Do I need a Prenuptial Agreement?
If you are asking yourself this question, the answer is absolutely yes, you should seek the advice of counsel about whether a Prenuptial Agreement is a good idea for you. Let’s face it, the era of everyone getting married right out of high school and acquiring all of their assets and liabilities together during the marriage is long gone. Chances are, you already have assets and liabilities going into your marriage, or maybe it is even a second marriage, and you really need to understand the impact your upcoming marriage will have from a legal standpoint.
I realize that prenuptial agreements are often regarded as unseemly. But they get an unfair rap. A prenuptial agreement is just the legal document that outlines the understanding of both spouses as to how they wish to maintain their assets both during the marriage, and in the worst case, upon a divorce. It simply codifies the intention of the parties going into the marriage as to how they will keep both separate and joint assets, and treat debts, so that it is perfectly clear how the division of assets and liabilities is to take place upon a divorce. It is often used as part of an estate plan for a second marriage. In fact, just like if you die without a will, without a prenuptial agreement, your marital assets and debts are divided pursuant to the law. Most of us don’t want the law to decide for us what happens with our assets after we die, so we undertake estate planning and sign documents such as Wills in order to control the distribution of our assets. A prenuptial agreement is no different– it puts you in control of what happens to your marital estate upon divorce or death.
So why is that so important? Well, for one, most people have no idea what the Divorce Code says about the division of assets, so they don’t have any idea what impact marriage will have. And you should know how the law sees it, so that you and your spouse can make decisions about your finances and what you see as fair. As a Divorce Master for almost 20 years, I saw a lot of spouses who were totally shocked about how the court viewed their assets and liabilities. For example, many spouses wrongly think that they can create and maintain separate bank accounts and credit cards in their own name, and therefore the other spouse is not entitled or responsible. Not true. When you are married, without a written agreement saying otherwise, all accounts and debts during the marriage are deemed marital no matter whose name is on the account. Another common misconception is that what you had before marriage in your name remains yours free of any claim. Also not true. Without a prenuptial agreement, if you have separate assets prior to marriage, and they grow, that growth is considered marital even if you maintained the asset in your separate name. Over a long marriage, and depending on the asset, that growth can be substantial– think about assets like pensions, real estate, and investment accounts. Another common mistake is thinking that your spouse cannot share in any inheritance or gift you receive during the marriage. Just as with premarital property, the increase in value during the marriage of any inheritance or gift is considered marital unless waived by agreement.
So “prenup” should not be a dirty word. It’s an important planning tool for anyone getting married. Engaged couples plan everything from the details of their celebration, to where they are going to live, to how they envision their future together. Planning ahead as to the financial decisions of your marriage are just as important, and a prenuptial agreement can avoid unintended consequences.
Julia Vanasse is an attorney at Russell, Krafft & Gruber, LLP. She represents individuals dealing with both simple and complex family law matters. She previously served as a Divorce Master in Lancaster County, Pennsylvania for almost 20 years and helped countless litigants resolve difficult and complex divorce matters.