Jessica Simpson recently gave an interview to CNBC discussing the overwhelming financial success of her fashion line, a company that some have valued at upwards of $1 billion. Besides focusing on the highpoints of her career, the singer/businesswoman also mentioned what she considered her biggest financial mistake:not having a prenup for her first marriage (to Nick Lachey).
Experts say that Simpson and Lachey chose not to sign a prenup, with Simpson's father advising against it, given that at the time, Lachey was the wealthier party. In only a few years, the situation had reversed and at the time of the divorce, Simpson was believed to be worth around $35 million while Lachey was worth only $5 million. The decision not the sign the prenuptial agreement cost Simpson dearly, something she says she now wishes she could take back.
If you want to avoid similar mistakes and are considering drafting one, it's important to understand what prenuptial agreements can and cannot do. First, prenups are great for resolving the financial aspects of a divorce. They can be used to detail what property each party is bringing into the marriage and how property will be divided during a divorce. If there are certain premarital items, like artwork or antiques, that you want to ensure you end up walking away with, a prenup can help you accomplish that. Prenups can also be a good way to care for children from a previous marriage, making clear that they will receive money in the event of your death during the course of the marriage.
While it's true that prenuptial agreements can do a lot, they can't do everything. For instance, prenups cannot be used to decide issues of child custody or child support. No matter how much you may want to have these issues settled in advance, courts will strike down these provisions if they appear in a prenuptial agreement and give them no weight in a future divorce proceeding. Provisions that waive a person's right to alimony are also frequently struck down. Finally, any provisions that involve creating rules for personal behavior rather than financial matters are likely to be tossed out by a judge. That means stipulations about how children will be raised, about how chores will be allocated, or how much time you'll spend with in-laws will almost always be thrown out by a judge.
Source: “Why did Jessica Simpson say her marriage to Nick Lachey was her ‘biggest money mistake'?,” by Emily Yahr, published at WashingtonPost.com.