Pros and Cons of Prenuptial Agreements
For every article in popular media that focuses on the negative aspects of prenuptial agreements, another one is published that theorizes they make marriages stronger. Still others say prenups are a sign that you and your spouse-to-be simply don’t have enough trust to survive a long marriage.
Whether or not a prenuptial agreement is to your advantage depends on many circumstances, such as the property you or your partner own, who makes the most money, the existence of children from prior relationships and the state where you live. In Arizona, a community property state, anything acquired during a marriage — including financial investments, savings and even retirement accounts — is considered jointly owned and will likely be split 50/50. Typically that puts the person with less earning potential and less property in a better position than the person with more wealth and assets.
One of the chief uses of a premarital agreement is to supersede community property (or, in other states, equitable distribution) by defining what should be excluded from the marital estate and protected from other people with potential claims. An agreement not only can shield the wealthier spouse from losing half of his or her property but also can ensure certain assets for the less wealthy spouse, giving him or her priority rights over the other spouse’s creditors and other family members.
Any circumstance in which you want to protect an asset and keep it separate from the marital estate could be good motivation for signing a prenuptial agreement. One example is where a spouse who owns a business wishes to prevent the other spouse from taking a share of it upon divorce. Another use is to protect the interests of children from a previous marriage or other relationship.
While prenups are often touted as eliminating marital discord over finances, they may sow seeds of distrust in a marriage. The very fact that these agreements contemplate an eventual divorce can lead to resentment and friction. However, the best way to look at these agreements is as financial planning tools. Similar to an estate plan, a prenup can make specific provisions for disposing of property in the future, thereby not leaving these decisions to chance.
As with any legal document, you should not sign a prenuptial agreement without having it reviewed and negotiated by your own family law attorney with expertise in this area. Relying on the word of your partner’s attorney that the agreement is fair or simply standard boiler plate can be a recipe for trouble. You can have a perfectly amicable process that involves two attorneys reviewing the agreement to ensure that it protects the interests of both future spouses.
Clark & Schloss Family Law, P.C. regularly represents clients in negotiating and reviewing prenuptial agreements for clients in a wide variety of circumstances. Call 602-789-3497 or contact us online for a free consultation at our Scottsdale office.