All About Prenuptial Agreements: Frequently Asked Questions
There are so many questions to consider regarding prenuptial agreements and whether one would be right for your situation. It can be a potentially sensitive topic, as each person has their connotations about prenuptial agreements. To make it easier for you and to provide some guidance, I’ve compiled a list of frequently asked questions about prenuptial agreements that I’ve received from clients over the years. Although not an exhaustive list, I hope that these will serve as a starting point to guide you and provide insight on whether a prenuptial agreement is right for you.
Why might someone want a prenuptial agreement?
The main reason someone may want a prenuptial agreement is to provide them with financial security, whether they are the partner with more or fewer assets. The partner with more pre-marital assets likely wants to protect them and avoid or limit the amount to pay for spousal support should the marriage end. The partner with fewer pre-marital assets likely wants to ensure that the pot of “marital assets” will grow during the marriage and will be equally divided should the marriage end. They will also want to know that they will be able to seek spousal support under certain circumstances.
Many people don’t want a court battle—another reason someone may want a prenup would be to limit what there will be to fight over should the marriage end. I’ve had many millennial clients tell me they simply don’t want their parents’ divorce. They saw how much their parents fought about finances or how unequal their parents’ post-divorce lifestyles were from one another, and they don’t want that for themselves or their own children.
What are the benefits of a prenup?
There are a variety of benefits to a prenup. The benefits are providing financial security, limiting litigation, and providing the opportunity for a couple to have difficult conversations about money and expectations for their marriage when the relationship is most likely at a very strong point. Talking about these issues when you’re feeling so much love for each other is much easier than at a later point when the marriage may be in trouble.
Why should you get a prenup?
If it’s important to you to protect the assets you bring into a marriage, you should get a prenup. This will help you know what you can and cannot do with those assets during the marriage. It’s easy for money you earn during the marriage to get mixed up and commingled with pre-marital assets and many people want to be able to use assets from before the marriage to buy a home or another valuable asset that will benefit their spouse and family. It’s difficult to know what you may be entitled to without a prenup. It could be hard to decipher what you each have as a credit for the contributions you made with your separate property. There is a lot of litigation around those issues.
Another reason to get a prenup would be if you want your divorce to be as non-adversarial as possible. Most people don’t want to relive—or have your children experience—a contentious divorce that your own parents may have had. Having a prenup can help avoid these situations and save you or your children from unnecessary emotional turmoil.
You should also consider a prenup if you expect that one spouse may give up his or her career to be a primary caretaker of your children. Stepping out of the workforce for even a few years can cause a significant setback for the stay-at-home parent. This can impact their future earning capacity and make potential re-entrance into the workforce difficult. A prenup can address how that parent will or will not be supported should the marriage end.
Is there any reason you should NOT get a prenup?
Individuals have different concepts and views on prenuptial agreements. I recently had a client spend months negotiating a prenuptial agreement with her fiancé. In the end, she decided not to pursue it because of her fiancé’s reaction. Despite being financially secure in his own right, he felt disrespected by my client wanting a prenup to protect her assets that were greater than his. She realized a prenup wasn’t worth the emotional strain it would cause to her relationship. Instead, we had an in-depth discussion about what she should and shouldn’t do with her assets during the marriage to ensure that they were protected should there be a divorce. Each couple should weigh the pros and cons, but prenups are not for everyone.
Do you need a prenup even if you’re not “rich?”
Even if you’re not “rich” now, you could become so in the future. If there is a large difference in your and your spouse’s earning potentials, then you could end up paying much more in spousal support than you would feel is fair. It’s better to discuss these issues now so that your spouse can make appropriate career decisions during the marriage that reflect your agreement should the marriage end. I’ve known many clients who, at the end of a 20 to 30 year marriage, say they never would have given up their careers to be stay-at-home parents had they known how relatively little support they would be entitled to.
A prenup will also limit the chance that you will end up in litigation as a result of your divorce. Litigated divorces cost a lot of money—tens of thousands or even hundreds of thousands of dollars. Should you become financially successful during your marriage, you could end up spending a good chunk of it fighting with your soon-to-be ex.
What does a prenup protect?
A prenup protects pre-marital assets and defines how both pre-marital debt and marital debt will be handled. It serves other purposes as well, though. It protects a party’s right to spousal support or protects a spouse from having to pay spousal support. It protects against nasty litigation if you divorce. It provides peace of mind during the marriage because each spouse knows what their rights and obligations are.
All marriages end, whether by divorce or death. So, a prenup can also protect estate rights should one spouse die.
What does a prenup NOT protect?
A prenup cannot protect your rights to child support or child custody if the children aren’t yet born when the prenup is signed.
Additionally, a prenup may not protect you if you don’t get proper legal advice or if you enter into it too quickly and do not give your partner adequate time to carefully consider the terms. You should take the time necessary to seek legal advice and thoroughly review a prenup beforehand.
Deciding on whether a prenuptial agreement is right for your situation can be a sensitive topic for many couples and an uncomfortable topic to discuss when starting your future as a married couple. If you have additional questions on prenuptial agreements, contact us today.