It’s that time of the year again: wedding season! Beyond tuxedos, white dresses, and flowers, an important decision couples must make involves finances and the decision of whether to have a prenuptial agreement. For some entering marriage, that can be a difficult conversation to have, but with marriage comes compromise.

A prenuptial agreement is a written contract between a soon-to-be-married couple that they reach before walking down the aisle. It names assets and liabilities that will remain outside the marital estate and outlines the financial understandings of each person during the marriage, regardless of how it ends, be it death or divorce. A prenup is also used to protect family businesses. It is also commonly used to help protect one’s individual wealth for the benefit of one’s children from an earlier relationship.

Should you have a prenuptial agreement if you plan to get married in the near future? The answer varies, based on your circumstances. To help you decide, follow these three steps.

  1. Document your assets and liabilities. The assets side includes cash, investments, real estate, family business interests, and valuables such as artwork or jewelry. Examples of debt are lines of credit, credit cards, and loans that are cosigned. It’s essentially a way of saying, “This is what I have in my name now.” Every prenuptial agreement is controlled by state law. Therefore, it is strongly advised that every individual use their own attorney to ensure that assets and debts are shown in a suitable manner and state-specific guidelines are properly met.
  2. Once the disclosures of premarital assets and liabilities as well as the beneficial interests of each party have been met, the next step is to address how each asset or liability will be handled in the event of divorce or death. What are you going to do with these assets during marriage and thereafter? Popular items to address are the uses and rights to joint assets such as investment accounts, rights and usage to separate properties like real estate or inheritances, the treatment of family business interests, various provisions that need focus such as children from previous relationships and rights to an arbitrator in the event a dispute arises. It is worth noting that child support cannot be addressed in a prenuptial agreement and future spousal support varies from state to state. Once all terms have been met and agreed upon, both parties sign the agreement in a clear mental state knowing that the agreed-upon financial terms cannot change.
  3. The final, and perhaps most important, step is to work as a married couple to ensure that commitments are upheld and financial plans stay consistent. Throughout the course of a marriage, couples will have to decide on items such as naming beneficiaries for their accounts and do various levels of estate planning. Were items previously agreed upon in a prenuptial agreement or is there some flexibility? It is also important that married couples align their financial goals. How much are you planning to save for future purchases? How does each party view the usage of debt? What is important to each party from an estate planning perspective? Are you even going to combine your finances after getting married? How much should the children be involved at later stages in life?

Prenuptial agreements can be a sensitive subject. However, if carried out in a capable manner, they can be a helpful tool to build healthy financial futures. Your relationship with your intended spouse should be filled with sincerity and trust. If you have any financial planning questions, especially surrounding major life events such as getting married, please do not hesitate to reach out to our team at Savant Wealth Management. And if you are getting married this summer … Congratulations!

Author Jonathon D. Merickel Portfolio Advisor

Jonathon has been involved in the financial services industry since 2002. He earned a bachelor of science degree from Syracuse University and an MBA from Le Moyne College.

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