We have heard about the idea of prenuptial agreements and probably know someone who has such an agreement in place. It should come as no surprise that in the context of providing financial advice to our clients we may be asked by a client whether a prenuptial agreement is a good idea.
Not surprisingly there are differences of opinion on this for as many reasons as there are people. It has been said that in a first marriage there should never be a prenuptial agreement because it may stifle the romance and set the couple against each other. It has also been said that where a client has children from a failed prior marriage that the next marriage should absolutely feature a prenuptial agreement to protect the interests of those children.
What to do? If there are substantial assets owned by both parties, it may be wise to keep some of them separate by agreement, particularly where they involve, for example, a family business or an intellectual or artistic creation by one party. Where one party brings no financial assets to the marriage while the other has significant established assets, perhaps an agreement is a good idea to protect BOTH of the parties. This could ensure that the no asset party is provided for financially in the event of a divorce while ensuring that the wealthy party is able to protect some assets and have a known level of exposure.
The key here is to make sure the agreement is based on full and fair disclosure by both parties thereto. They should have their own counsel –attorneys – to represent their interests in the agreement and to understand both the requirements of state law and the ramifications of their relationship on the financial level. It would seem that such an approach would actually be liberating to the parties who would then be free to enter into their marriage without those fears the agreement addresses.