Here’s How A Prenuptial Agreement Can Protect You Financially



The famous Malay proverb, “Prepare the umbrella before it rains”, does not apply only for the weather. It is applicable for every part of your life including marriage as life constantly holds heaps of surprises for us.

With age at first marriage expected to increase to 33 for both male and female by 2015, compared to 28 and 25 in 2000, many would be entering into marriage being financially established. At the same time, the divorce rates have increased from 15% in 2008 to 18% in 2012. It has stirred a fear that they may lose their individual wealth or have to go on financially unprotected if something were to go wrong with the marriage.

As such, it is only wise for couples to sign a prenuptial agreement, to straighten out their financial obligations in or out of marriage before they exchange marriage vows. A prenuptial agreement helps protect the finances acquired individually and prevent a prolonged and expensive divorce settlement.

Although prenuptial agreements have been popular in the West for decades, the awareness on the importance of prenuptial is still low in Malaysia. They still have a negative connotation associated with them.

Signing a prenuptial agreement does not automatically mean you will end up with a divorce or that you do not trust your partner. There are many benefits to having a prenuptial, as outlined below:

How does it protect your finances?

1. Financial obligations

Signing a prenuptial agreement is a good way to make financial obligation, rights and expectations clearly outlined and understood before the marriage. It makes you decide early on how you want to share expenses, decide whether to have joint or individual bank accounts, or how finances are handled once you are married.

2. Second marriage

If you are getting married for the second time, you might bring in assets, children or financial obligations from your previous marriage. Signing a prenuptial agreement can help ensure that if something happens to you, your assets, children and obligations are covered.

3. Divorce

No one wants to think of a divorce even before marriage. However, as the future is uncertain, it is only wise to be prepared if it happens. In a divorce, people so often fight over trivial things such as who owns what, so make sure you settle that beforehand.

Signing a prenuptial agreement will outline how both your wealth, such as retirement savings, investment funds, property and other finances will be divided between you and your partner. You can also specify how much to pay in alimony or whether you are waiving alimony entirely in the agreement. The primary goal here is to make sure you are protected. However, prenuptial agreements do not cover child custody.

4. Property

If you already own a property before the marriage, signing a prenuptial will help keep the ownership of your property separate from your partner.

5. Business

If you own a business, a prenuptial agreement will protect the ownership and fortune of your business in the event something goes wrong with your marriage. It also helps ensure that your spouse does not become involved in the decision-making or benefit from profits of your business without your consent.

6. Debt

In today’s world, most of us have some sort of debt, such as loans or credit card bills. A prenuptial agreement can help protect you against any debt that your spouse may bring into the marriage or any future debt that is acquired after you are married. You can customise your prenuptial as a way to protect yourself from their debt obligations and vice versa.

7. Financial differences

You might be earning more or are financially better off than your partner. You could also be entitled to a family inheritance or property. If you do not like the idea Kanye’s Gold Digger actually applying to you, signing a prenuptial can help you avoid that potential problem down the road.

8. Discover each other

Money is one of the biggest causes of disagreement in relationships, so it is important to know where you and your partner stand when it comes to finances. Discussing and writing a prenuptial agreement will help you discover more about yourself, your partner, and your relationship.

You and your partner may have different opinions on money matters, and this agreement will help to understand your views on finances and how each financial decision will affect one another. As prenuptial agreements require you to be transparent on your assets and liabilities, this can be positive for your relationship. With this, you can actually strengthen your bond with your soon-to-be spouse when both of you understand that you are creating one for sound financial planning purposes as a family.

Experts advise that the best time to sign a prenuptial agreement is at least 6 months before the actual marriage ceremony, to avoid any disruption on your wedding planning and preparations. Since an agreement signed today may not be fair in the future, you can agree to make periodic adjustments based on factors such as change in lifestyle, increase in earning capacities, purchase of new property or investment, etc.

Although prenuptial agreements are not legally binding in Malaysian courts today, it may in the future as more come to realise its importance. A need for a prenuptial is equal to the need of insurance policies – to be prepared for the future.

While all of us fantasise a “happily ever after” ending to our marriage stories – for various reasons, things can go the opposite way. Today, with a divorce costing thousands of Ringgit and several years of painful proceedings, your burden could be lightened with a prenuptial signed before the exchange of vows. At the same time, having a prenuptial agreement will help you better plan your financial future as a couple while protecting your individual finances.

With or without a prenuptial agreement, finding out your partner’s financial personality before marriage enables you to execute your financial goals better and probably achieve them in time as a couple!

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