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Why prenups are smart, even if you’re not rich

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With singer Joe Jonas and actor Sophie Turner announcing an “amicable” divorce Wednesday, an apparent prenuptial agreement will ensure that they won’t have to fight over how to split their wealth.

While prenups are often mentioned in celebrity news stories — think Kevin Costner or Tom Brady and Gisele Bündchen — they can also be a smart move for regular people who want to avoid drawn-out divorce settlements or burdensome legal costs.

“I would absolutely advise having an attorney draw up an ironclad prenuptial agreement,” says Crystal Cox, a certified financial planner in Wisconsin. “I always say you have a prenuptial agreement one way or another, the only difference is whether you decide the terms or if you let the state decide.”

How prenups work

A prenuptial agreement is a legally binding contract made between two people before they get married. The contract outlines how assets, debts and property will be divided in the event of divorce, separation or death.

To ensure that a prenup holds up in court, the agreement should be drafted by a lawyer and signed by both parties well in advance of the wedding, says Jacqueline Newman, a New York-based divorce lawyer.

Financial disclosures should also be accurate, with a clear breakdown of how assets and debt will be split, she says. Child custody and support are separate matters from prenups and are generally handled by family courts.

There are all sorts of reasons to sign a prenuptial agreement even if you aren’t rich, says Scott Bishop, a CFP in Houston. Here are a few to consider:

  • If you have children from a previous marriage, you can ensure their inheritance is protected
  • If you have a lot of debt, you can mitigate the risk to your partner by separating that debt from joint debts within the marriage
  • If you have complicated business dealings, you can keep them separate from your marriage for the sake of simplicity and convenience

It’s also commonly recommended that both spouses have their own lawyer to review the prenup on their behalf, says Sara Stolberg Berkowicz, a CFP in Illinois.

However, it’s worth noting that any prenuptial agreement can be challenged if the financial disclosure is misrepresented or there are unfair terms as part of the settlement. Unfair terms can include penalties for infidelity or stipulations about child custody or support, says Newman.

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