address who will make the financial decisions and handle bill payments, address whether large expenditures require mutual decision-making, determine whether income streams be combined or remain separate, and determine long-term financial goals for the marriage and how each partner will contribute. A prenup should address debt acquisition and premarital debts and obligations, as well.
Estate Planning
A prenup can play a crucial role in starting a process for estate planning for those who are entering into a second or subsequent marriage. When one or both spouses have children from a prior marriage or relationship for whom they would like to provide, it can help protect the assets they are going to inherit. Notably, by specifying what is marital and separate property, a prenup can prevent a current spouse from taking a larger portion of the marital estate and leave more for the children. A prenuptial agreement can address situations such as living separately at the time of death, family heirlooms, long-term healthcare facilities and payments, as well as life insurance beneficiaries.
Contact Experienced Ohio Divorce and Family Law Attorneys
If you would like to learn more about the benefits of a prenuptial agreement, a knowledgeable divorce attorney can best advise you. Located in Green, Ohio – halfway between the Akron and Canton courthouses – Melissa Graham-Hurd & Associates, LLC provides skillful representation to clients for divorce, dissolution, and a broad scope of family law matters. Contact Melissa Graham-Hurd and Associates to schedule a consultation to learn how we can help.
