Do I Need a Prenuptial Agreement?

Biracial heterosexual couple talking to financial advisor at home

When making your wedding checklist – food, guest list, seating chart, music – a prenuptial agreement isn’t likely top of mind (or even on your mind at all). 

Prenuptial agreements have the stigma of being unromantic and lacking trust or faith in a relationship’s longevity. But when constructed mindfully, they honor, value, and protect each partner’s financial future –  and what could be more loving and respectful than that?

What is a prenuptial agreement and should you consider one before tying the knot?

A Prenuptial Agreement

A prenuptial agreement, or more popularly known as a prenup, is a legal document that outlines the division of assets and liabilities in the event of a divorce or death.

For many couples, engaging in this process helps lay all financial cards face-up on the table. Both parties should be acutely aware of the other’s financial situation before entering into a contract as significant as marriage, and a prenup can provide that clarity. 

Financial conflict is cited time and again as a leading cause of arguments, separation, and divorce. Couples who calmly discuss and legally divide their assets ahead of time can avoid future disagreements.

A prenup gives couples the space to openly and authentically talk about their financial goals, attitudes, outlooks, habits, and debts before marriage – conversations pivotal for a healthy financial future. 

Planning for a Divorce? 

Since there’s a lot of misunderstanding around what these agreements mean, let’s talk about what a prenup isn’t:

  • It isn’t a precursor for divorce.
  • It isn’t reserved for ultra-wealthy couples.
  • It isn’t used to outline child support or custody arrangements.

Some people feel spending time on a prenup is planning for the divorce instead of planning for the wedding. But for many couples, it’s a way to protect existing assets, inheritances for children, and other meaningful financial arrangements.

Prenups aren’t just for rich celebrities or high-profile business owners. Anyone who owns assets they want to thoughtfully protect can consider a prenup. Think about it like this: without a prenuptial agreement, your state of residence determines the division of your assets. This is similar to how the courts decide the best way to divide your assets without a proper estate plan. A prenup returns the control back to you and your partner. 

While a prenup can’t provide child support details like custody arrangements, it can outline spousal support.

What else can it do? A prenup can:

  • Protect the pre-marriage assets of both partners.
  • Outline how to split their home.
  • Find equitable ways to divide marital property/assets and debts.
  • Create a plan for spousal support.
  • Set financial expectations before marriage.

Prenups safeguard you and your partner’s financial future. Should the marriage not work out, this document could save you a lot of time, money, and frustration while navigating other elements of the divorce settlement.

Why Couples Get Prenuptial Agreements

While prenups aren’t right for every situation, more couples benefit from them than you might think. The last few years have seen a spike in couples signing them – 62% according to the American Academy of Matrimonial Lawyers.

But why consider a prenup? Here are some common (and compelling) reasons why it could be the right path for you.

One or Both of You Have Children

Prenups can be incredibly beneficial to estate and inheritance planning for couples with children, especially from previous marriages or partnerships. The document can help keep certain assets separate such as a living will or trust, and avoid conflicts over asset division upon a parent’s death.

In this case, it can act as another financial planning tool, spelling out your legal wishes for your estate. Estate planning is never easy, but it’s often streamlined when your wishes are outlined in legally-binding ways.

One or Both Partners are Business Owners/Entrepreneurs 

Business funds can suffer in a divorce. If you’re in business with other people, their shares can also be impacted. A prenup can protect your business assets and provide control over managing the business now and in the future. 

It can outline what interest (if any) a spouse has in the company. As business litigations in divorce proceedings can be costly and time-consuming, a prenup is often a wise move in this case.

One Partner has Significantly More Debt

Once you’re married, your partner’s debts become your debts as well – unless you have a prenup. Without it, creditors can target joint marital assets to cover debt costs. How can you protect yourself here? Your prenup might state that debts can’t be paid with joint property, whether it’s credit card, student loan, or business debt.

Post-divorce debt can also significantly impact your credit score, hampering your ability to get a mortgage or other loans. 

One Person Makes Much More Money

This doesn’t mean all couples with bank account discrepancies should get a prenup, yet if one partner marries with significantly more wealth, a prenup is an avenue to protect it. 

One or Both Partners Have Been Married Before

A prenup might be more important to couples who have been married before. That lived experience could prompt them to approach their finances from a new lens. 

One or Both Spouses has an Inheritance to Protect

Generational wealth is a common reason for inciting a prenuptial agreement. It’s often very important to people that their family money remains within the family and is protected in the event of divorce. A sizable inheritance can be viewed as non-marital property, especially if it’s kept out of joint accounts and accompanied by a prenup. 

One Partner is a Stay-at-Home Parent

Prenups can safeguard stay-at-home spouses. In the event of divorce, that spouse should be properly compensated and treated fairly in the settlement process. 

How to Get a Prenuptial Agreement

Prenups are relatively simple to get. You can download templates online or have your attorney draw up the paperwork. 

While templated versions do exist, it’s a good idea for each partner to have their attorney review the document before signing. That way, both parties can ensure their interests are accurately represented. 

The cost varies depending on the complexity of your financial situation. It could be as little as $1,000 and as high as $10,000 or more. The more complex the case, the more expensive it will be due to billing hours and negotiations. 

Prenups Aren’t Right for Every Couple

It’s important to understand that prenuptial agreements can bring up different emotions in different people. When considering such an agreement, be respectful of your future spouse’s feelings, reactions, and thoughts. Have open and honest conversations about what a prenup means to both of you to decide if it’s in the best interests of your marriage. 

Prenup or Not, Open Communication is Critical

Prenups don’t have to be an omen for marital discord, but they also aren’t the only way to find financial honesty and transparency before marriage. 

Engaged couples should talk about how their finances will evolve after marriage; perhaps those conversations will lead to a prenup and perhaps they won’t, but it’s the mutual exploration that’s valuable. 

Be sure to talk about the following:

Financial planning for couples presents unique opportunities and challenges. Engaged couples should be cognizant of how their finances will merge and progress after marriage. 

How can you better understand your finances as a couple and is a prenuptial agreement right for your relationship? Set up a time to talk with an Abacus advisor today. 

Share:

Share on facebook
Share on twitter
Share on linkedin

What’s your financial archetype?

Simplify your life with a plan

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.