Although prenuptial agreements have a reputation as a romance killer, they can help couples avoid financial conflicts. The documents spell out how a couple’s assets will be divided in the event of a divorce or death. “To create a prenup you have to discuss your goals and wishes for the future, which can get couples on the same financial page,” says Kathleen Rehl, a financial planner in Land O’ Lakes, Fla. “Besides, most people I see getting married now are in their 30s or 40s, and it just makes sense to protect any assets that you have earned.”
Ideally, you’ll want to iron out the details of a prenup well before you walk down the aisle. But if you’re already married, in many states you can draft a postnuptial agreement that covers the same ground. Either document should list each partner’s property, investments, and debt.
It’s also a good idea to keep your premarital assets in your name in a separate account. “If you commingle any of those funds for something like a down payment on a home, a divorcing spouse may be able to successfully argue that the money should be considered joint property,” says Linda Campbell, a financial planner in Columbus, Ohio. Keep money you inherit during your marriage in a separate account, too.
Prenups are useful for second marriages, especially if you have assets you want to divide between your children from a first marriage and your new spouse. “Otherwise, your assets may not be distributed in the way you wish,” says Jake Engle, a financial planner in Portland, Ore. For example, your second husband might end up leaving all or part of your family business to children from his first marriage.
To help ensure that the document will hold up in court, both parties should have separate legal representation. In most jurisdictions, a valid prenuptial agreement has to be in writing; it must be executed voluntarily; there must be full and/or fair disclosure at the time of execution; and the agreement must be executed before a notary public.
This article appeared in Consumer Reports Money Adviser.