We sometimes hear that people don’t believe prenups are effective because they can get thrown out or “always favor the richer person.” But the reality of the matter is that prenups are effective (if done right and with good legal assistance). Making sure that the state requirements are followed when creating a prenup (i.e., following your state laws regarding prenup creation) and negotiating the prenup to a level that both spouses feel comfortable with can result in a VERY effective prenup that does more than just protect your money.
Are prenups effective… and if so, how?
Yes, prenups are effective as long as they are done correctly (i.e., valid and enforceable) and negotiated in a way that you are comfortable with. Let’s dive into just a few of the ways prenups are effective.
Prenups protect assets and income
The most glaring benefit of a prenup is the ability to protect your assets in a way that is comfortable for you (and for your partner). Assets may include real estate, accounts, investments, artwork, crypto, etc. Income may include salary, bonuses, commissions, royalties, etc.
You can protect assets and income in many ways with a prenup:
- through property division (keeping certain assets separate),
- through waiving alimony (making sure you don’t have to pay alimony in a divorce),
- through protecting yourself against your partner’s debt,
- making sure inheritances stay separate, and more.
All of these different things add up to making sure your money stays intact.
Prenups align goals and expectations
A lesser-known advantage of prenups is aligning goals and expectations between the spouses. The process of getting a prenup facilitates in-depth communication on certain issues, including how the spouses will spend money during the marriage (expenses, budgets, joint bank accounts, etc.), how they will split up their assets, the marital roles (e.g., will one person stay home with the children), and more. This in-depth communication results in goal alignment and expectation setting for both partners. For example, both spouses know that they either do (or do not) want a joint bank account and for one of the spouses to stay home with the children eventually (or not). By the end of the prenup process, both spouses are ready to start their marriage on the same page.
Prenups help maintain predictability in case of divorce
Let’s face it–nearly 50% of marriages end in divorce. If you’re getting married, you have to face the reality of that possibility, no matter how happy you are. With that said, getting a prenup allows you to rest assured in some certainty should you fall on the wrong side of that 50% one day. In other words, your prenup dictates many of the divorce issues that you would otherwise leave up to fate (and the law).
Prenups help avoid long, stressful, and expensive divorce
Another advantage of a prenup is the way it can streamline the divorce process. Again, many issues (property division, alimony, debt) are already pre-determined for you in your prenup, so there is no need to “argue” over these issues with lawyers and in court… it’s already decided. This saves you time, money, and stress at a typically chaotic and difficult time in your life.
When are prenups not effective?
Nothing in life is 100% perfect, and prenups are no exception. Prenups have downfalls, too.
One way a prenup is not effective is if it’s thrown out in court. Now, before you go running for the hills, just know that it takes certain things to happen before a prenup can be thrown out (there’s rhyme and reason to it, it’s not just a free for all). Not only does the prenup have to be invalid and enforceable for some legal reason laid out by your state, but your partner also has to actually challenge it and take it up to a court to question its enforceability (which is quite expensive to do).
Most prenups are settled outside of court because of the sheer expense and time-suck of asking a court to decide. Now, with that said, if you get a prenup done with legal help (such as through a lawyer or a state-compliant platform like HelloPrenup), your odds of getting a prenup thrown out may be reduced because you likely followed the requirements to make sure the prenup is enforceable. The bottom line? If you follow your state requirements on the validity and enforceability of prenups, then your chances of getting a prenup thrown out are likely reduced. But that’s not to say it’s still not a possibility.
Prenups are not effective in handling child matters; this includes not being able to add child custody and child support clauses in your prenup. Why? Because children are individuals with specific needs and desires that change over time. Allowing two parents to decide on the custody and support of their children, possibly YEARS before the child is even born may not be what is actually in the child’s best interest at the time of the divorce. Nearly all states are in agreement on this, but there are few states, like New York, that will allow prenups to include child matters in certain, narrowly defined cases.
Prenups are also not effective if you don’t negotiate them to your liking. For example, if you let your partner “steamroll” you into agreeing to every single term that THEY want, you’re not going to have an “effective” prenup for YOUR purposes. But it sure will be effective for your partner! For example, let’s say Nancy is engaged to successful CEO John. Nancy wants to make it clear that she’s “not in it for the money,” so she waives her right to nearly everything in the prenup (despite feeling a little uneasy about this). Fast forward a few years, and John cheats on Nancy, and they file for divorce. Nancy now may not be so happy with her decision to waive all of her rights, and the prenup may not be as “effective” in her perspective because she did not negotiate it to a degree she felt comfortable with.
Who are prenups most effective for?
We’ve said it once, and we’ll say it again: prenups can be useful for nearly anyone. However, there may be some people that would benefit more so from a prenup than others. Let’s dive into who those people might be:
Yes, that’s right, the homemaker is someone who can significantly benefit from a prenup. How? Well, they can ensure that they are supported in the event of a divorce since they have likely forfeited their career to clean, cook, and care for the kids. This can be done by ensuring alimony stays an option, adding in a lump sum/equalization clause, dividing assets in a certain way, allowing the stay-at-home parent to remain in the marital home, and more.
Of course, the tried and true trope for a prenup is the high net-worth person (think celebs, CEOs, doctors, trust fund babies, politicians, etc.). One of the main purposes of a prenup is to protect assets, and for someone with a lot of assets, getting a prenup is crucial. But don’t be fooled: just because the high net-worth individual is protected doesn’t mean that the lesser-earning spouse can’t also be simultaneously protected in other ways.
Someone who owns a business and wants to protect the value of their business (or future businesses) is a great candidate for a prenup for multiple reasons. Of course, protecting the business itself and its value, but also for confidentiality purposes and making sure business trade secrets and financials stay private, even in a divorce.
People getting married to partners in debt
If your partner (or you) has a significant amount of debt (think: student loan debt, credit card debt, business debt, etc.), then a prenup can be an efficient way to protect the other partner from absorbing the debt that isn’t theirs. Making sure premarital debt and marital debt stays separate from the person who actually borrowed it is one great way to utilize a prenup.
People who are not earning money now but will in the future
Let’s say you don’t have any money now. Do you think you’ll make money in the future? Maybe you’re not Jeff Bezos, but you could climb the corporate ladder and make a nice chunk of change down the road. Prenups can protect FUTURE assets, income, and debt.
People with inheritances
No, inheritances are not automatically protected in a divorce. Yes, if you expect to receive an inheritance one day, a prenup can help protect it in a divorce and make sure your family money STAYS in the family.
People with children from other relationships
If you have kids from another partner and you’re now entering into a marriage with a new partner, a prenup can be an effective way to protect your kids’ financial support and/or inheritance. If this isn’t your first rodeo, you know that in a divorce (without a prenup), you can end up forfeiting money to your spouse. That money you end up paying or splitting with your future ex-spouse could be money used to either support your kids or provide an inheritance for them in the future.
People with pets
This is a lesser-known reason to get a prenup, but no less effective! Prenups can provide for “pet custody” clauses and even “pet visitation” clauses in which you can ensure your pets remain in your custody or you lay out a visitation plan for your pets in the event of a divorce.
The Bottom Line
At the end of the day, a prenup is an excellent tool that nearly anyone can find an “effective” use for. Whether you’re a high-net-worth person or a stay-at-home parent with few assets, a prenup can benefit you. It’s important to make sure you are following your state’s requirements on prenup validity and enforceability to make sure your prenup is not thrown out. With a little legal help and some negotiations/discussions with your spouse, you’re well on your way to an effective prenup.
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: [email protected]