Any couple planning on getting married in New Jersey has the option of creating a prenuptial agreement. Often known as a prenup, the agreement acts as a contract between the partners. The contract presents terms and conditions that come into effect should the couple divorce. A prenuptial agreement may also coordinate with an estate plan and come into effect upon a spouse’s death. The terms typically focus on assets and how to divide or not divide them during a divorce.
Who needs a prenup the most?
People use prenuptial agreements to protect themselves or their children from financial losses in the event of divorce or death. The agreement can prevent disputes that may result in lengthy and unpredictable court battles if a marriage ends.
Financial advisers recommend prenuptial agreements for:
- Business owners
- People with children from previous relationships
- People with assets to protect
- Couples with large differences in income and/or debts
How a prenup helps in these situations
A divorce could force a business owner to sell the company in order to settle a divorce. To avoid this, the owner and the future spouse sign a prenuptial agreement that separates the business from marital assets. As for people with children from a previous relationship, the contract can explain what the children receive upon the parent’s death. This prevents an estate from going mostly to a spouse instead of children.
Should you and your future spouse have a big difference in income or debts, you may address this in a prenuptial agreement. A low-earning spouse could lock in certain assets or perhaps alimony payments. In the case of one person having excessive debts, the non-debtor spouse could avoid liability for paying them. Overall, the negotiation of the contract offers a way for two people to understand each other’s financial position.