Academic journal article Journal of Accountancy

Quick Points on Prenups: Premarital Agreements (Also Known as Prenuptial Agreements, or "Prenups" for Short) Involve Elements of Estate Planning and Divorce Law. and Because Such Agreements Can Center on Finances and Taxes, Accountants Should Be Aware of How They Operate

Academic journal article Journal of Accountancy

Quick Points on Prenups: Premarital Agreements (Also Known as Prenuptial Agreements, or "Prenups" for Short) Involve Elements of Estate Planning and Divorce Law. and Because Such Agreements Can Center on Finances and Taxes, Accountants Should Be Aware of How They Operate

Article excerpt

WHEN A PRENUP MAY BE NEEDED

Prenups aren't just for rich people--they are for anyone who is concerned about losing control of his or her property as a result of marriage. They may be especially helpful when:

[check] One or both spouses have significant assets. The parties might need what is referred to as a "yours is yours, mine is mine" prenup. Under it, each party, upon dissolution of the marriage, would retain property owned in his or her sole name prior to the marriage. In addition, neither party has the right to the other's property upon the death of one spouse. Co-owned property, which may include property acquired during marriage, is usually divided equally or based on the parties' respective ownership interests. In most cases, the parties will choose to opt out of the default state laws, which can vary widely on equal or equitable distribution of community or marital property upon death, divorce or annulment.

[check] One or both spouses have children from prior to the marriage. A prenup can preserve lines of inheritance for each spouse separately

[check] Assets from a family business are owned by one spouse. A spouse may agree to waive certain rights in return for a payment, with the amount often tied to the length of the marriage.

SITUATIONS COVERED BY A PRENUP

While articles concerning prenups--usually about the marriage or divorce of some celebrity--appear regularly in the media, not much is written about what prenups actually accomplish. They can help spouses:

[check] Manage ownership of assets and responsibility for liabilities during marriage. The parties can address issues such as taxes (will they file joint returns?) and use of property. For instance, if they plan to reside in a house owned by Wife, will Husband be required to pay any house-related expenses? If so, should such payments give Husband an ownership interest in the house?

[check] Decide in advance how to divide property in the event of divorce. …

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