A prenuptial agreement is a private contract between two people intending to marry, or if postnuptial, two people already married. A typical prenuptial agreement discloses each person’s assets and liabilities that they bring to the marriage. The agreement generally will settle financial and property issues that arise in the event of divorce or death—who gets the house, who pays spousal support and what property will be considered separate or marital. Most importantly, prenuptial agreements settle the issues normally governed by family and estate laws so that these laws are typically overridden by the agreement. This can help to avoid drawn out legal battles in divorce court or probate.
Prenuptial agreements are not just for the rich and famous. You also would benefit from having a prenuptial agreement if one person makes more than the other, either person is a business owner or owns a substantial interest in a business, if you come to the marriage with any property like a house, retirement fund or investments, or if there is a potential for a big increase in income for one person, as in the case of a medical student.
Particularly nowadays when couples are coming to marriage later in life with more assets and often many debts, it’s wise to establish up front how everything will be divided if things don’t work out or if one person dies. This increasingly makes sense for second marriages and blended families or even situations where third parties, like aging parents, are dependent on a member of the couple for support.