5 Reasons Average People Should Consider a Prenup
Prenuptial agreements are pretty regular and matter of fact when the rich and famous get married. Considering the amount of wealth these high-profile couples have, it makes perfect sense why prenups are as common as their lavish weddings.
But what about the rest of us? Are prenups a good idea for people without millions of dollars to protect?
Depending on your finances and relationship, a prenup might be a good idea for you and your sweetheart. Here are five reasons in Maryland why people without multimillion-dollar net worth might choose to sign a prenup before saying “I do.”
1. If either of you have children from a previous relationship
As of 2013, 40 percent of new marriages include at least one spouse who has previously been married. Couples who have been down the aisle before are more likely to bring children into their new marriage, which adds a level of financial complexity to their new marriage. These parents often want to make sure children from their previous relationships will be financially taken care of in case of either death or divorce.
A prenup can help parents protect assets for their children, especially in terms of estate planning. For instance, state laws generally consider marital property to belong solely to a surviving spouse after one partner dies. A prenup could ensure that a portion of that property, or assets that the parent brought into the marriage, would go to the children of a previous marriage or relationship rather than the surviving spouse.
While wills and trusts can cover this same ground, having just a will that leaves your spouse less than an elective share of your estate (between one-third and one half) does not necessarily preserve assets for your children. A will still allows for your spouse to make a claim against your estate for the elective share. Additionally, with Trusts, they can be more expensive than a pre-nuptial agreement and they must be funded to be valid. Having a prenup that spells out what assets go to children of a previous relationship, along with a will that cements the terms of the prenup, will be a much more solid method of protecting your children.
2. If either of you has a great deal of debt
We tend to think of prenups as being a way of protecting our wealth, but they can also protect you from your partner's debts (or vice versa). If you are entering into a marriage with a great deal of individual debt, a pre-nuptial agreement can delineate who has responsibility for the debt payments during the marriage, as well as how the debts will be handled in the event of a divorce; and can spell out exactly whose debt it is. A Judge in Divorce case Maryland cannot divide debts, only can only divide assets.
3. If either of you is an entrepreneur
Figuring out the specific valuation of assets, such as closely-held business interests or stock options, can be tricky. These things can cause a messy delay in the event of a divorce. If either spouse is an entrepreneur or small business owner, drafting a prenuptial agreement that spells out exactly how these kinds of assets will be valued will save you a great deal of heartache, time, and lawyer's fees if you ever need to split them up in a divorce.
4. If either of you plans to get an advanced degree while the other works
It's common for one spouse to financially support the family while the other gets an advanced degree or other higher education. The problem with this division is if the marriage does not survive.
The fallout can happen in a few ways. Maybe, for example, the degree-seeking spouse ends up much better off financially because their new education helps advance their career. Meanwhile, the supporting spouse may be stuck toiling away for a lower paycheck. Or, in another example, maybe the supporting spouse makes good money, but the degree-seeking spouse is unable to find a job or is crippled by student loans post-divorce.
In the case of a divorce, there is rehabilitative alimony to address just such a scenario, but there are many factors that are required to be considered by the Judge before making just such an award and any award granted vary greatly depending on the facts of the case, the particular Judge and the jurisdiction. The amounts are much more concrete if the couple has a prenuptial agreement and takes away the discretion allowed by the Judge.
A couple who knows that one partner will work to support the family while the other goes to school may want to draw up a prenup that will make sure both of them will be financially OK if the marriage does not last.
5. If either of you plans to be a stay-at-home parent
A spouse who stays home with the children may not be bringing in a salary, but he or she is certainly saving the family money. According to a 2016 Salary.com estimate, stay-at-home parents are saving their families over $143,000 per year by doing all of the work that would otherwise have to be contracted out.
Unfortunately, there is no real way to quantify those cost savings if a marriage dissolves, which can leave the non-paycheck-earning parent at a distinct disadvantage. A prenuptial agreement can do a great deal to protect both of the spouses, by providing a set amount to be paid for a set period of time. That “set-amount” can also be a formula for figuring that amount out in the future, using percentages.