To Prenup or Not-To-Prenup

Marriage is a legal union.  It’s a loving partnership, but also a type of business relationship.  Through marriage, partners gain financial rights and the power to make healthcare decisions for one another.  The decision to get a prenuptial agreement is something many couples consider.  A prenuptial agreement is an agreement between two people regarding the financial separation in the event of a divorce.  Prenuptial agreements are not intended to be “taken personal.” 

They don't cause divorce.  It doesn't mean that if someone asks you for one that he/she doesn't love you or is not fully committed to you.  The prenup isn't going to keep you from a fully loving and committed marriage.  They don't mean that one partner is already preparing to get a divorce.  They don't make the process of a divorce so much easier that you work less hard to keep your marriage.  They simply make for a cheaper more financially expedited divorce if you need one in the future.  

I am an advocate of marriage and an advocate of divorce.  I think people should terminate a hopeless relationship of any kind.  And, it’s a fact that most people turn into terrible versions of themselves during a divorce if they are hurt or don’t really want the divorce.  This agreement can help to assure that things stay fair.  Prenuptial agreements should be considerate of both parties and can actually be a great first financial activity together.  However, they need to be done right to be fair and equitable for both parties. 

Make Sure:

  • Both partners actively collaborate in the creation of the prenuptial agreement.  It can't be one sided...drawn up by one and presented to another.  Both parties need to sit down and talk through each asset/debt and concession made. 
  • Have a mediator to assist with understanding and to keep things positively focused. 
  • Have separate lawyers to ensure things are fair.  I would also suggest that the wealthier partner requesting the prenup pay for the other’s lawyer.
  • Consider a "sunset clause."  A sunset clause provides for the termination of the prenuptial agreement after a predetermined date (e.g., 20 years).  This may be a useful concession if you are approaching someone that is very against prenuptial agreements.   
  • Also, make sure to include a minimum (100% or 80%) asset distribution requirement.  This is a minimum estate distribution if a spouse dies during the marriage.  Without this, if one dies while the marriage is ongoing the other spouse has no spousal rights to inherit. There are generally no-contest clauses to prenups, so the living spouse loses either way.

Reasons to consider a prenuptial agreement:

  1. Community Property State:  California and Texas are both community property states.  This means that, without a prenuptial agreement, all assets and debts are split equally regardless of reason for divorce.
  2. Disparity in Wealth:  Any assets prior to the union are the sole property of that partner unless a concession is made.  It’s parasitic to take what’s not fairly yours through marriage or any other way.
  3. Impending inheritance:  If one partner is expected to inherit substantial assets in the future a prenuptial agreement can make sure that those assets stay with the inheritor. 
  4. Significant Debt:  Assets and debts are divided during a divorce.  If your partner has a lot of debt you won’t be responsible for it if your marriage ends.
  5. Disparity in Income and/or Stay at Home Parent:  Alimony is a reality.  It is financially supporting your ex-spouse generally until they die or remarry.  If you make a significant amount more than your spouse and have been married for the requisite period of time for that state, a prenuptial agreement can limit the amount payable for alimony. 
  6. Children From a Prior Union:  A prenuptial agreement can help protect assets and distribute them fairly to all your children.  It can protect them in your divorce and in the event of your death during your marriage.
  7. Business Owner:  If one partner owns a business prior to the marriage and there is no prenuptial agreement, the other partner could end up owning part of it after the divorce.  This would mean that you would have to buy them out or keep them as a partner and they would get a say in your business ventures.  A prenuptial agreement can ensure that this business is not divided.

So, if you're sure that you want a prenuptial agreement or even considering it, you need to talk about it.  I suggest you talk about it during the same discussion you have about "do you want children and if so how many."  If you can, talk about it even earlier than that.  Perhaps  mention it within the first several dates along with the other serious topics broached at that time.  This will help your partner decide if they would be amenable to the possibility. 

The Do's:

  1. Discuss the financial aspect of a marriage.  This should include handling savings, investments, retirement, and spending.  Debts and assets should also be discussed.
  2. Establish a dialogue and accept it may take a while before resolution.  Explain why it’s important and how you suggest going about it.  Explore the advantages and disadvantages for both parties. 
  3. Both parties should try to see the other's perspective.  The one who wants it should understand that they are asking their partner to forfeit their marital rights.  It's a big deal when you forfeit any rights, so have some compassion and understanding.  The one who has been asked, but is unsure or doesn't necessarily want one... try to remember that your partner is the same person as before he/she asked.  And, if you were their close friend, would you advise them to get one or not and why.  
  4. Both parties should be willing to make concessions. 
  5. The prenuptial agreement should be a joint-creation.  Strive for equity on the behalf of each partner. Decide the terms together.
  6. Make the prenuptial agreement fluid over time.  

The Don'ts:

  1. Do not expect an answer immediately.  Pressing for one will only make your partner defensive.  Let them think about it.  This communicates respect.   
  2. Do not tell your partner that “everyone” you know thinks it’s wise to get one.  This is a bullying tactic that will only make your partner more defensive and unwilling to consider it.
  3. Do not give your partner an ultimatum.  Approach it as a team.  It’s your first bonding experience on a financial matter.  Be sensitive of their perspective.  Try to consider their feelings and viewpoint.  This should be a conversation.
  4. Do not have someone else introduce the topic to your partner.  This is disrespectful.
  5. Do not have the prenuptial agreement drawn up and then spring it on them. 
  6. Do not seek a prenuptial agreement if you think, even in part, that the agreement ensures your partner is marrying you for you and not your assets. 
  7.  Also…. if the wealthier partner’s parents are overly focused on their child’s prenuptial agreement this could unnecessarily introduce discontent into their child’s union.  This is especially true if those parents make personal attacks and swear their child’s partner is only marrying their child for their assets.  Great care should be taken if you are the wealthier partner and these are your parents.  You may yourself believe in prenuptial agreements, but this parental influence “makes it personal.”   Establish boundaries and expectations with your parents and pursue the prenup.

For many people…talking about prenuptial agreements is stressful whether you want them or you don’t want them.  Best to do it in an open, honest, and loving fashion.  

by Delicia Mclean, Ph.D. MHA