We’ve all heard of the celebrity divorces—and payouts. Remember Tiger Woods’ massive divorce settlement from Elin Nordegren that was reportedly between $200 to $500 million dollars? Years ago, Amy Irving negotiated her prenup with director Steven Spielberg and also walked away with a substantial sum.
Over many years of experience, we’ve found that prenuptials have been a positive planning vehicle to help create a happy and healthy marriage.
A Prenup Makes All the Difference
You don’t have to be a celebrity, athlete or a business mogul to benefit from the financial protections of a prenup. They’re recommended for everyone.
If you’re like most people, you’ve worked hard to save for retirement, invest wisely and perhaps own a property or two. When you think about it collectively, your assets can be worth quite a bit. And you also may not want to take on your spouse’s existing debts or other financial issues if your marriage dissolves. This is where a prenup can help protect your assets.
Now, if you live in any of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), if you should divorce, you will be required to divide equally all the assets that you acquired during the marriage. In non-community property states, a judge will decide how to divide the property equitably.
Protecting Your Finances
A prenuptial agreement, where properly negotiated, can protect you:
- If you have greater assets than your spouse. A prenuptial agreement can protect your savings and investments in case of divorce. Many people may have accumulated retirement or education funds, or life insurance policies before marriage. They may also independently own property or have an inheritance that they wish to keep intact. A prenup can help give you peace of mind that these funds stay where you have intended.
- If you are less affluent than your spouse. Prenups are not just for the wealthy. If you happen to have a smaller portfolio than your potential spouse, then you will want to ensure that you are financially protected in case of divorce. The same applies if one spouse plans to stay at home and raise any children. This time out of the workforce impacts the spouse’s earning ability and Social Security contributions for several years. A prenup can compensate the stay-at-home spouse for lost earnings.
- If you are remarrying. If you have children from a previous marriage, you may have child support payments, college funding, a home, business or other obligations that you wish to keep within your “first” family. You may also want to include your new spouse and any children in your wishes. Like a will, a prenup can help ensure that you are able to provide for your families in the manner you intend.
- If your potential spouse has a lot of debt. Marriage merges many financial obligations. So if you do not want to be responsible for your spouse’s student loans, credit card or car loan debt if your marriage should end, then a prenuptial agreement can help protect your individual assets.
- If you are a business owner. Your business may be a significant asset. Without a prenuptial agreement, if your marriage ends, your spouse may end up owning a part of the business. If you have business partners, they may not be too pleased to have the ex as part of the deal. A prenup can ensure that your spouse stays out of the business equation.
What a Prenuptial Agreement Can’t Do
While prenuptial agreements are very useful for financial planning, they cannot be used to resolve general divorce issues such as:
- Determining child support and custodial arrangements.
- Determining who has the right to live or sell the marital home.
Helping You Navigate the Financial Waters
Getting married—or remarried—is an exciting, happy time. We want to help take the financial stress out of the equation. Some may not see a prenup as the most romantic step toward their future union, however, it can be a useful tool to protect everyone.
Contact us to learn more about how we can advise you with a range of financial planning situations and help you plan for a new life together.