While no one enters a marriage expecting to split up, the unfortunate reality is that more than 1 in 2 marriages end in divorce. If you are a physician or business owner engaged to be married, odds are either a friend or family member has recommended you get a prenuptial agreement. Should you listen? Here’s a rundown of the pros and cons you ought to consider.
If you’re a high earner – or a potential high earner – it makes sense to protect as many of your assets as the law will allow. Without a properly written prenuptial agreement you are subject to the laws in your state. In NJ, couples are subject to equitable distribution, whereby there is a basic 50-50 allocation of the assets accumulated during the marriage. In some states, in the absence of a prenuptial agreement, other factors may enter into the equation: such as the couple’s age, the length of the marriage, the number of children involved, and the role of each spouse in building household wealth. A wife who supported her husband financially as he went to medical school, for instance, may be entitled to a much more generous settlement because of the sacrifices she made to help him pursue his dream.
Protecting Your Business
Not only does a prenuptial agreement protect you, it can spare your business partners from the hassles of valuing the business in a split as well. A business can be been turned upside-down during the divorce proceedings of a partner by accountants who can spend many months– or even years– going through receipts and other paperwork in attempting to properly value the partner’s stake in the business.
Family Lifestyle Decisions
Prenuptial agreements can be used to determine lifestyle issues of your future children. It can hammer out issues such as what religion any future children will be raised in and whether they’ll attend public or private schools.
Prenuptial agreements make sense in theory, but what if your partner is uncomfortable with it? By highlighting the very real possibility of divorce, it can start your relationship off on the wrong foot, and can in fact lead to broken engagements. On the other hand, however, some believe that by shielding your assets, it can actually help preserve and enhance the new relationship. It can create comfort with one another because you know both of your interests are protected.
Will it Hold Up in Court?
Even a well written prenuptial agreement won’t necessarily be enforceable in court. Many states, for instance, require both parties to fully disclose their assets and liabilities for the prenuptial agreement to be enforceable. An unexpectedly large windfall (such as from lottery winnings or an inheritance) can also affect the enforceability of the agreement.
In conclusion, the decision regarding prenuptial agreements is a highly personal one. If you have children from a previous marriage and significant assets, you should seriously consider the extra measure of financial protection a well-crafted prenuptial agreement would afford you.