Like estate planning which provides for your family in the event of your death, a prenuptial agreement is like “divorce planning” in the event of a divorce. Although it is not easy to think about planning for a divorce as you pick the guest list for the wedding, what is most important is that both you and your fiancée understand that it is designed to preserve as much of your separate wealth as you can, usually for your children, if the marriage is not successful.
Essentially, a prenuptial agreement excludes premarital assets, their growth in value, income from those assets, and any assets bought in exchange with those assets from distribution in a divorce. They require full and fair disclosure of all assets, debts and incomes, an arms-length discussion or negotiation process, and an opportunity for each of you to have your attorney review it before you sign. A common concern about prenuptial agreements is if a divorce does happen, the person who has fewer assets than the other, or nothing to protect, will get nothing financially from the marriage.
Prenuptial agreements do not need to be “all-or-nothing,” meaning that even though you have protected your premarital assets from a divorce, each of you can still provide for the other spouse in several ways. One option is to have a “marital account” which the parties use during the marriage to buy or invest in new assets not listed in the prenuptial agreement. Any money deposited into this account becomes marital and anything bought with this money is now an asset of the marriage. In addition, nothing in a prenuptial agreement prevents either spouse from providing for the other either through life insurance in the event of an untimely death or by dividing all marital assets if a divorce occurs.
Before you talk about a prenuptial agreement with your fiancée, please consult with an attorney who specializes in divorce or family law. Allow enough time before your wedding for both of you and your respective attorneys to reasonably discuss the terms and conditions of the agreement and how it can best serve not only both of you, but your families as well.