Prenuptial agreements used to be considered a tool for wealthy individuals, but they are becoming more commonly used by people of all backgrounds. A prenuptial agreement is a marriage contract that settles financial matters before a divorce or death occurs. Creating a premarital agreement before marriage can help a couple feel more secure with their financial situation and protect their assets.
Many benefits come with creating a premarital agreement. Premarital agreements provide a clean slate, so both parties understand what will be shared. A well-drafted prenuptial agreement protects both parties during the marriage. Contact Jones Gregg Creehan & Gerace to schedule a free initial consultation.
The Purpose of a Prenuptial Agreement
The purpose of a prenuptial agreement depends on the client’s needs and goals. No two prenuptial agreements are the same because everyone has different assets, liabilities, income, and financial goals. Ultimately, the client should define the purpose of the prenuptial agreement. Some people use prenuptial agreements to state which assets will be considered separate, nonmarital assets in the event of a divorce or the death of one of the spouses. Other prenuptial agreements define a percentage of the distribution of marital assets in the event of a divorce or death.
Marital Property vs. Separate Property
Prenuptial agreements need to distinguish between marital assets and separate property. Marital assets include any assets acquired after marriage. Separate property consists of a spouse’s assets before marriage or received as a gift or inheritance. When couples divorce, the court will divide the marital assets between spouses using principles of fairness and equity. The court will consider multiple factors when dividing and distributing marital property.
Consequently, the court may not divide property fairly, and you could risk losing a significant amount of your assets. When you create a prenuptial agreement, you can specifically state which assets will be considered separate property. As long as the asset is listed as separate property, you can keep it after the divorce. The distinction between marital and separate property is crucial, and an attorney can help you protect yourself by clearly stating which assets are separate.
Debt Liability Limitations, Inheritance, and Child Support
You may wish to include protections against that your spouse might incur during the marriage. For example, if one spouse decides to take out tens of thousands of dollars in credit card debt during the marriage, you can protect yourself from being responsible for that debt through a prenuptial agreement. Limiting your debt liability can substantially limit the stress of going through a divorce. You can also use a prenuptial agreement to ensure that your children from a previous relationship inherit your property if you pass away before your spouse.
The Pros and Cons of a Premarital Agreement
By entering into a premarital agreement before you get married, you can feel more secure about protecting your assets in your overall financial situation. The spouse with greater assets can protect his or her assets from going to his or her spouse after the divorce. The spouse with fewer assets can ensure that he or she will receive a fair portion of the assets should the couple divorce. It’s a common misconception that prenuptial agreements protect the party with more assets. When a prenuptial agreement has been well-drafted, and both parties understand the terms of the agreement, the agreement can benefit both parties equally.
When couples take time to discuss their finances before they get married, it can help them remain transparent and open about communication. Financial challenges are one of the leading causes of divorce. Taking time to get on the same page regarding finances will help you start your marriage out strong, especially regarding financial matters.
If a divorce does happen, a prenuptial agreement can make the divorce process much less stressful and financially draining than without an agreement. As long as the prenuptial agreement is legally enforceable, a court will use the terms of the prenuptial agreement to create the divorce settlement. Since the couple has already negotiated the divorce terms ahead of time, the divorce is often less contentious.
Protecting Future Income with a Prenuptial Agreement
Prenuptial agreements can protect earnings that you make in the future. For example, suppose a couple enters a premarital agreement while they do not have any significant assets. They start a business, acquire assets, or take over a family business. The couple has acquired more assets and begins the divorce process. If they had agreed to a well-drafted prenuptial agreement, a spouse can keep assets as his or her separate property in the event of a divorce. Just as future earnings can be protected, future debts can also be avoided.
What to Include in a Pennsylvania Prenuptial Agreement
When a client has children from a previous relationship or has adopted children, premarital agreements can be used to ensure those children receive a portion of the marital assets when one spouse dies. Many couples choose to include the amount and duration of alimony or spousal support one party will receive in the divorce. Other couples include a provision stating neither party will seek spousal support in the event of a divorce.
The couple may include language saying that each spouse will pay their own attorney’s fees in the event of a divorce or that the spouse with more assets will pay a set amount of attorney’s fees for the other spouse. Some couples include language related to spousal responsibilities, such as which spouse is responsible for paying which household expenses, the contribution of each spouse to their savings account, and how a joint bank account should be managed.
Contact Our Pittsburgh Prenuptial Agreement Attorney Today
If you’re interested in creating a prenuptial agreement, we recommend starting two to three months before your wedding date. If you have significant assets or anticipate a more complicated agreement, starting sooner can be beneficial. Contact the experienced attorneys at Jones Gregg Creehan & Gerace today to schedule your initial case evaluation.