It is a common misconception that prenuptial agreements are for the very wealthy, but that is not always true. There are numerous reasons to enter into a prenuptial agreement even if you do not have substantial pre-marital assets to protect. Many couples balk at the idea of a prenuptial agreement in the early stages of a relationship because a written agreement made in contemplation of divorce does not mesh well with the romantic notions of wedding day bliss and a honeymoon on the beach. But a well-drafted prenuptial agreement can prevent future heartache in the event of a divorce, even if the couple does not have a lot of money.
First, a prenuptial agreement can protect future earnings. For example, if a husband starts his own law practice shortly before the parties get married, he may have no significant assets at that time. However, the husband likely expects the firm to be successful and his income to increase significantly. Through a well-drafted prenuptial agreement, the husband can protect the future earnings of his business in the event the marriage does not survive. This situation can also come into play if one spouse expects to take over a family business or another potentially substantial asset in the future. A little advance planning and a well-drafted prenuptial agreement can allow the spouse to keep the asset as his or her separate property in the event of a divorce.
While future earnings can be protected, so can future debts be avoided. In today's economic climate, it is not uncommon for parties to incur substantial debts during the marriage, such as credit card debt or student loan debt. A prenuptial agreement can address the parties' respective liabilities and ensure that the debts of one party do not become the responsibility of the other. For example, if the wife is contemplating law school when the parties get married and she has to take out student loans to pay for it, the parties can agree that in the event of a divorce, the wife will be solely responsible for the debt. Or, for example, if the future husband has a history of incurring substantial credit card debt, a prenuptial agreement that calls for each party to assume responsibility for their own debts in the event of a divorce can allow the wife some comfort in proceeding with her nuptials despite her beau's financials issues.
Prenuptial agreements can also allow individuals to provide for children from previous relationships. Because spouses have certain rights to IRA accounts, life insurance policies and other assets, a prenuptial agreement can provide that these assets be left to the children, rather than to the spouse, who could otherwise inherit these assets in the event of death. Generally, in a prenuptial agreement the parties can waive their rights to certain assets, but it important to consult with a trusts and estates lawyer and a financial planner to be sure that the proper estate plans are made with respect to your beneficiaries.
Although it may seem unromantic to consider what you will do in the event of a divorce, it is also practical. In fact, in cases where the parties have some assets, but not enough to spend thousands of dollars fighting over, a prenuptial agreement may allow for a swift resolution in the event of a divorce.