Prenuptial agreements still get a bad rap. People often crack jokes when talking about them, saying they are for the paranoid, the pessimistic, and the greedy. And how unromantic they are.
But wanting or signing a prenup doesn’t mean you are planning for divorce. In reality, they serve a very important estate planning function, particularly in second marriages. Such agreements can also be made after marriage and are called post-nuptial agreements.
Imagine this scenario: Two people marry, each with children from a previous marriage, and they do not do a prenuptial agreement.
Eventually one spouse dies, and the other continues on. A problem can occur when the second spouse dies. All or most of the assets of both spouses, from their first and second marriages, may then pass on to the children of the second spouse to die, either inadvertently or intentionally. And the children of the first spouse to die are left hurt and resentful.
How could this have been avoided? The first tip is to keep assets titled separately. And since a prenuptial agreement is a contract between spouses, legal rights can be waived. So rather than having the house pass automatically on the first spouse’s death to the second spouse, (which then could pass to his/her heirs or beneficiaries with the chance that the children of the first spouse to die will be left out) you can spell out in a prenup how you want proceeds of the sale of the marital home and other assets to be divided. (You can also provide that the surviving spouse can live in the home until his/her death.)
When considering a prenuptial agreement, you must keep two things in mind. There must be full disclosure by each party of all their assets and liabilities, and each spouse must be represented by their own lawyer before signing. Check with your estate planning attorney as to how a prenup can help you realize your financial goals.