Why a Premarital Agreement Matters

In recent weeks, we have covered topics including Financial Survivorship Basics for Couples and Financial Planning When You Find Love, Again. Today, we will discuss why it is important to consider a premarital agreement.

If you are planning to get married, you need to consider the advisability of a premarital (prenup) agreement. This is true whether it is a first marriage, a second marriage with children from a prior relationship, or a second marriage with one or both spouses with significant assets.

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Too often people avoid the premarital agreement conversation because:

  1. It is an awkward conversation. Talking about ‘who gets how much’ should the marriage fail or if someone passes away can take the romance out of the journey. Then, once you get into the details and the attorneys get involved, it can easily take on a life of its own.
  2. People do not understand how the law works. Many people think that each spouse in the soon-to-be-married couple simply keeps their own stuff, or never gives any thought to the possibility of divorce or death.

Why a prenup matters: Death

In the absence of a prenup (or postnup), state law may govern where a portion of assets are transferred in the event of death. The laws can differ based on the state of residency. For example, in Alabama, you cannot write a spouse out of your will if there isn’t a prenup or postnup written. The law allows the surviving spouse to ‘elect against the will’ and take an elective share of up to one-third of the estate of the deceased spouse. The same can be true if the spouse died without a will (intestate).

The formula for division of assets can be complicated so it is vital that you consult an attorney with experience in these matters. If you want to be certain where your assets go upon your death, having a prenup as part of a complete estate plan is necessary.

Why a prenup matters: Divorce

Again, state law impacts how assets are divided. You cannot assume that in a failed marriage each spouse will simply return to singlehood with the assets they had before the marriage. That is simply not the case. State law, as well as details of the marriage, will impact the divorce settlement.

If you have significant assets and are considering marrying, you would be wise to iron out the details of a settlement in the event of divorce or death before you say, “I do”. If you jumped the gun and married without a prenup, consider the advisability of a postnup…an agreement of division of assets in the event of divorce or death for couples already married.

Be sure to consult with a Financial Advisor about how to organize your assets in preparation for a new or existing marriage.



Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States.  He is the author or co-author of six books, including 50 Rules of Success J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaireand 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch GroupConsult your financial advisor before acting on comments in this article.



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