Tuesday, May 10, 2016

Whether to enter into a prenuptial agreement or not is a very personal decision. Each individual and couple is unique. Therefore, you should base your decision on your own unique circumstances. Review the pros and cons of prenuptial agreements and then read through the steps below to help you decide if a prenuptial agreement is right for you.

Pros of a Prenuptial Agreement

Some of the benefits of a prenuptial agreement include:
  • Documenting each spouse's separate property to protect it as separate property.
  • Supporting your estate plan and avoiding court involvement to decide property distribution.
  • Distinguishing between what is marital and what is community property.
  • Documenting and detailing any special arrangements between you and your spouse.
  • Avoiding extended court proceedings, which result in the time of expensive divorce attorneys.
  • Reducing conflicts during a divorce.
  • Establishing procedures and rules for issues that may arise in the future. 
  • Assigning debt, such as credit cards, school loans, and mortgages, to the appropriate spouse to avoid both spouses sharing debt liability.

Many people fear that discussing these matters, or even bringing up the word prenuptial agreement, will cause turmoil in their relationship. Often times, just the opposite is true. One of the main irreconcilable differences leading to divorce is finances. Talking to your spouse ahead of time regarding finances, property, and marital asset management can avoid a lot of these disagreements. You both can get on the same page in the beginning so that the issue does not pop up and cause an argument later. Furthermore, discussing these issues nurtures healthy communication. Even if you and your spouse decide a prenup is not for you, discussing the mentioned issues is a very good idea.

Cons to a Prenuptial Agreement

Although nuptial agreements carry a lot of benefits, there are some downsides that you should consider before creating one.

  • It's not romantic. If you fear that discussing a property and finance distribution and the possibility of a separation or divorce will dull your relationship in some way, then a prenup may not be right for you.
  • The timing may not be right. The beginnings of a marriage are typically a time of marital bliss, when many of the issues involved in a prenup are not even a thought. You may be at a point in your lives where you don't yet know the answers to some of the issues in a prenup. The truth is these issues will come up eventually, whether during the marriage or if you divorce. If you think the timing of discussing these issues is bad, or you just don't have a basis for formulating decisions or answering questions, then the timing may not be right for you. 

You can always wait until after you are married, when you may know a little more about the management of your household. An agreement made after you're married is called a "postnup". These are enforceable, but be sure to consult an attorney before creating one, because the legalities and enforcement of postnups do vary from prenups.
  • There may be state laws that cover all of the issues you want to address, without a prenup. Different states have laws that determine how property is distributed in the case of a separation of divorce. These laws may be perfectly ideal for you. If so, there is no need of going through the trouble of creating a prenuptial agreement. On the other hand, there may be certain issues in your situation that are not covered by the law, and would nudge you towards clarifying the issue in a prenup.
  • A prenup cannot include child support or child custody issues. The court has the final say in calculating child support. The court determines child support based on a "best interest of the child" standard, with several factors at play. A court would never uphold a provision of a prenuptial agreement that dealt with child support.
  • A court can set aside any provisions it finds to be unfair or not in the interest of justice. For example, courts have set aside provisions that do not allow a spouse any share of the other's bank account, if the account holder contributed greatly to that bank account during the marriage. The most commonly set aside provisions are alimony agreements and alimony waivers.
  • A prenup cannot include personal preferences, such as who has what chores, where to spend the holidays, or what school the children should attend. Prenuptial agreements are designed to address financially based issues. Judges grow uncomfortable when they see private domestic matters included in a contract, and will often view the document as frivolous, striking it down.

Analyzing your specific situation

Now that you have reviewed the pros and cons, think about your specific situation to decide if a prenuptial agreement is right for you.

Take The Prenuptial Agreement Questionnaire
  • Do you own real estate?
  • Aside from real estate, do you have more than $50,000 in assets?
  • Do you earn more than $100,000 a year in earned income?
  • Do you own any part of a business?
  • Do you have more than one year's worth of retirement benefits?
  • Do you have employment benefits such as stock options or profit sharing?
  • Do you or your partner plan to go to school for an advanced degree, while the other works?
  • Does a part of your estate name beneficiaries or heirs other than your partner?

If you or your partner answered yes to one or more of these questions a prenuptial agreement is in your best interest. If you answered no to all of them, a prenup is probably not needed, but could still be used to protect your current or future assets.

Tuesday, May 3, 2016

5 Smart Ways to Spend Your Money and A Big Wedding Is Not One!

Your wedding day should be one of the best and most important days of your life, so it makes sense that some people choose to spend a lot of money on it. But often, there are many aspects of a wedding that people don’t even think about (a wedding cost estimator can help you anticipate costs).

While the wedding day is important, many people wonder at the end of it how it went by so fast and where all the money went. You have to determine with your partner whether you want a big (or even a small) and expensive wedding, or if you want to put the money elsewhere. If you decide to go for the wedding, you can still save money by following these tips. However, if you decide that you want to use your money elsewhere, here are some ideas.

1. Put the money toward savings (or keep it there)

If you have no emergency fund, you need to think about whether paying for a big wedding is a dangerous financial move. If your parents or other family members are giving you money for your wedding but you have no emergency fund or very little future savings, ask if you can use the money for that purpose. Many family members want to be a part of your big day, and you can always consider having a less expensive, simple reception without spending lots of money on a lavish wedding. If your parents want to help you start your life together, it’s possible that the best way they can do that is to help you get on solid financial ground.
If the money is your own, and you or your partner have been saving for a wedding, you should still discuss your options. Ten, twenty, or even five thousand dollars spent in one day can be quite a shock – you may find that the dinner and dancing isn’t worth the price tag.

2. Pay down debt

Another way you can start your marriage off right is to be debt-free, or at least, reduce your debt. Reducing your debt will free up more money for other parts of your budget, and it will also take a huge weight off your shoulders. Consider paying off your debt, or at least paying some of it, instead of having a big wedding. If you are really attached to a wedding, try to use some of the money to reduce your debt and some of it to pay for the wedding itself. It’s easy to buy into the dream wedding fantasy or to compete with friends or family members, but remember that after your friends and family go home, you will be the one stuck with the bill.
If you don’t have much money saved for the wedding, you might be considering going into debt in order to pay for one. This is usually a bad idea, because you will be paying for your one day of fun for a long time, and you might even rack up credit card debt.

3. Put the money toward a downpayment

The average cost of a wedding in the U.S. is $25,200. Most people try to put down at least 20 percent of the cost of their new home when they take out a loan, although this isn’t always possible. If you choose to put the money you have saved toward a downpayment instead of an expensive wedding, you will see many advantages. Obviously, the more money you can put down when you pay for a house, the lower your mortgage bills will be each month.
Putting down at least 20 percent will also save you on interest payments (and may actually get you a lower interest rate), and you will be able to skip the mortgage insurance. Also, a large downpayment may protect you later if you have to sell your house and the market goes down, because you don’t want to find out that you owe more than your home is worth.

4. Go on a nice honeymoon

Many people pay for the wedding and the honeymoon, and this can really add up. The average cost of a honeymoon is $4,466. This is much less than the average spent on a wedding, but isn’t a small amount of change. Some people use the money that they get from their wedding to help finance their honeymoon, but unless you are having a huge and expensive wedding that brings in tons of gifts, or you have a lot of very generous friends and family, you probably won’t escape without paying for some of the honeymoon yourself.
One idea is to consider just going on the honeymoon and escaping the wedding costs altogether. Or, as mentioned before, have a small and intimate event instead of an expensive one. Weddings are definitely romantic, but the honeymoon can be, too, because it is a chance for you and your partner to be alone, and it will probably cost you a lot less than a big wedding.

5. Buy something you need

If you and your spouse have two unreliable cars, you might want to spend your money on a newer, more reliable car; that way, if one car breaks down, you will at least have one car you can depend on. Or perhaps neither of you have very much kitchen stuff, but you are moving into a bigger home and you need appliances and new place settings. You could add these items to your registry, but the amount received via gifts will almost never add up to the amount you will spend on the wedding. The same is true of furniture or other household items. If you want to save money, you’re better off purchasing the items yourself and skipping (or reducing) wedding costs.
While these ideas do show you how you could spend your money if you choose not to have an expensive wedding, the choice is really up to you. For some people, the wedding day needs to include family and friends, and if that is the case for you, then you should make your day special. On the other hand, if you are worried about going into debt or if you are having a wedding just because you think it’s what other people expect from you, you might want to reconsider how you are spending your money.
For additional assistance and planning help contact me here, let's schedule an appointment and learn more about your spending habits and saving needs.