Why a Premarital Agreement Might be Right for You
According to the CDC and the National Center for Health Statistics, over 2,000,000 marriages happen each year, and nearly 750,000 marriages end because of divorce.1 Often times before getting married, people may talk about their dreams, goals, starting a family, where they want to live, and how many kids they want to have. However, one of the common mistakes is not talking about their finances and what would happen to their money and assets in the event of a divorce.
In the United States there are two types of states that people live in, as it relates to how marital property is split: community property vs equitable distribution property states. In a community property state, there is an absolute 50/50 split of all assets and property that are acquired during marriage. Equitable distribution states do not have to necessarily split assets 50/50 during marriage, but more assets could be considered marital property. When getting married, no one ever thinks they are going to divorce, but having the discussion with your partner about a pre-nuptial or post-nuptial agreement can help potentially alleviate any financial anxiety and surprises in the event the marriage ends.
There are several reasons couples may want to consider a pre-nuptial agreement:
- It forces partners to communicate openly about money and learn about each other's attitudes and habits about money
- You can negotiate what is best for each partner when there is potentially less negative emotion involved
- It provides both financial and relationship boundaries. Some couples can negotiate what happens if there is violence, adultery, or if there are kids involved, and anything else that is important to them
- Though pre-nuptial agreements may cost upfront, it can help save in legal fees in the future
In addition, some may consider pre-nuptial or post-nuptial agreements if they fall into any of these demographics:
- One or both parties have been previously married
- Businesses are owned by one or both partners
- One partner may have more debt going into the marriage than the other
- One or both partners have accumulated wealth individually that they'd like to keep separate
- One or both partners have children
When it comes to building and protecting your future and current wealth, having a discussion about pre-nuptial agreements with your partner, can be a healthy discussion to have and can save one or both partners financial worries in the future.