Prenuptial agreements have become more common for couples preparing to marry – regardless of their age or assets – in recent decades. However, many young couples still see no need for one.
That’s particularly true if they’re going into marriage with roughly the same amount of money (and probably some debt). What they may not realize is what they stand to inherit from parents and other family eventually. Parents understandably want to keep the assets they’ve worked hard to accumulate or that they’ve inherited as the result of their own parents’ or grandparents’ hard work in the family.
How an inheritance can be at risk in a divorce
While individual inheritances are considered separate property as opposed to community property, that can change if the funds become commingled with joint assets. For example, inherited funds deposited in a joint checking account are considered commingled and may have to be divided if the marriage ends in divorce.
If someone has a share of the family business, that too can be at risk in a divorce. That’s true even if they have no role in the business’s operations.
These are two common reasons why parents are increasingly urging their young adult children to get prenups. This can be a tricky topic of conversation. It can be even more fraught if there’s already an engagement.
That’s why it’s typically best to start talking about prenups as one element of sound financial planning before your child is in a serious relationship. This way, it doesn’t seem like a reflection on your opinion of their partner or their chances of a happy marriage.
What not to do
A prenup must be between the two people getting married. Parents should not be involved in the negotiations or writing. It’s important for your child to know what they’re protecting (like a future inheritance), but they don’t need specific dollar amounts.