Even the word likely elicited a strong wave of emotions and judgments in you. Unromantic? Sleezy? Not in love? Preparing for divorce? Others?
I know when I tell others I am getting a prenup, that look frequently comes over their face. That look of “I would never do that” or “Why is he getting married if he is already thinking about what would happen in divorce?”
I can empathize with their feelings. I don’t share them, but I can empathize given the media attention surrounding prenups. They usually are discussed only in the context of the ultra-wealthy and usually paint someone as a gold digger. If that’s how I knew them, I’d judge me, too.
However, I actually think prenups are romantic, practical, and a key ingredient going into some marriages.
It’s a way to put everything on the table, set clear expectations, and discuss your future.
This article is not legal advice. It’s not a “how-to” detailing the process of putting a prenup in place. It’s simply explaining my rationale, and why I think more people should consider getting a prenup. I’ll likely write an article in the future explaining the process I went through in more detail.
For now, welcome to my world of thinking around prenups. I’m going to explain what a prenup can do for you, who probably does not need a prenup, and three key reasons it’s a good idea to consider getting a prenup.
What Can a Prenup Do?
Think of a prenup as a multifunctional tool. You know, the leatherman with the bottle opener, knives, screwdriver, pliers, ruler, scissors, and more? That’s a prenup, but for your marital finances.
A prenup can outline how:
- Assets will be split in the event of a divorce
- Debts will be split in the event of a divorce
- Alimony (financial support paid to a spouse during or after divorce) should be paid (if at all) and how much
- Income will be treated during marriage (separate or marital)
Essentially, it’s an agreement about how you are going to operate the finances in your marriage. Think about your marriage as a business and prenups start to make more sense. And for those of you shaking your head thinking about your marriage as a business, stop.
You earn money using your skills or selling products. You spend money on large expenses, everyday items, and invest in your future. You can take on debt. You can build assets. You have a net worth.
Your marriage is like a business. Why not have an agreement that outlines the responsibilities of each person?
Who Should Not Get a Prenup?
First, let’s start with who probably does not need a prenup.
Prenups are not for everybody. In general, I don’t see the need for a prenup if a couple is coming to the marriage with approximately equal assets and debts, have similar earning potential, are okay with and understand how the state they reside in would split assets in the event of a divorce, or have very little money or income to pay for a prenup.
If you have equal assets and debts, there may not be a need for a prenup. If your marriage ends in a divorce, they will likely be split in a fairly equal manner. There is always the exception, such as kids from a prior marriage, or other circumstances where people with approximately equal assets and debts may benefit from a prenup.
If you have similar earning potential, alimony may not be rewarded and the asset split may be less important. Life does throw curveballs. Similar earning potential could turn into drastically different incomes ten years down the road.
If you are okay with how the state splits assets by default in a divorce, then you probably do not need a prenup. But, I find most people do not know how their state would handle a divorce. It’s a good place to start researching before going down the prenup path.
Lastly, if you don’t have very much money saved or income to pay for a prenup, you may not have the ability to get a prenup. You could live in a very inexpensive place and get it done for $500 or you could live in an expensive city and pay $5,000+. For some people, it does not make sense to pay that amount of money.
Each person’s situation is unique, which is why it usually makes sense to talk with an attorney about your circumstances and whether exploring a prenup is worthwhile.
Now that you have a better understanding of what a prenup can do and who may benefit from a prenup, let’s talk about three reasons why I find them valuable.
Reason 1: It Forces You to Talk About Money
Is it an expensive way to force you to talk about money? Absolutely!
But, sometimes we need to pay money to convince ourselves to do something. Just ask people who pay for gym memberships to help accomplish their New Year’s resolutions to get in shape. You can get in shape outside of a gym, but sometimes paying for a gym membership is enough to force yourself to go on the days you don’t want to go.
It can be challenging to say, “Let’s sit down and talk about our assets, incomes, debts, and how we see life changing over the next few decades.” Most people won’t do it. Most people won’t talk about what it would mean for their households if they quit their jobs to become an entrepreneur or become a stay-at-home dad. They won’t go through the scenarios.
A prenup can help you talk about your finances both now and in the future.
If one person had always thought about going back to school or making another big life change, going through the prenup process is a great time to discuss it. Better to set expectations before you get married than after.
Going through the process, I thought about the following questions.
- How do I see our incomes changing in the future?
- If one of us had to move to care for aging parents, how could that change our income potential and how we would support each other?
- If we got divorced, how would I want to split our assets?
- If we got divorced, how would I want to split our debts?
- Do we want alimony if we divorce? If yes, is it only after a certain number of years together or for specific reasons, such as moving for one’s career?
- How will we handle household finances? Who is paying for what? Under what circumstances will that change?
You don’t need the prenup to have those conversations, but it is a great way to open up about your finances and talk about your future together.
Reason 2: Marriage is a Legal Binding Contract
Marriage is a legally binding contract. I feel that needs repeating because very few people understand it. Marriage is a legally binding contract.
It’s a legally binding contract to share income and property acquired during the marriage, financial responsibility for a spouse in the case of a divorce, financial support for children, liability for debts, and more.
It’s not all obligations. There are estate planning benefits, health insurance perks, the right to make medical decisions, government benefits, and tax benefits. And, my chief editing officer, my fiancée, reminds me “so that I don’t sound completely dry”, that marriage has the untold benefits of having a life partner, love, and much more than the legal and tax side of things.
I can’t stress it enough – marriage is a legally binding contract.
I find it wild that it’s one of the few legally binding contracts people will enter into without consulting an attorney.
People consult attorneys for rental properties, non-compete agreements, starting a business, buying a business, intellectual property, estate planning, and the list goes on.
I’d argue marriage is probably the most important legal binding contract you will ever enter. It touches nearly every area of life and is one of the few contracts where if it does not work out, your net worth can be split in half overnight, the process can drag on for months or years, and you can come out of it emotionally wrecked.
Imagine building a business for 30 years expecting to share 100% of what you built with the love of your life only to have it fall apart and see it split in two. You now have 50% of what you thought, but your expenses did not decrease by 50%, you are exhausted from the fighting, and it took more than a year of your life.
Wouldn’t it be nice to have clearly defined how the process would take place in advance?
Despite how important of a legally binding contract it is, only about 5-10% of people get a prenup.
The article linked above was from 2003, and I couldn’t find a more recent statistic, but I would bet it’s still a relatively low number. My guess is that it is higher because it’s becoming more socially acceptable, people are getting married later, and there are more second marriages with blended families.
Although the statistics are hard to find regarding what percentage of marriages end in divorce, as of 2018, “Experts now put your chances of uncoupling at about 39% in the US.”
If you know eight couples, that means about three will likely end in divorce.
I know people don’t want to think about their own marriage possibly ending in divorce, but the odds are decent that some marriage in your life will end in divorce. Better to prepare for it while in love in case it is you.
Reason 3: Better to Decide While in Love
My last reason for why a prenup is a good idea is that it is far better to decide what a divorce will look like while in love than at the end when you may hate each other and each fight is costing you $500+ an hour in attorneys fees.
Let’s be honest – if you can’t openly, honestly, and maturely discuss how you want money to work in your marriage and how it would work if your marriage ended, you probably should not be getting married.
If you can’t figure it out now, when is a better time to figure it out?
Think back to the last person you know who got into an argument. It can be small – which toppings to get on a pizza, which ice cream flavor to buy, or which movie to see. How well did those two people get along? How was their decision-making process to come to a conclusion?
If it is like most people, it probably was not pretty, and the process left them upset.
Imagine trying to do that for everything you own, your debts, where you live, how you pay each other in the future, and dividing illiquid assets. Now, imagine doing that with someone you once loved, but don’t anymore. Imagine doing it while emotionally fried, exhausted from the ongoing negotiations, mediators, and attorneys. Imagine it consuming your life and trying to make reasonable decisions.
Better to decide while in love with a relatively small upfront investment than pay through the roof down the road for a team of professionals helping you decide how to divide your life.
Again, if you cannot agree now, while in love, how you would potentially treat your financial life during a divorce? What chance do you have to do it well later under worse circumstances?
You may not be the roughly 4 in 10 who get divorced, but if you are, wouldn’t an outline of how that process looks be helpful in advance?
People don’t plan to die, but they buy life insurance.
People don’t plan on their homes getting damaged, but they buy home insurance.
People don’t plan on crashing their cars, but they buy auto insurance.
You can plan on not getting divorced but still get a prenup.
Summary – Final Thoughts
I dislike that prenups have a negative connotation. I believe it should have a positive connotation.
Nobody looks at people funny when they buy insurance, plan a trip in advance, or make backup plans.
It’s a normal part of life to prepare in advance, even if something has a low probability of happening.
A prenup is nothing more than planning your financial life and what happens if your marriage ends in divorce.
It can be romantic if you allow it to be. It can lead to really productive and positive conversations if you go into it openly. More than anything, it can make the divorce process much smoother if you’ve already agreed on a framework of how it should go.
Prenups are an excellent way to get you to talk about your financial life before marriage, more fully understand the legally binding contract you are entering, and agree on the most equitable way to split things while still in love.