If you are planning to marry in this day and age, chances are you have thought about a prenuptial agreement. There are pros and cons to having a prenuptial agreement, and it is not necessary in every situation, but in some instances the benefits and protections of a prenuptial agreement are imperative. Here are four reasons why you should consider having a prenuptial agreement.
1. Preserving Wealth. This is probably the most obvious and common reason why people enter into prenuptial agreements. The law in Virginia, and most other jurisdictions, is that any property acquired by either party during the marriage, even if it is held in separate names, is marital property and subject to division in a divorce. This includes retirement benefits, stock options, and deferred compensation. In addition, all income received by either party during the marriage is marital property. Prenuptial agreements allow parties to override the law and make their own decisions as to what property is considered marital property.
You can also ensure that your premarital or inherited property is fully protected through a prenuptial agreement. While premarital and inherited property is generally considered “separate” property (i.e. not subject to division in a divorce), there are ways in which separate property can become marital property, or partial marital property based on how it is treated by the parties and handled during the marriage. This is often unintentional, and you can quite easily and unknowingly, cause your separate property to become marital property. A prenuptial agreement will ensure that your separate property is fully protected and remains separate property no matter what.
2. Future Certainty. In addition to defining what property will be considered marital property, prenuptial agreements can also spell out how marital property will be divided in the event of a separation or divorce, including each party’s percentage share and the mechanics for dividing assets. Parties can also pre-determine alimony, including the amount, duration and terms for payment. There is no formula for dividing marital property or calculating alimony under Virginia family law, and without a prenuptial agreement anything can happen. One of the benefits of a prenuptial agreement is that these issues can be resolved in advance and with certainty. Thus, in the event of a separation or divorce, you will know what to expect and you will not be left wondering about your rights or obligations.
3. Protect Business Interests. A business interest is property, just like any other asset, which is subject to valuation and division in a divorce. Even business interests which were established prior to the marriage can become marital property, or partially marital property, based on the contribution of money during the marriage or the personal efforts of one of the parties to grow and build the business. The valuation and division of business interests in divorce is a complicated and expensive process, and the owner-spouse often has great concern regarding the impact of the divorce on the well-being of the business. The only way to fully protect business interests in a divorce is through a prenuptial agreement.
4. Providing for Children from Another Marriage. It is very common for couples to marry later in life, after they have already amassed significant assets and savings, and one or both of the parties have children from a prior marriage. For many people, it is a priority to ensure that their estate is preserved for their children. Even if parties never separate or divorce, upon the death of a party, the surviving spouse has a legal entitlement to a certain portion of the deceased party’s estate. In Virginia, a spouse cannot be excluded from a Will, and if the surviving spouse is not provided with a certain portion of the deceased party’s estate, the Will may not be honored. However, parties can agree to waive these estate rights in a prenuptial agreement so that they each have the freedom to make estate planning decisions which are best for their families.
These are some of the main reasons to consider a prenuptial agreement, but there are many other factors and variables which could impact your specific situation. If you are thinking about whether or not you need a prenuptial agreement, the first step is to schedule a consultation with one of the family lawyers at MDMB.