By: Nicole Makris, Attorney
When marriage is on the horizon, the discussion of a premarital agreement can be an important step in planning for the future. Some people are hesitant about discussing a premarital agreement with their significant other because they fear it appears to be “planning for divorce.” This outlook overlooks the numerous benefits to a premarital agreement. Similar to an insurance policy, the premarital agreement is only there if you need it someday. Here are five reasons to consider when deciding if a premarital agreement is right for you.
- Premarital agreements can be personalized.
You can design your premarital agreement to meet your specific needs. Some couples only wish to distinguish their personal property owned prior to the marriage as separate property so that the rest of the property acquired during the marriage would be considered marital property in the event of divorce. Premarital agreements can be limited in scope to protect specific assets, such as inheritances or residences, or to designate responsibility for specific debts, such as student loans.
- Premarital agreements promote financial disclosure.
The process of entering into a premarital agreement helps promote transparency as to each party’s assets and debts. The sharing of financial standings with one another before marriage can help promote openness in dialogue surrounding financial matters during the marriage.
- Premarital agreements are not only for people who have significant assets at the time of the marriage.
Indiana law considers all property of the parties to a marriage to be marital property subject to division. A premarital agreement can be especially important for individuals who have significant assets that he or she will be bringing into the marriage. Through a premarital agreement, these assets can be classified as that individual’s separate property if a divorce occurs. When an individual has interests in a family business, a premarital agreement can designate the business interests as that person’s non-marital property. However, premarital agreements are not only for people who have significant assets at the time of the marriage. Even if neither party has personal property of value at the time of the marriage, a premarital agreement can plan for the division of future assets that the couple acquires throughout the marriage, such as retirement accounts.
- Premarital agreements can simplify property division in the event of divorce.
Premarital agreements can be extremely valuable in the event of divorce by outlining each spouse’s property rights, from real estate to bank accounts. Premarital agreements also allocate responsibility for debts of the couple, such as credit cards and vehicle loans. Having an agreement on these issues before marriage can minimize the number of issues that the couple must determine if a spouse later files for divorce.
- Premarital agreements may be modified.
You and your spouse can decide to make changes to your premarital agreement during the marriage. Any modification will need to be in accordance with the terms of the original premarital agreement. Couples may choose to modify a premarital agreement when new significant assets or debts have been acquired or if they agree upon a new division of property in the event of dissolution of the marriage.
Premarital agreements can provide clarity to couples on property issues and simplify the division of property if divorce occurs in the future. I have helped many clients over the years with premarital agreements. If you are considering a premarital agreement or have additional questions, please contact me for a consultation.