Many couples choose to create a prenuptial agreement prior to their marriage. This agreement is a contract between the two parties that outlines the financial plans of each person in the event of death or divorce. It is most commonly used for people entering second marriages, or people who have a lot of wealth. This agreement is used to outline how the assets and debts of the couple will be divided if one of these events occurs.
Most states allow and recognize the use of prenuptials, but have certain requirements that make these documents legal. All prenuptials should be in writing and be voluntary by both parties involved. They should also contain all assets and debts of each person and be conscionable, meaning there should not be extreme penalties or benefits for either party. Prenuptials should also be either completed by an attorney, or signed in front of a public notary, if created without the help of an attorney.
The purpose of a prenuptial agreement is to protect each party’s assets and debt obligations. It is a way that people safeguard their assets, to ensure that upon death or divorce, the assets are allocated properly and fairly. It is also a way for a person to protect himself from getting stuck with debt that was not his. Many people also use prenuptials as a way of protecting their assets to ensure their children receive what they are entitled to.
Among the many things that are included in a prenuptial agreement, many people include a life insurance policy. Life insurance policies should always contain one or more beneficiaries; the people who will receive the insurance payout at time of death. By placing the life insurance policy into the prenuptial, the other party agrees that he will not fight for the proceeds. Many times, a prenuptial will list a life insurance policy and have certain rules, or requirements attached to it. For example, it might have a clause that gives the other party a percentage of the policy upon death of the policyholder. This percentage might increase as the length of the marriage increases. In other words, the living spouse might receive 5-percent of the payout after 2 years of marriage, but if married for 10 years, he might receive 20-percent.
It is always important to talk about the content, the prenuptial agreement will contain, with your future spouse. Give a sufficient amount of time, prior to the wedding, to make plans for the prenuptial. This will allow both parties to feel confident about the arrangement and positive about the terms contained within the document.