FINANCE COMMUNICATION

Marital trends are changing and many couples are turning to prenuptial agreements to protect their financial future. Increasing numbers of Americans are tying the knot at an older age and may be entering their second or third marriage. These couples generally bring more assets into the relationship and may have complex financial situations. According to a 2010 poll by the American Association of Matrimonial Lawyers, prenuptial agreements are becoming more generally accepted as a tool to protect assets and income by Americans of all ages and income levels.

At their most basic level, prenuptial agreements, also frequently called premarital agreements, are contracts signed by couples before marrying that cover property and asset distribution in the event that the couple divorces. Most couples that create prenuptial agreements do so when either partner:

• Owns real estate, such as a primary residence;

• Brings significant debt;

• Holds significant assets like retirement accounts or other wealth;

• Has children from a prior relationship to support;

• Has existing estate plans

If you’re debating about getting a prenuptial agreement, it’s important to understand what the law allows in this type of contract. Keep in mind that every state has different laws regarding premarital agreements and it’s wise to consult a financial adviser or family attorney before taking this important step.

There can be many positives to creating a premarital agreement with your future spouse.

Developing a prenup with your partner may help strengthen your relationship by ensuring you’re both on the same page about important issues surrounding money. While people may imagine negotiating a prenup is adversarial or implies distrust, talking frankly about money and property can establish ground rules and eliminate misunderstandings that might otherwise crop up. Remember, you and your future spouse will be discussing money throughout your entire marriage so there’s no time like the present to start.

Prenuptial agreements can also help protect separate property that either or both of you may bring into the marriage. For example, you may own a family heirloom or share in a family asset that you want to protect. By properly defining what property will be considered community property and what will be kept separate you may be able to reduce conflicts and save money in the event of divorce. Some of us bring debts, as well as assets, into a marriage. A prenup can help prevent creditors from turning to marital assets to satisfy individual debts.

A prenup may be necessary if you or your spouse has children from another relationship to support. If you are concerned about ensuring your children inherit their share of your property, you can develop an agreement with your spouse that stipulates how assets will be divided in the event of a death. If protecting your estate plan is one of your goals, it’s vital you also update your estate planning documents to support your intentions.

While there are definite advantages to developing a premarital agreement with your future spouse, there are some possible downsides to consider, as well.

Prenuptial agreements may not always be necessary. If neither you nor your partner have accumulated significant assets, do not expect to inherit property, or do not have children, a prenup may not be necessary. In other cases, the existing laws in your state may already accomplish the goals of a prenup. In community property states, assets and debts owned before the marriage are usually considered separate property and those accumulated during the marriage are generally split equally.

SOURCE: “Big Rise in Prenuptial Agreements Says Survey of Nation’s Top Divorce Lawyers.” American Academy of Matrimonial Lawyer s. www.aaml.org/about-the-academy/press/pressreleases/pre-post-nuptial-agreements/big-rise-prenuptial-agreements-sa (Accessed December 16, 2013) Securities and advisory ser vices offered through SII Investments, Inc., member FINRA, SIPC and a Registered Investment Advisor. Fross and Fross Wealth Management and SII Investments, Inc. are separate compa nies. SII does not provide tax or legal advice.

In both these cases, the time and expense associated with a prenup may outweigh the possible benefits.

Negotiating or asking for a prenuptial agreement can also bring up tricky emotional issues or erode trust between partners. Open communication and timing are important when discussing money with a partner. Marriage is a financial partnership, as well as a romantic one, but if you don’t feel that you can discuss issues of property or divorce without creating problems, you may not be good candidates for a prenup.

You should also keep in mind that prenuptial agreements can be set aside for reasons such as lack of independent representation of one partner, failure to completely disclose assets, or if there is evidence of fraud or duress when signing the agreement. “Unfair” provisions, like financial penalties for infidelity, are also frequently unenforceable.

Prenuptial agreements can be a valuable tool to protect your family’s financial future, but they may not be for everyone. It’s wise to consult a financial adviser or marital attorney who can help you explore your personal situation and assist you in developing strategies to suit your needs. If you’re concerned about the emotional aspects of the process, consider bringing in a mediator who can help smooth the process.

If you decide that you want to sign a prenuptial agreement with your future spouse, it’s critical to discuss the agreement early in the relationship process — don’t wait until you’re ready to walk down the aisle to bring up such an important issue. Be honest with your partner about your thoughts, feelings, and motivations for wanting a prenup; your discussions will be laying the groundwork for communication about important issues during the marriage.