The Pros and Cons of a Prenuptial Agreement
In the process of getting married and committing to a lifelong relationship with your partner, you face an interesting predicament: whether or not to get a prenuptial agreement. Ideally, you would like to believe that you will never get divorced or need a prenuptial agreement. A prenuptial agreement may seem unnecessarily formal and can ruin the romance of marriage. However, a prenuptial agreement is also a practical way to protect both you and your future spouse. In some cases, a prenuptial agreement can even strengthen your relationship.
Having an honest, open, and strong discussion about a prenuptial agreement with your future spouse is very important. The goal is to make sure you both agree to the terms of the agreement and that you are both on the same page. No matter what the future holds, you want your marriage to be founded on trust and mutual respect.
Pros
Pro # 1: Prenuptial agreements can also protect those with less money.
Even those who have little or no money can benefit from prenups, contrary to popular belief. It's true. Despite having no money at all, a prenup can still be beneficial to you. How is that possible? A prenup can make sure the financially disadvantaged spouse receives benefits from the other spouse, such as alimony (spousal support), specified equitable distribution payments or asset allocation, possession of the primary residence during and after divorce, and life insurance death benefits.
Pro # 2: Prenuptial agreements can outline obligations during the marriage.
It is extremely helpful to have a prenuptial agreement that outlines certain obligations during a marriage. It's a common misconception that prenups only cover divorce. However, they may also cover marriage as well as if the marriage ends. Will you and your partner have a joint bank account, for example? If so, you can specify the expenses and contributions to the joint account in your prenuptial agreement. An important aspect of financial planning is that it gets written down in a contract, making it more concrete.
What amount will each of you deposit into the joint account each month? How will the account be used to pay for expenses? Things like these must be negotiated and agreed upon. By having this conversation before the wedding, you can create alignment with your partner and set expectations.
Pro # 3: Future assets can be protected through prenuptial agreements.
It is often believed that prenuptial agreements aren't beneficial to those without assets...yet. At 25, you might be engaged. You are just beginning your career, paying off debt, and don't have many assets accumulated. That's perfectly normal! But you know what? There will be assets one day, whether they come from an inheritance, a retirement account, a savings account, real estate, or something else. With a prenuptial agreement, you can protect assets that don't yet exist!
Pro # 4: Children can be protected by prenuptial agreements.
Listen up if you have kids from another relationship. It's not just you who can benefit from a prenup. If your kids are minors or fully grown adults living on their own, a prenuptial agreement can ensure their financial security. Suppose you have minor children from a previous marriage. In the absence of a prenuptial agreement, you may face a 50/50 split of your assets (or worse, 40/60, 30/70, depending on your state and situation). When you lose assets, you have less money to give to your children. Conversely, if your children are older and no longer need your support, a prenuptial agreement can still protect their future inheritance.
Pro # 5: Prenuptial agreement facilitates in-depth communication and life planning, which strengthens relationships.
A prenuptial agreement promotes self-reflection, setting goals, having difficult conversations, matching expectations, and aligning lives. Getting a prenup requires you to agree on a lot of things, such as a joint bank account (or no joint bank account), property division, and alimony. The process may require you to conduct introspection and discussions with your partner on a level you have never done before. (Money, death, divorce, you name it!) These are tough and sometimes uncomfortable topics.
It's not just about agreeing on everything; you're also required to disclose your finances, which means both spouses have to be on the same page. The process of financial disclosure involves outlining everything about your finances, from loans to real estate. Taking shortcuts is not an option.
Cons
Con # 1: The prenup process can be uncomfortable.
Death, finances, and divorce aren't the most comfortable topics to discuss with your future spouse, but they are necessary. You don't want to do it, but you know you will feel better afterward. Almost like cleaning baseboards and ovens. While it's annoying and uncomfortable, you'll be glad you did it. Having an uncomfortable conversation with your partner will give you a deeper understanding of them and a better alignment with life.
Con # 2: Getting a prenup can lead to judgment from others.
The media and Hollywood have historically portrayed prenuptial agreements negatively. Today, prenuptial agreements are much more common, accepted, and encouraged. However, they used to be a shameful thing that only "untrusting spouses" got. Some people (probably Gen X or Boomers) may still hold onto those old stigmas about prenups. Your Boomer grandparent or Gen X uncle may refer to your prenuptial agreement as a "shame on you.". They may even talk behind your back about it. In either case, you may receive unwanted commentary regarding prenups.
Con # 3: In rare cases, prenuptial agreements can be thrown out by a court.
A prenuptial agreement may be invalidated if it is executed improperly or if it contains unconscionable provisions. A court will not enforce an invalid prenuptial agreement. For issues like property division and alimony, the court will use the default state divorce laws. These state divorce laws are usually overridden by prenuptial agreements, so if your prenup is thrown out, you're back where you started. If you have to follow the default state divorce rules, it is not the end of the world; you may just not like the outcome as much as you would with a prenuptial agreement.
Do the pros of a prenup outweigh the cons?
A prenuptial agreement generally has more benefits than drawbacks. The main advantage of a prenuptial agreement is that it allows spouses to discuss finances openly and make plans for the future together. Often, couples worry that discussing divorce with their future spouse will be awkward or even harmful to their relationship. However, many experts believe that openly discussing difficult topics like finances and separation can strengthen a marriage over time. Healthy relationships are built on communication.
By creating and signing a prenuptial agreement, spouses can save time and money in the future. Divorce is stressful, and making important financial decisions during that time is the last thing you want to do. Having a thorough prenup means that most of your decisions are already taken care of. As a result, spouses have more control over their assets during the divorce process, so they don't have to rely on a judge to divide assets and debts. Indeed, a prenuptial agreement can sometimes favor one spouse over the other. However, there are ways to make sure your prenup will benefit both spouses. If you want to maximize the benefits of your prenuptial agreement, you should hire a lawyer who can assist you and your future spouse. Having an excellent lawyer ensures that the agreement is viable and beneficial for both parties.
Is a prenuptial agreement something you're considering creating with your future spouse? Consider speaking with a family law attorney who can guide you both through the legal process. My highly experienced law firm is on your side! Contact me today for an initial consultation. Since these situations may be stressful for my clients, I strive to provide them with the best service and guidance possible. If you are reading this and have questions about divorce, don't go it alone. Call my office to schedule a free 20-minute call with me to discuss your divorce case.
The contents of this blog entry are provided for informational purposes only. You should consult with an attorney to determine how the law applies to the facts of your particular case. Reading this blog entry does not create an attorney-client relationship with Kelly McGriff.