A Brief Guide to Prenups

Reasons To Get a Prenup

In any situation where another person is involved, it’s a good idea to have guardrails and guidelines. Here’s how a prenup can benefit both of you:

• Avoiding expensive courtroom drama. If a divorce occurs, there's no hiding it will be a painful process – so why add a logistical and costly nightmare into the mix? The average cost of a divorce proceeding without a prenup is around $15,000 to $20,000 per person, and the more you’re worth, the more that can rise. Prenups can at least make that process go more quickly and save you money in the long run.
• Maintaining business ownership. Business owners work hard, and that effort shouldn’t be jeopardized by the dissolution of a relationship – plus, if your company employs or partners with other people you respect, you have a responsibility not to negatively impact their livelihoods while you rearrange your personal life. In addition to keeping the company or practice in your hands, you may want to keep control of any intellectual property as well; not all valuable assets are physical. It also leaves you in control of your business interests and what you do with the company in the future.
• Protecting family property. You may have property, heirlooms, or family wealth that you want to ensure stays within the family you came from before marrying. Without a prenup, you can't guarantee cherished or familial assets are kept separate. 
• Separating debt. People bring debt into a marriage as often as they bring a couch you might secretly dislike. Unfortunately, divorce can impact your credit rating even when things go smoothly, but taking on responsibility for your ex-spouse’s debt can be potentially devastating. Substantial student loan debt alone can be reason enough to consider a prenup.
• Distributing assets. Regardless of the state you get married in, without a prenup you are beholden to local laws that dictate your decisions and choices. In states with community property laws, assets are typically divided into as equal a split as possible, and in states with equitable distribution laws, they are divided in a manner considered fair when taking factors into account like each spouse’s contribution during marriage and needs post-marriage. Either way, these decisions will ultimately be made by others, potentially without you being able to influence the outcome. Prenups short-circuit this problem long before such a contentious scenario arises.
• Protecting children. A lot of marriages begin with prior children as part of the deal. A prenup can be used to ensure that your children will still inherit your property, no matter what else happens. Without one, divorcing can mean inadvertently removing what you intended on passing to them. A prenup can stipulate distribution of property, assets and even life insurance benefits upon the death of one of the partners in a marriage, making it worth considering for practical reasons in the healthiest and longest-lasting of relationships.
• Supporting healthy communication. Prenuptial contracts can clarify each person’s motivations entering a marriage, which leaves more room for a healthy relationship. Protecting your partner is romantic, including protecting them from your debt! The truth is a marriage takes an incredible amount of work to keep thriving: If you can’t talk about money now, how are you going to discuss all the other tough topics your union will need to tackle?

Best Strategies for a Prenup

Prenups are a precautionary measure that hopefully won’t be necessary, but that doesn’t mean you shouldn’t take it seriously. When implementing a prenup, consider the following:

• Make it legal. There have been plenty of high-profile divorces that languished over poor documentation like verbal agreements or notes on a napkin. The most enforceable prenups are ones completed with a real lawyer, not informal records or through online services.
• Get your own lawyer. You are about to join your lives together, hopefully forever. But before that, it’s important to advocate for yourself and your interests should the worst occur. Whether the prenup was your idea or your soon-to-be-spouse’s, hire your own attorney who will exclusively focus on your best interests. Don’t just agree to a prenup written by your partner and their lawyer, and don’t ask your partner to sign one done up by just you and yours. The entire point of a prenup is to enter a marriage in a state of balance.
• Focus on finances and assets. Avoid nonfinancial and informal demands, as courts tend not to enforce these things. Some prenups have made headlines by having strange or amusing stipulations, which further fosters them being a silly exercise, but a powerful prenup is ironclad and focused more on an amicable separation and a good outcome for all parties involved.
• Avoid surprises. These agreements provide an opportunity to lay all cards on the table, so both of you know exactly what you’re getting into. Don’t try to hide anything: if your spouse can show that you omitted key financial disclosures, your prenup risks being voided. Similarly, don’t spring a contract on someone at the last minute. Courts have often found that agreements signed right before the actual wedding presents undue pressure on one of the parties. In general, a prenup should be completed and signed a few months prior to the wedding, ideally before any event deposits have been placed.
• Communication is key. It may be helpful to think of a prenup as the first major marital agreement of the many to come; it’s excellent practice in how to communicate about challenging and important things. Take your time to think it through and make sure you’ve considered and properly discussed everything. Negotiating with your fiancé about a prenup may be about the comfort of knowing you’ll each be taken care of financially, but it’s important to take care of each other emotionally in the process. When successful, this moment can develop mutual understanding and support. Make time for you both to express concerns and desires in layman language and make space to be open and curious as opposed to defensive or reactive. The goal of this process is to have a prenup signed with the relationship strengthened as opposed to strained. Starting the conversation early means that you can both get used to the idea without feeling pressured.

Trusts Can Serve as an Alternative

Prenuptial agreements are not a fight about money – they’re a vaccination against such rows. Just the same, if the reputation that accompanies prenuptial agreements feels too pessimistic ahead of your big day, you might consider a trust.

Trusts can serve as effective alternatives because they hold assets outside of your marital estate. While both partners must agree to a prenup, a person on their own can create a trust. Some people feel very strongly that family wealth should be passed down generationally and not through marriage, and that inheritance and funds should bypass a spouse directly to children – trusts are a way to ensure that.