Prenuptial agreements are most often used for the following purposes:
Keep finances separate
Every state has laws designating certain kinds of assets accumulated during marriage as marital property or community property, even if these assets are held in the name of just one spouse. If a couple divorces, or when one spouse dies, the marital or community property will be divided between them, either by agreement or by a court. If you want to avoid having some or all of your individual accumulations during marriage divided up by a court, you can do so with a premarital agreement.
Protect each other from debts.
Some of us bring debts, as well as assets, to a marriage. If there's no prenup, creditors can sometimes turn to marital or community property to satisfy the debts of just one spouse. But if you want to make sure that saying "I do" does not mean saying "I owe," you can use a prenup to limit your liability for each other's debts.
Provide for children from prior marriages.
A prenup is helpful (perhaps essential) if either of you has children from another relationship and you want to make sure that your children inherit their share of your property. In a prenup, one or both spouses can give up the right to claim a share of the other's property at death, perhaps in exchange for an agreed upon amount of property.
Keep property in the family.
If your property includes something you want to keep in your birth family, whether it be an heirloom or a share in a family business, you and your spouse can agree that it will remain in your family, and you can specify that item in your prenup. This can even include property that you expect to receive in a future inheritance.
Follow through by making your estate plan.
In addition to using your prenup to waive inheritance rights and state your intentions for passing on your property at death, it's vital that you prepare the estate planning documents — a will, living trust, and so on — that actually transfer your property as you intend. (See Wills and Estate Planning for more information.)
Define who gets what if you divorce.
Without a prenup, state law will specify how your property will be divided if you ever divorce. These laws may dictate a result that neither of you wants. You can use a prenup to establish your own rules for property division and avoid potential disagreements in the event of a divorce. In most states, you can also make agreements about whether or not one or both of you will be entitled to alimony. Some states forbid or restrict agreements about alimony, however. (See "What You Can't Do With a Prenup," below.)
Clarify responsibilities during the marriage.
In addition to the reasons listed so far, there are countless other uses for a prenup, depending on your circumstances. Here are some examples of other matters people include in their prenups:
- whether to file joint or separate income tax returns or to allocate income and tax deductions on separate tax returns
- who will pay the household bills — and how
- whether to have joint bank accounts and, if so, how you will manage them
- agreements about specific purchases or projects, such as buying a house together or starting up a business
- how you will handle credit card charges — for instance, whether you will use different cards for different types of purchases, what kinds of records you will keep, and how you will make payments
- agreements to set aside money for savings
- agreements for putting each other through college or professional school
- whether you will provide for a surviving spouse — for example, in your estate plan or with life insurance coverage, and
- how to settle any future disagreements — for example, you might agree to hire either a mediator or a private arbitrator.
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