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The Importance of Prenuptial Agreements in Protecting Your Assets

The decision to get married is one that is based on love. You follow your heart and believe that you and your beloved will be together forever. From the minute you get engaged, you and your fiance are immersed in creating a beautiful wedding day. One thing you may not always think about, especially at this time, is how to protect your assets should you ever require a divorce. 

Rather than have the state dictate how your community property and assets are to be split, you can protect yourself with a prenuptial agreement. An experienced Seattle family law attorney will assist you with implementing a prenuptial agreement. 

You don’t need to be vastly wealthy to benefit from having a prenuptial agreement with your future spouse, and having a prenuptial agreement does not mean you believe your marriage will fail. Instead, it is a thoughtful tool for determining how assets will be divided should you and your spouse split up. 

What is a Prenuptial Agreement?

A prenuptial agreement, also called a premarital agreement or prenup, is an agreement between two parties that is made prior to marriage. The agreement is a contract that provides details for how property and assets are to be distributed in the event of a divorce or death. It may address a number of issues such as division of property, health insurance matters, how inheritances are to be distributed, spousal maintenance, how income will be allocated during the marriage, and more. When properly executed, the prenuptial agreement goes into effect when the marriage begins. 

During a divorce, Washington State has legislation that determines how things like community property, assets, and debt are to be divided. A prenuptial agreement allows you to take these matters into your own hands and determine what will happen in the event of a divorce. 

Because the state of Washington does not have specific statutory guidelines for prenuptial agreements, it is important that these documents are well–written, comprehensive, and thorough. 

Benefits of a Prenuptial Agreement

A prenuptial agreement is designed to protect your assets. One of the benefits of a prenup is that it provides specific details for how to handle property distribution in divorce. A good prenup will all but eliminate the need for settlement discussions in a divorce. The prenup addresses the nuts and bolts of asset distribution and will make the divorce process easier and less stressful. It also provides peace of mind that you will not lose your assets in divorce. A prenup can make divorce less acrimonious. 

Separate and Community Property

In order to understand how a prenuptial agreement can help protect your assets, it is helpful to know the difference between separate and community property. Washington is a community property state. This means that assets and property that you obtain during the marriage are to be split equally between spouses in a divorce. Community property is also sometimes called marital property. 

Separate property typically includes assets you owned prior to marriage, gifts you received, and inheritances that you got, even if they were during the marriage. Questions can arise, however, when it comes to some types of assets. In some instances, assets you owned before you married can become community property after marriage. For instance, if you bought a home before you were married, but after you got married you paid the mortgage from communal funds, your spouse will likely have an interest in the property. One way to resolve these types of matters is by addressing them in a prenuptial agreement. 

Asset Protection

One of the main purposes of a prenup is to protect your assets. A prenup protects your assets by defining the property you own and how to divide it in a divorce. Generally, without a prenup, there is a potential to lose some assets that should be yours. Both parties may benefit from a prenup in that they will identify and decide how to handle assets before they begin their marriage. A prenup is particularly beneficial to those who have significant assets before they get married.  

Family Protections

Those who have children from previous relationships or those with former spouses may have issues in regard to their financial interests. A prenuptial agreement can address these matters and provide details to designate assets that should belong to your children, for example. It is important to protect the assets of these family members. Use a prenup to ensure that you protect all of your property as well as property that should eventually belong to your loved ones. 

Debt Protection

Another way a prenup can protect your assets is by addressing potential creditors. If your spouse has a large amount of debt, that debt can sometimes come into the marriage. You want a prenup to protect you from the potential perils of debt so you do not become responsible for the debts of your spouse. In Washington, debts incurred by one spouse are considered communal obligations, regardless of which spouse incurred the debt, and therefore, you could become responsible for these debts. A prenup can address how to distribute debts in a fair manner in divorce. 

Business Protections

A prenuptial agreement can protect your business in the event of divorce. If you own your own business, you will want to protect it from potential distribution. A business may have other built-in protections,, but it is necessary to make sure that your company is not going to be hurt financially if your marriage ends. You must define your spouse’s interest in the business and handle business matters fairly if you owned the company before you married. 

Seeking a Prenuptial Agreement

It can be difficult to think about discussing a prenuptial agreement with your fiance prior to your wedding. Although it can be a challenging discussion, it is one that you need to have as soon as possible. A prenup is a legal contract, and some may feel that it is unnecessary in a loving relationship. However, a prenup does not mean that you think the marriage will fail. Instead, it will actually help eliminate some of the problems that can arise if a couple later decides to end their union. A skilled family law attorney will ensure that your prenup provides the protections you need. 

What to Include in a Prenuptial Agreement

A prenuptial agreement should be created to include your specific details and to protect your interests. A knowledgeable family law attorney will guide you through the process. Each prenup is unique and should provide information about your particular needs. Some items to consider including in your prenup are identification and distribution of assets, retirement, taxes, household expenses, debts, investments, businesses, and inheritances. For example, a prenuptial agreement can help determine what happens to stock options, a 401k, Roth IRAs. In addition, you will want to include how to handle possible disagreements, such as through mediation. 

A prenuptial agreement is not just for the rich or famous. It can be a helpful financial tool that will serve as a roadmap. The prenup can certainly offer some stability and guidance in the event the marriage ends. A skilled family law attorney will assist you with your prenup needs. To learn more about prenuptial agreements, contact our legal team at View Ridge Family Law & Estate Planning at (206) 966-4020 to schedule a consultation. 

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