Prenuptial agreements aren’t always seen in a positive light. Many people associate these contracts with fears about divorce. If you’re engaged, you may think a prenuptial agreement is pessimistic or “unromantic” because of that association. You might even think that these agreements are reserved for older people who have already been divorced.
That’s just not true. A prenuptial agreement is more than just a list of who gets what if you divorce. It can be an anchor that helps your relationship feel more stable, and it can be a shield that protects the both of you financially.
No matter how old you are or whether you’ve already been divorced, premarital contracts are a useful tool. Here are five benefits of prenuptial agreements you might not have expected.
1. Take Stress Off Your Relationship
Yes, prenuptial agreements can help you prepare for a potential divorce. However, they can also help you avoid a divorce in the first place. There are a few reasons for that.
First, the process of setting up a prenuptial agreement requires you and your partner to have in-depth discussions. To write a thorough contract, you’ll need to talk about your finances, your hopes for the future, and whether or not you want children.
You can learn a lot about your future spouse in the process. Your new knowledge might reinforce your relationship, or it might show you places where you’re not as compatible as you thought. Either way, you’ll have fewer surprises that could lead to arguments down the road.
Second, the contract itself can be reassuring. Some couples use it to outline relationship responsibilities and expectations on top of financial details. When you both know what you expect out of the relationship, you’ll feel more secure. That means less stress and less risk of a relationship breakdown and divorce.
2. Avoid Inheritance Disputes
Your prenuptial agreement will affect more people than you’d expect. Since these contracts regularly address inheritance, they can impact both your children and your parents. For example, families with treasured heirlooms or generational property can use well-designed premarital contracts to stay in control.
The trouble is that California is a community property state. All assets you and your spouse acquire during your marriage is supposed to be split 50/50 in a divorce. While California law does consider inheritances to be separate property, there are many ways that divorce can complicate that.
If the inheritor mixes their inheritance with marital assets, it’s considered “tainted,” and the court may not take the time to tease out the two. Instead, the entire tainted amount may be considered marital property. That means it’s subject to the 50/50 split, and family heirlooms might be at risk.
However, a premarital agreement can force the court to consider a “tainted” inheritance as separate property. By naming specific future inheritances in the agreement, you can make sure that your family heirlooms and assets are protected for future generations.
3. Make Your Business More Attractive
If you’re a business owner, you know exactly how much work goes into keeping a company running. It doesn’t take much mismanagement for a thriving company to collapse. If you’re looking to grow your business, a prenuptial agreement may be a useful tool.
Why does your marriage affect your business? It’s simple. When a company is growing under certain management, stakeholders want to feel confident that the leadership situation is stable. They want to be able to trust that their investment will continue to grow.
If you’re responsible for your company’s growth, then stakeholders want you to remain in charge. They don’t want an outside, inexperienced influence entering the picture. However, if you get a divorce without a premarital agreement, that’s exactly what could happen. The asset division process might give your ex-spouse half of your stake in the company and have the right to make decisions.
A prenuptial agreement can keep that from happening. You can use the contract to retain full ownership over your current and future companies in case of a divorce. When you have that protection in place, your business is a more attractive investment for potential partners and stakeholders.
4. Protect Yourself from Your Partner’s Debts
There are many ways even financially-savvy people can rack up debt today. If your partner has a bad history with credit cards, mortgages, or student loans, they bring those debts into your marriage.
In California, debt collectors can seize half of all marital assets to pay off one partner’s debts. If you’re the primary source of income, that means half of what you bring in could go to covering your partner’s past mistakes.
A prenuptial agreement can prevent this. By keeping your income or assets separate in the contract, you can protect yourself from debt collectors. Your partner’s past mistakes won’t return to penalize you. Instead, you can work together to create a plan to conquer those past debts together.
5. Combine Premarital Assets
Finally, premarital agreements can do more than just keep your property separate. If you and your partner have been together for a while before getting married, you may already have combined assets. You can use a prenuptial contract to officially share ownership of these assets.
For example, many couples will buy a home before they’re married. If one partner has significantly better credit and a higher income, then they may leave the house in just that name. However, both partners often contribute to the mortgage and upkeep after the purchase. Despite that, the house would still be considered separate property even after the couple gets married.
A premarital agreement can help you consolidate ownership in situations like this. You can take equal responsibility for the house by converting it to marital assets. This can be a significant benefit around tax time.
A Prenuptial Agreement Equals Protection
Prenuptial agreements aren’t a bad thing. They’re a tool that you can use to protect yourself, your marriage, your family, and your business. If you have things and people worth protecting, then a prenuptial agreement is just a good decision.
If you’re planning to get married, you should get in touch with a qualified prenuptial agreement attorney. Both you and your future spouse need to work with an experienced lawyer to produce a contract that holds up in court. Reach out today to get started protecting your future.