Prenuptial agreements were once typically reserved for the super-wealthy. Over time, however, the arrangements have become increasingly common for a broader cross-section of people. Common premises for using one often involve couples getting remarried later in life who want to keep their finances from getting too tangled, especially if they have children. Younger millennials are also using them to keep their finances in good order.
Business owners should be especially careful
It is also quite common for business owners to use a prenup, especially if they run a multigeneration family business. The reason for the business owner wanting the prenup is simple: unless there are other arrangements, marital assets (generally defined as those accrued over the marriage) pass to a spouse when the business owner dies. The spouse may suddenly become the unintended owner as other family members involved in the business (or stood to inherit it) look on.
Assets get commingled
Assets may start as separate if accumulated before the marriage. Still, over time they often get commingled and eventually (if the marriage goes long enough), all separate property will likely become marital unless an agreement states otherwise. Moreover, a marked increase in the value of a personal asset like a business will also likely fall under the umbrella of a marital asset.
It’s best not to wait for the wedding day
Prenuptial agreements are like other contracts, which means those signed under duress are null and void. With a prenup, it is a mistake to present it for signing on the eve of the wedding or otherwise coerce the future spouse into signing it. Agreements that leave one spouse very little or nothing will also be unenforceable.
It is wise to have honest conversations with the future spouse about your expectations of who gets the business or some other asset that has been in the family for generations. Rather than leaving it to spouses who divorce or survivors after a death, it makes more sense to indicate in a prenup that certain assets will remain with the individual or their beneficiaries.
