When Younger Couples Should Have A Prenup

When Jessica Simpson and Nick Lachey called it quits last December, Ms. Simpson probably regretted not signing a prenuptial agreement before the two tied the knot in 2002. In 2005 alone, the 26-year-old singer reportedly earned around $35 million; Mr. Lachey, 32, could claim her wealth as part of the marital assets subject to division in their divorce.

Details of the financial terms of their split, finalized in June, aren't public. Asked about the absence of a "prenup," Sarah Joyce, a spokeswoman for Sony BMG Music Entertainment speaking on Ms. Simpson's behalf, noted that when the couple married, Ms. Simpson "wasn't really making any money"; Mr. Lachey of boy band 98 Degrees "was the breadwinner."

Sudden wealth is unfortunately not likely to complicate the financial affairs of most of the twentysomethings now making wedding plans. And few are heading to the altar with substantial assets already in their names or seven-figure annual incomes -- key factors that prompt many older couples to sign prenuptial agreements before they say "I do."

Still, while most twentysomethings don't need to take up the testy subject of signing a prenup, there are some situations in which younger couples may want to consider one, financial analysts, divorce mediators and attorneys say.

An Issue for Family Firms

Say you have an ownership interest in a family business. You might want a prenup with a provision that that asset would be excluded from the marital assets subject to division, along with any increase in the asset's value and any proceeds if the business is sold.

Indeed, some older business owners insist that their adult children sign prenups before the parents will give the children stock in the company. One reason: to avoid having private information about the business made public in a nasty divorce.

Similarly, people who expect to acquire professional licenses or graduate business degrees after they marry may want to look into an agreement. If they believe their future earnings will far outstrip the spouse's, they may want to limit the spouse's potential claims to the value of those certifications or to alimony or "spousal support" in a divorce. "Higher earning power in the future is a reason for a prenup," says Robert C. Jazwinski, a financial planner at JFS Wealth Advisors in Hermitage, Pa.

A Matter of State Law

Under state laws, assets accumulated during a marriage are usually considered part of the marital estate subject to "equitable" division at divorce.

In divorce court, the split deemed fair by a judge won't necessarily be an even one. But in California and nine other "community property" states, assets earned or acquired by either spouse during the marriage are owned 50/50 from the start and subject to equal division at divorce.

In most states, assets that a person owned before marriage remain separate personal property, as long as those assets are kept completely separate from marital assets. That is generally also true of a gift or inheritance received by one spouse during the marriage and kept separate.

Prenups are binding legal contracts that can include provisions that spell out a person's separate ownership of premarital or even postmarital property, confirm a person's premarital debt as his or her own and possibly contain a waiver of one spouse's property rights.

With a prenup "you can do almost anything you want with property" as long as you both agree to the terms and the agreement is fair, says Elliot Wiener, an attorney in the matrimonial practice at Phillips Nizer in New York.

Katherine E. Stoner, an attorney and mediator in Pacific Grove, Calif., adds that a prenup "gives people a chance to say 'here's what we think is fair'" without letting state laws decide.

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Comments

[Michelle]

I would recommend a prenup for nearly any couple. Unfortunately it is very uncaring seeming.