I previously wrote about the rise in prenups (prenuptial agreements aka premarital agreements) across the country. Dallas divorce attorneys are seeing similar trends as well. Then, a client asked me, what are the most important things to put in a prenup?
Interestingly, CNBC is currently researching this topic and contacted me about being involved in a documentary they are filming. I did the interview yesterday and the episode is expected to air in February 2011.
The most important consideration in a prenup is to think about what the goal of the document is before drafting it or even talking about it. Is the goal to preserve an inheritance? Or a business started before the marriage? Is the goal to protect the financial interest of children from a prior marriage? Or, maybe it is important to provide financially for one spouse in the event of death or divorce? The bottom line, have a clear purpose in mind for the prenup.
Also, be upfront with your soon-to-be-spouse about the reasons you want a prenup and discuss it openly. Many people find prenups distasteful and even disrespectful, so be open about the reasons for it.
Full disclosure of assets and liabilities by both soon-to-be-spouses is essential in a prenup. List completely and accurately the extent of the assets that each spouse has going into the marriage, such as retirement account balances, business ownership interest, even baseball card collections if they are valuable and important to preserve.
A prenup can be used for many reasons. It is, at its most basic, a contract between two people. It can be used to simply define what each spouse has going into the marriage so everyone is on the same page if a divorce becomes necessary about what belongs to each outside of the marriage relationship. Or, a prenup can be more complex in dividing up money and propery earned or acquired during the marriage. A prenup can also preserve as separate property an asset such as a business interest that may transform or mutate during a marriage from suddenly transforming into a community property asset. For example, if a business is of one type (such as an LLC) at the beginning of the marriage, but maybe due to changes in tax laws, it becomes necessary to change the formation to something different (such as an LLP), the mutation can be defined in a prenup as to not change the characterization of the asset as one spouse’s separate property.
A prenup can also address protecting the inheritance rights of children from prior relationships or how each spouse will designate beneficiaries. I’ve even seen prenups that provide an amount of spousal support for one or both spouses in the event of a future divorce.
If you are thinking about getting married and think you may need a prenup, contact a lawyer to discuss how a prenup could benefit your particular situation.