Many people have an instinctively negative reaction when they hear the term “prenuptial agreement.” When prenups first became popular, they were typically viewed as a weapon by which rich spouses took advantage of less wealthy, less sophisticated partners. Making the headlines today, we often hear about celebrity scandals involving messy divorces and high-stake prenups. Questioning some of the negativity surrounding these legal contracts, I wanted to get more information.
There are four main reasons that modern-day couples are obtaining prenups:
- Spouses who have children from a prior marriage are often concerned about their future financial protection. A prenup can ensure that if something happens to you, both your spouse and children will be taken care of fairly, just as you’d like.
- Prenups can protect against joint liability for debts. For example, if a spouse owns a small business and personally guarantees loans, a prenup can limit legal responsibility and preserve assets for both of the spouses.
- If one spouse co-owns a business, a clear succession plan is often necessary to obtain financing. A prenup can clarify what happens if the business owner dies, and make running the business easier.
- By clearly showing how assets will be titled during the marriage, a prenup can facilitate gift and estate tax planning.
Not so bad, huh? It’s time we outsmart the old myths on prenups and romance and live realistically in love.