When people hear "premarital agreement," often referred to as a "prenup," they might immediately think of ultra-high net worth individuals trying to protect their wealth. While these agreements are certainly used by those with significant assets, they are not exclusive to the wealthy. In fact, premarital agreements can benefit many couples, regardless of their financial situation.

Understanding Premarital Agreements

A premarital agreement is a legally binding contract between two people who intend to marry. It outlines the ownership of their assets, debts, and financial responsibilities during the marriage, and provides for the division of assets in case of divorce or death. It can also address other matters, such as alimony, property rights, and responsibilities regarding children from previous relationships. A premarital agreement allows a couple to agree themselves how these matters will be handled, rather than leaving it up to state law or a court to make these decisions in the event of divorce or death.

Benefits of Premarital Agreements

There are numerous benefits to entering into a premarital agreement. Some of those benefits include:

1. Agree on Your Handling of Finances – Will you maintain a joint bank account or separate? Do you plan to combine your saving and investing? Will expenses be shared or divided? Do you intend to pay off your respective student loans together or separate? A premarital agreement can provide for the foundation of how a couple will handle their finances during their marriage, helping to avoid miscommunications and conflicts down the road.

2. Tailoring to Unique Circumstances – A premarital agreement can be customized to address a couple’s bespoke circumstances, such as the handling of a family business, the intellectual property rights of a party, or even what happens to the family pets.

3. Protecting Family – For couples entering into a second marriage, often with children from their previous relationship, a premarital agreement can outline inheritance rights for those children to ensure they are taken care of and protected. Couples can also provide for the possibility of new children as they establish their life together.

4. Clarity and Transparency – A key component of a premarital agreement is the full and open discussion of each parties assets, debts, and overall financial situation. This ensures couples have a clear understanding of the other’s financial status, therefore avoiding any surprises during the marriage.

5. Protection from Debt – Premarital agreements are not only helpful at protecting assets, but can also address how debt will be handled and potentially shield one spouse from another spouse’s debt. This could be because one party has significantly more student loan debt, has taken out a business loan which they have personally guaranteed, or has accrued credit card debt. The premarital agreement can help protect both spouses in these situations and avoid exposing their spouse to any unexpected financial burdens.

6. Avoiding Disputes – Whether it’s the emotional turmoil of going through a divorce or navigating the nuances of an unexpected death, premarital agreements allow couples to simplify the process and avoid potential future disputes by establishing ahead of time how assets, debts, and financial matters will be handled.

As you can see, premarital agreements are not just for the wealthy. They are a valuable tool for any couple planning to marry. A strong, healthy marriage is built on open communication, trust, and transparency, and a premarital agreement can help lay that foundation. By addressing potential conflicts proactively, couples can strengthen their relationship and focus on building their future together.

Anyone considering a premarital agreement should consult with an attorney well in advance of their wedding to ensure there is enough time for a comprehensive process to prepare a fair and legally sound agreement.

Please do not hesitate to reach out to our office (630.920.0406 or info@donatellicoules.com) if you would like to schedule a meeting to discuss your marriage goals and whether the implementation of a premarital agreement would potentially make sense for you or someone you love.