Should You Create a Prenuptial Agreement?

Prenuptial agreements help ensure that couples are on the same page about financial matters before they get married. These documents establish guidelines about how the pair will share property, assets and debt during the marriage and divide these items in the event of a divorce.

Creating a prenuptial agreement, commonly called a prenup, is a personal decision for each couple. These are some of the factors you should consider to determine whether you need one.

Wealth and assets

When one or both individuals own significant assets and/or property before the marriage, a prenuptial agreement can ensure that each partner will retain his or her wealth if the union ends. Even if you are not wealthy, you may want to protect a family heirloom or other personal property.

Debt

If you are entering a marriage with debt, you can shield your future spouse from the effects of this financial burden with a prenuptial agreement. This situation is common when one or both partners has student loans from medical or law school. Similarly, if you have good credit and your future spouse is struggling with debt, a prenuptial agreement may help protect your FICO rating.

Personal history

When one or both partners have already been through contentious divorces, they may want to avoid that situation in the future with a prenuptial agreement. If you have children, you can provide for their inheritance with this legal document as well.

Business

As a small business owner, you should protect your company from the impact of a future divorce. This is especially important if you are a sole proprietor and do not have an existing business agreement that establishes ownership rights in a divorce.

Prenuptial agreements cannot include certain provisions. For example, they cannot establish child custody or support for future offspring. If you are already married and did not sign a prenuptial agreement, you and your spouse can create a postnuptial agreement.