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Everything you need to know about prenuptial agreements

Nothing can kill romance faster than the word prenup. But with about one in three of all first marriages ending in divorce, and 50 percent of second or third ones hitting the skids, a prenup is smart financial planning, legal and financial experts say.

"Think of it as a business arrangement or as an insurance policy to help remove some of the emotion that's naturally involved," says Nancy Dunnan, a New York City financial adviser and author. "Marriage is not just an emotional and physical union -- it's also a financial union. A prenup and the discussions that go with it can help ensure the financial well-being of the marriage."

A prenuptial accord is a contract between two people about to wed that spells out how assets will be distributed in the event of divorce or death. Such agreements have existed for thousands of years in some form or another, particularly in European and Far Eastern cultures, where royal families have always made provisions for protecting their wealth.

Understanding the prenup
It's an enchanted evening, and your dreamboat has just popped The Question: "Honey, will you sign a prenuptial agreement?"
Nothing can kill romance faster than the word "prenup." Check out this guide to the often-misunderstood agreement that is becoming more and more common.
1. Who needs a prenup?
2. Approaching the subject
3. Signs of a valid prenup
4. Follow proper legal procedures
5. Keeping the prenup up to date
6. Legal benefits of having a prenup

Not just for the rich
You don't have to be a Rockefeller or Trump to need a premarital agreement. A person who has managed to save $30,000 may be more protective of their little nest egg than someone who has millions.

"Those are sometimes the most jealously guarded assets because it has taken a lot of hard work to accumulate a small amount," says Joseph P. Zwack, an Iowa lawyer and author of a best-selling handbook "Premarital Agreements: When, Why and How to Write Them."

You should consider having a prenup if you fall into any of the following categories:

You have assets such as a home, stock or retirement funds
Own all or part of a business
You may be receiving an inheritance
You have children and/or grandchildren from a previous marriage
One of you is much wealthier than the other
One of you will be supporting the other through college
You have loved ones who need to be taken care of, such as elderly parents
You have or are pursuing a degree or license in a potentially lucrative profession such as medicine
You could see a big increase in income because your business is taking off, or that garage band you play in has just gotten a contract with a big record company.

Approaching the subject
So how does one broach this touchy subject? First, do it as early as possible. The mention of a prenup shouldn't come as a surprise if you and your sweetheart have been open with each other as the relationship became serious.

Dunnan recommends couples talk it over before the engagement. "Let your intended know you believe these agreements are important and that you'd like to go over the topic."

Second, the discussion must be honest. "You have to be real candid about why you want the agreement. It's not very romantic, but you have to appreciate what the other party's concerns are," says Michael McDonough, a Palm Beach County, Fla., lawyer who practices matrimonial and family law.

Next: "Both parties must FULLY disclose their assets."
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