Is a Prenup Right for You?

Whether to enter into a prenuptial agreement is a very personal decision, and each couple is unique. For instance, one spouse may want to protect her family-owned business in the event of a divorce, or perhaps a high net-worth individual wants to protect their assets. In any event, there's no one-size-fits-all solution for all couples and you should base your decision on your own unique circumstances.

Below is a list of advantages -- and potential drawbacks -- of prenuptial agreements and when they might make sense. Is a prenup right for you? Only you can say for sure.

Why a Prenup May be Right for You

Some of the benefits of a prenuptial agreement include the following:

Documenting each spouse's separate property to protect it as separate property.
Supporting your estate plan and avoiding court involvement to decide property distribution.
Distinguishing between what is marital property and what is community property.
Documenting and detailing any special arrangements between you and your spouse.
Avoiding extended court proceedings, which result in the time of expensive divorce attorneys.
Reducing conflicts during a divorce.
Establishing procedures and rules for issues that may arise in the future.
Assigning debt, such as credit cards, school loans, and mortgages, to the appropriate spouse to avoid both spouses sharing debt liability.

Many people fear that discussing these matters, or even bringing up the word "prenuptial agreement," will cause turmoil in their relationship. Often times, just the opposite is true. One of the main irreconcilable differences leading to divorce is finances. Talking to your spouse ahead of time regarding finances, property, and marital asset management can avoid a lot of these disagreements.

Why a Prenup May Not be Right For You

Although nuptial agreements carry a lot of benefits, there are some downsides that you should consider before creating one.

It's not romantic. If you fear that discussing a property and finance distribution and the possibility of a separation or divorce will dull your relationship in some way, then maybe you should avoid the discussion.
The timing may not be right. You can always wait until after you are married, when you may know a little more about the management of your household. An agreement made after you're married is called a "postnup."
There may be state laws that cover all of the issues you want to address without a prenup. On the other hand, there may be certain issues in your situation that aren't covered by the law, and would nudge you towards clarifying the issue in a prenup.
A prenup can't include child support or child custody issues. The court has the final say in calculating child support. The court determines child support based on a "best interest of the child" standard, with several factors at play.
A court can set aside any provisions it finds to be unfair or not in the interest of justice. For example, courts have set aside provisions that don't allow a spouse any share of the other's bank account, if the account holder contributed greatly to that bank account during the marriage.
A prenup can't include personal preferences, such as who has what chores, where to spend the holidays, or what school the children should attend. Prenuptial agreements are designed to address financially based issues.

Analyzing Your Own Unique Situation

Now that you have reviewed the pros and cons, think about your specific situation to decide whether a prenup is right for you.

1. Take The Prenuptial Agreement Questionnaire

Do you own real estate?
Do you have more than $50,000 in assets?
Do you earn more than $100,000 a year in earned income?
Do you own any part of a business?
Do you have more than one year's worth of retirement benefits?
Do you have employment benefits such as stock options or profit sharing?
Do you or your partner plan to go to school for an advanced degree, while the other works?
Does a part of your estate name beneficiaries or heirs other than your partner?

If you or your partner answered yes to one or more of these questions, a prenuptial agreement may be in your best interest. If you answered no to all of them, a prenup is probably not needed, but could still be used to protect your current or future assets.

2. Brainstorm Important Property Issues

Once you've decided that a prenuptial agreement is right for you, you need to decide what to include. Here's a list of some common prenup topics to help you:

Estate planning issues, for example, conveying family property or providing for children from previous marriages (not child support).
Separate business.
Retirement benefits.
Distinguishing separate and joint property.
Holding yourself not responsible for your partner's debts.
Distribution in the event of divorce, including alimony.
Income, deductions, and claims for filing your tax returns.
Management of household bills.
Management of joint bank accounts, if any.
Arrangement regarding investing in certain purchases or projects, like a house or business.
Management of credit card spending and payments.
Savings contributions.
Arranging putting one or the other through school.
Property distribution to the survivor, including life insurance, in the event of death.
Settlement of potential disagreements, such as using mediation or arbitration.

3. Evaluate Your Comfort Level

Once you've thought about whether you need a prenuptial agreement and what issues should be covered, you should evaluate how comfortable you are with the idea of having a prenup. Familiarizing yourself with the laws of your state might also be helpful, especially if you question how a prenup affects your rights versus not having one.

Remember that your partner may not be as comfortable as you are. Be sympathetic to that. Also, remember that you two will disagree on some things, but that's okay. Talk it out. Give yourselves plenty of time and be willing to seek help if you need it.

Should You Get a Prenup? Get Help From an Attorney

Even if there are sound legal or financial reasons for getting a prenuptial agreement, it's not the most romantic thing you can do during your engagement. But not getting a prenup when one is warranted can set you up for disaster. Make sure you're making the right choice by meeting with a family law attorney near you.