Pre-Nup Mistakes: What to Avoid
NEW YORK ( MainStreet) About 46% of matrimonial lawyers noted an increase in women initiating requests for prenuptial agreements, according to a new study.
"Many women who own a business or professional practice have put years of love, sweat and tears into their operations," said Jeffrey Landers, a financial advisor. "The last thing any woman wants to do is lose both her husband and a chunk of her business in divorce. It's a double whammy."
Over the past three years, the American Academy of Matrimonial Lawyer (AAML) survey found that 62% wanted pre-nup protection in the area of increase of value in separate property, 39% for inheritance rights and 23% for community property division.
"As the financial and real estate markets continue to improve, there is a greater awareness of risk to possibly sharing these gains in a divorce," said Alton Abramowitz, president of the American Academy of Matrimonial Lawyers.
Pre-nups offer some protection when they are drawn up correctly. Landers suggests signing pre-nups as early as possible and ideally before the wedding invitations are mailed.
"Don't wait until the day before your wedding to sign a prenup or to ask your spouse to sign, because it can indicate the pre-nup was signed under duress and could be grounds for invalidation," said Landers, author of the book Divorce: Think Financially, Not Emotionally (Source Media Books 2012)
Before having a prenuptial agreement drawn up, Abramowitz recommends clearly defining how expenses are going to be shared and if there will be joint or separate bank accounts.
"Make a decision about where you will be living and who will own the home," Abramowtiz said. "Have a detailed discussion about future career plans and determine if one spouse might possibly stop working once children arrive."
Other recommendations include defining how your estate will be eventually handled.
"If you own a house or condo prior to marriage and the value of that property increases along with your equity in it, that may not be something you want to share if the marriage goes south," Landers said. "The purpose of the pre-nup is to clarify which property remain separate and which is marital."
In the absence of a valid pre-nup, the laws of your state will dictate how your assets and debts get divided in divorce.
"In essence, you already have a pre-nup, which are the divorce laws in the state you live in," Landers said. "By not having your own pre-nup, you agree to the default pre-nup that the state gives you. If you don't like what the state says you must do upon divorce, it makes sense to create your own."
Finally, don't rule out the possibility of using a post-nup for assets acquired during a marriage. A post-nup is an agreement drawn up during the term of a marriage.