Today, more and more couples are choosing to get a prenuptial agreement when they get married. Although all married couples are able to get a prenuptial agreement, it is highly recommended for high-earning individuals or couples, such as professional athletes, to get a prenuptial agreement. Even if you trust your spouse and don’t plan on getting a divorce, a prenuptial agreement is considered an excellent idea. In this article, we will explain what a prenuptial agreement is and the pros and cons of getting one.
What is a Prenup?
A prenuptial agreement, commonly called a prenup, is a written contract created by two people before they are married, detailing each person’s financial and property rights after the marriage in case they divorce. In simple terms, it covers how finances will be allocated between the pair, no matter who is the primary breadwinner, and includes where shared property or property owned before the marriage will go, as well as any debt the couple accumulates in the event of a divorce.
Many couples are hesitant to get a prenuptial agreement because it feels as though you are planning for failure. It can be a challenging conversation to bring up to your partner or fiance as you talk about getting married. However, a prenuptial agreement may benefit the spouse who has or earns less.
Are Prenups Only About Protecting Your Wealth From Your Spouse in the Case of Divorce?
A very common misunderstanding about a prenup is that it exclusively protects the breadwinner and leaves the other person with nothing. In some cases, this may be true. However, for a pair that focuses on fairness and providing for each other no matter the status of their relationship, this is not the case at all. In fact, it’s quite the opposite.
For example, some choose to quit their jobs and become stay-at-home parents. Even if they had a high-paying job at the time of the wedding, they will likely be worth far less years after leaving their job. A prenup can include how finances will be split between the couple, even if one of the parents quits their job later. This can be designed to protect the stay-at-home parent because they will still have some finances, other than child support, to fall back on in the case of a divorce. In this case, a prenuptial can actually benefit the lesser-paid spouse.
Why Get a Prenup?
There are many reasons to consider getting a prenup depending on your financial situation. For athletes, many have a very high salary, which can put them at risk. Splitting your income with your ex-spouse can drastically decrease your earnings, and can be disappointing if you earned the wealth or purchased an asset before your marriage. Below are some other reasons to consider a prenup.
You Can Address Certain Future Concerns About Your Finances and Assets
As an athlete, you may have a high-paying salary that you need to protect, no matter how much you trust your spouse. With a prenuptial agreement, you can agree to how much your spouse will receive in the case of a divorce. This puts the decisions in your hands, rather than the court. Oftentimes, courts determine you and your spouse have to equally split your earnings and debt after a divorce is final. Additionally, you may be required to split your assets such as cars, homes, and business ventures. This can be a big issue if you owned the assets before you got married. A prenup can outline distribution of anything you owned before the marriage so it will remain in your possession.
Your Spouse Won’t Be Responsible For Your Debt
Did you or your spouse accumulate a considerable amount of debt before your marriage? Either way, neither of you may want to be responsible for each other’s debt. A prenup can outline that in the case of a divorce, each person will handle their own debt and will not hold each other financially responsible. This decision can result in saving people thousands of dollars later.
This can also be valid in case of a death. With a properly designed prenup, the surviving spouse will not be responsible for paying off the debt of the deceased. There are countless situations where debtors have come after the assets of a widow or widower. This is the very last thing a surviving spouse should have to deal with, making this a major pro of prenups.
Children From Previous Relationships Are Protected
Without a prenuptial agreement, your spouse can take assets away from your children from a previous relationship, whether it being during a divorce or if you pass away. Although everyone hopes their spouse would never do such a thing, it has happened countless times before. Children from a previous relationship aren’t protected if you don’t have a prenup, outside of a court-ordered child support agreement.
In the case of a divorce, the courts may decide to split all of your assets with your current spouse. This can affect college savings funds for your children, or a car you purchased for them that has your name on it. In the case of death, your spouse may get everything unless you have a will and/or properly structured trust document that specifically outlines where each dollar should go. A prenup is another opportunity to protect your kids and their futures.
You Protect Any Business You Have
Many athletes find themselves starting businesses of their own on the side. This could be a car dealership, a sportswear company, or anything else they’re passionate about. After you get married without proper planning, half of the business may go to your spouse. This can make them a partner of your business, unless you can buy them out. However, with a prenup, you can clearly state your business is yours, and not for your spouse in the case of a divorce.
Getting a Prenuptial Agreement
Despite its reputation, a prenuptial agreement is an excellent idea for most athletes and other high-earning people. Not only can you protect yourself and your children, but you can also ensure your spouse has protection as well. So, hire a lawyer to represent you during your prenuptial discussions and a financial planner, such as the ones at Dayton and Sydney, to help you make the best decisions for your particular situation.
This information is general in nature and being provided based on our general understanding of this topic and should not be construed as legal advice, for which you should consult a qualified legal advisor.