You’re about to get married, and your partner has just asked you to sign a prenuptial agreement (prenup). This may cause you to question their trust in you or even make you wonder if they think the relationship will last if you haven’t married yet. Before diving into all of the thoughts that are swirling around in your mind, it's important to understand your partner's reasons for wanting a prenup. Is it due to financial disparities, concerns about pre-existing assets, or other factors? Understanding their motivations can help you find a mutually beneficial solution.
How to Tackle the Prenup Conversation
What Should I Ask My Partner About a Prenup?
The first step in having a conversation with your partner about a prenuptial agreement is to understand their motivations and concerns. It’s important to come into the conversation with understanding and openness. At the end of the conversation, the prenup may still be on the table, but you will have uncovered the underlying concerns and discussed your alternative options.
When tackling this conversation, here are a few questions you could ask your partner:
What are your primary concerns or reasons for wanting a prenup?
Are there any assets or debts you or I have that you’re considering protecting?
Are you open to negotiating or compromising on specific terms?
Are there any concerns today that signal our relationship won’t stand the strength of time?
How do you envision the prenup addressing education, child support, custody, and visitation rights of future children?
Alternative Options to a Prenup
Postnuptial Agreement: A postnuptial agreement is a contract created after marriage, addressing issues similar to those of a prenup but with different legal implications. It can be a flexible option if your relationship evolves. For example, if your employment situation changes and causes a substantial impact on your compensation or earning potential, this could be a reason for a postnuptial agreement. Were you a lawyer, doctor, or executive-level employee who changed careers or lost employment? Were you an entry-level employee when you were married, and your career skyrocketed, increasing your earning potential? Is your retirement something that you think needs protection, and are you both satisfied that your retirement accounts should be kept separate if you divorce?
A postnuptial agreement can be tailored to changing circumstances. It can also offer a way to address financial issues after marriage. Has one spouse obtained substantial debt that the other spouse did not agree to? Who should be responsible for those debts that are not jointly acquired? In addition, if you have acquired assets during your marriage, a postnuptial agreement can be established to protect those assets.
Cohabitation Agreement: If you're not married, a cohabitation agreement can outline financial responsibilities, property ownership, and other important matters. It can provide clarity and protection for both partners. What property, debts, and financial responsibility does each partner have during the relationship? A cohabitation agreement can help avoid disputes over property and finances. It can also be a valuable tool for couples considering marriage but wanting to test the waters first.
Revocable Trust: I’ve recommended a revocable trust to many clients who are married and have children from prior relationships. Yes, you can have a will, but a revocable trust decreases the likelihood of your assets going through probate. A revocable trust can protect assets and plan for inheritance, providing security without a formal prenup. Is it possible that your children may want the house or money remaining in your bank accounts?
A revocable trust can enable you to name who you want to receive your property and other assets. The good part about a revocable trust is that you can change who you designate as the beneficiary, albeit at a cost. It can also help protect your assets from creditors and potential lawsuits.
Thorough Financial Planning: Discuss your financial goals and create a comprehensive plan together. This can help alleviate concerns about asset protection and inheritance. Discussing your finances with your partner can help you both develop a clear understanding of your financial goals and strategies. Do you see children, continuing education, homeownership, or even early retirement in your future? Talk about it! It can help you make informed decisions about your finances and strengthen your relationship by fostering open communication.
See my feature in How Should Married Couples Split Finances?
Consequences of Signing a Prenup
Limited Property Rights: A prenup can limit your rights to certain property, mainly if acquired before or during the marriage. A prenup can specify how marital property (acquired during the marriage) will be divided in case of divorce. This can go beyond your main home and retirement assets. If you’ve acquired additional properties, investments, or established businesses for which you’ve had a hand in building, you may be waiving your right to the division of property. This could result in you receiving less than you might otherwise be entitled to under state law.
Reduced Spousal Support: In some cases, a prenup might limit your eligibility for spousal support in the event of a divorce. It’s important to review the prenup to determine if it establishes that you are not eligible for alimony in the case of divorce. Consider if the prenup states that there is a time period you must be married before you are eligible for spousal support. For example, if you are divorced with less than ten years of marriage, does it state that limited or no spousal support is available?
Waiving Rights: You might be waiving certain legal rights or protections you would otherwise have. A few of these rights are:
Child Support
Inheritance Rights
Business Interest
Retirement Benefits
Personal Property
Decision-Making Rights
Finances
Child-rearing
Relocation with children
The specific rights that can be waived in a prenuptial agreement can vary greatly, so it’s essential to have your agreement reviewed by an attorney.
See my feature in Self How to Begin the Process of Combining Finances
Advantages of Signing a Prenup
Signing a prenuptial agreement can offer several benefits. A prenup can provide clarity and certainty by outlining the financial rights and responsibilities of each spouse in the event of a divorce. It can also protect your assets, especially if one or both partners have significant assets or debts before entering the marriage. Additionally, a prenup can facilitate open and honest discussions about financial matters, potentially strengthening the foundation of the marriage and creating a basis for financial preferences within the relationship.
Clarity and Certainty: A prenup can clarify financial arrangements, reducing potential disputes in case of divorce. If a divorce occurs, the items within the prenuptial agreement are less likely to be contested as a contract has already been created to determine how specific items should be distributed, if at all.
Protecting Assets: It can help preserve pre-existing assets, especially if you and your partner have a significant financial disparity. Suppose you have substantial personal property or financial assets. If a divorce occurs, those items will remain yours and can eliminate the need to distribute assets you gained before marrying your current partner. For example, if you have a pension that you’ve worked over the past 15 years, and if you divorce your spouse ten years later, your pension remains yours. You won’t have to be subject to a Domestic Relations Order that distributes your future retirement asset.
Facilitating Marriage: In some cases, a prenup can be a prerequisite for marriage, particularly if there are complex financial situations involved. It can create open communication dialogue where you can discuss your finances and potential future outcomes, fostering a deeper understanding and trust between you and your partner. A prenup can reduce future financial stress and anxiety about topics that are typically not discussed until later in the relationship. When a prenup is introduced prior to marriage, the goal is to ensure that both parties are treated fairly and equitably, regardless of unforeseen circumstances. It’s not all about one partner leaving the relationship with what they entered, but ensuring that if you leave the relationship, defining what that looks like as well.
Creating a Counter-Prenup Agreement
If you're considering a prenup, you can propose a counter-agreement. Here are some potential elements to include:
Fair Division of Property: If you are concerned about premarital property gained jointly with your partner, consider negotiating a fair division of the acquired assets and their financial worth. Ensure that any property division is equitable and reflects your contributions to the relationship. Consider proposing a provision that protects your ownership of those assets.
Marital property: Specify how marital property (acquired during the marriage) will be divided in case of divorce. How will vehicles, homes (nationally and internationally), finances (debts and cash), retirement accounts, jewelry, and other assets be divided?
Spousal Support: Specify the terms of spousal support, including duration and amount. It’s important to consider state law and determine which agreement will be beneficial at the time of the agreement. This includes potential alimony, child support, and any other maintenance considerations.
Review Period: Consider a review period for the agreement, allowing for adjustments if your circumstances change. Don’t sign the agreement on the spot. Ensure that you review every component of the agreement to fully understand what you are signing and the advantages and consequences of both options. It’s okay to communicate to your partner that you want to review the agreement fully. Consider that they have consulted legal counsel and that you should be afforded the same opportunity. Which leads to my next point.
Legal Counsel: Consult a lawyer to ensure the agreement is legally sound and protects your interests.
Disclaimer: This is not legal advice. When discussing prenuptial or post-nuptial agreements, it's crucial to maintain open and honest communication while remaining open to finding a middle ground. It may be beneficial to consider seeking guidance from a qualified family law attorney who can provide insight into your legal rights and potential courses of action.
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