While most people associate a prenuptial agreement with a wealthy person wanting to keep control of their money, that is not necessarily the case. Regardless of how much money you have, you may have good reasons to protect your separate assets and plan for how marital assets and debts will be shared during and after marriage or in the event of death. Sometimes, the process of negotiating a prenuptial agreement is more beneficial to the less wealthy spouse because each side’s contributions to the marriage can be fully taken into account.
Prenups are valuable in any marriage because they encourage couples to discuss their finances and values and goals surrounding money. The parties also have to fully disclose their income, assets and debt, so each side goes into the marriage understanding their individual and joint financial situation. As part of these conversations, the couple should also decide how they will handle their day-to-day finances during the marriage as well as determine what happens if the marriage ends.
A good attorney will help the parties consider various scenarios to help ensure they are making well-informed decisions. Where there is a big income disparity, it is even more important to do this so neither party is taken advantage of in negotiations. A recent matter in our office illustrated some of the issues that are likely to come up when discussing a prenuptial agreement.
The Wife-to-be was a senior executive with a high salary. The Husband-to-be was a corrections officer with a lower salary, but excellent benefits. He also had children from a prior marriage, and he wanted to protect certain property for them. That property was designated as separate property in the prenup so he would not lose it in a divorce or in the event of his death. The couple also decided to keep their income as separate property and maintain separate bank accounts. However, they agreed to contribute to a joint account to pay joint expenses and purchase joint assets. They negotiated each side’s percentage contribution to the joint fund taking into account the Wife’s higher salary, the Husband’s better benefits, and the fact that the Wife would see a huge tax savings from filing jointly as a married couple.
How much wealth each side had or did not have was less important than taking the time to discuss their expectations about money. Ultimately, they went into their marriage knowing that they addressed important financial issues, so it is less likely to become a source of future problems. A prenup does not guarantee a happy marriage any more than it indicates that the parties do not believe their marriage will succeed. A prenup, however, does promote hard discussions between parties and shows them that difficult conversations can result in a solution that both parties feel good about so that they can feel positive about their future and their ability to find solutions together.
Prenups should always be negotiated and vetted by an attorney. If you are considering a prenuptial agreement, please contact us to find out how we can help.