Why Should I Get a Prenuptial Agreement?
Prenuptial agreements, also known as premarital agreements or “prenups,” protect your assets and other financial matters in the event of divorce. Prenups are becoming more popular among couples of all income levels. They are no longer the exclusive purview of the rich and famous, if they ever were. Below, we discuss a few of the advantages of obtaining a prenuptial agreement in Alabama.
Keep Your Finances Separate
One of the principal functions of a prenup is to define each party’s assets, including investment accounts, income, bank accounts, real property, and business ownership interests. You can protect premarital property as well as define ownership of property obtained during the marriage.
Prenups are especially helpful if any of the following apply:
• One party is significantly wealthier than the other partner or earns a significantly higher income
• One party owns a business or intends to start a business, which could become part of the marital estate and affect the value of the business if not addressed in advance
• One party has significant inheritance or retirement benefits that they prefer to protect for themselves or their children
Protect Premarital Property
Alabama is an equitable distribution state. Upon divorce, either the parties will decide upon the distribution of marital property via settlement agreement, or the court will issue an order dividing and distributing property based on what is fair and equitable for the parties.
Only marital property is subject to distribution, meaning property acquired during the marriage. Property acquired before the marriage is separate property, not subject to distribution. However, there are many ways in which separate property can be converted into marital property, either intentionally or accidentally. If marital assets are used to renovate a separately owned home, for example, or increase the profitability of a pre-existing business, or if separate funds are commingled with marital funds in other ways, then the line between separate property and marital property can be muddled.
To protect your valued premarital assets, it’s important to lay out what each party owns definitively in a premarital agreement.
Establish Property Rights and Distribution
Keeping your property rights explicit and separate from those of your spouse helps with distribution in case of divorce. A premarital agreement can dictate in advance how income, retirement benefits, business ownership interests, and other assets will be divided and distributed upon divorce. The prenup can serve as the basis for a marital settlement agreement, saving you significant time, cost, and emotional energy should you find yourself in a divorce down the line. To protect yourself, your finances, and your family, and to avoid unnecessary stress and hardship should the relationship end, it’s helpful to have a prenup on the books.
Protect Against Debt
Your prenup can cover not only assets but debts as well. If you end up in a divorce, you do not want to be saddled with all of your ex-spouse’s debts, adding insult to injury. To protect yourself against spousal debt, your prenup can lay out the separate debts of each party going into the marriage and how debt will accrue to each partner during the marriage.
Protect Children From a Prior Marriage
If you have children from a previous marriage or who otherwise predate the marriage to your current partner, prenuptial agreements are especially valuable. A prenup allows you to protect your children’s inheritance and other benefits regardless of whether you and your new spouse find yourself in a divorce.
A knowledgeable Alabama premarital agreement lawyer can help evaluate your circumstances to determine whether a prenuptial agreement is right for you and your family, and help you negotiate and draft the best agreement for your needs.