Prenuptial agreements (prenups) are legally binding contracts where couples predetermine how assets and debt will be divided if there’s a divorce in the future. Prenups are becoming more common (47% of Millennials say they had one, according to Axios), and that’s not surprising! If you think about it, would you enter a business partnership without having an agreement in place outlining the expectations of the merger? Absolutely not!
Marriage is not business, but it is a partnership where you and your love will merge lives “til death do us part.” The importance of having essential financial conversations and getting on the same page before marriage cannot be overstated.
What are the benefits of a prenup?
There is a tremendous peace of mind that comes from having a prenuptial agreement. The talks leading into signing a prenup invite the kind of open and honest conversations most couples fail to have before marriage. These conversations help you and your fiancé gain a deeper understanding of each other’s mindset regarding money and can clarify the expectations, fears, and excitement you each feel about the inevitable ups and downs in sharing a life together.
Also, when you consider the timing, making decisions now about how property and debt could be divided in the future is significantly easier and cheaper than negotiating these issues during a divorce, when things might be contentious. Divorces can last months to years and can be financially devastating. Legal fees rack up with every minute, and couples often spend a lot of the money they’re fighting over on legal fees and court costs.
The most obvious benefit to having a prenup is that if there is a divorce in the future, you and your spouse will split assets and debts according to your wishes and not based on state law and the opinions of whichever judge presides over your case. Prenups, if valid and enforceable, supersede state laws.
Signs you might need a prenup
Let’s discuss some of the signs you might want to consider getting a prenuptial agreement, from closing the wealth gap to stay-at-home parent needs, there are plenty of reasons why prenups can benefit you.
There’s a wealth gap between you and your partner
If you are entering the marriage with substantially more money than your fiancé, you might want to consider a prenup! Without this agreement in place, your personal wealth could be divided in the future. Along with predetermining how property will be distributed in a divorce, you should also consider including an alimony provision (i.e., “Spousal support” or “spousal maintenance”). An alimony clause will dictate how much financial support you give your partner (or none at all if you’re waiving it) during and after a divorce.
If you’re marrying someone who has more financial assets than you, know that prenups aren’t only for the wealthy! A prenup can protect you by ensuring that, even if they hire the most expensive and most effective lawyers during a divorce, your alimony is already set in stone in your prenup. You can decide now that they will pay you a certain amount each month after a divorce for a predetermined amount of time.
You or your fiancé has children from a previous relationship
A prenup can help ensure the financial well-being and inheritance rights of children from previous relationships. We’ve all heard nightmare stories about families fighting with a parent’s new spouse or ex-spouse over family money. Prenups can prevent all the drama and protect your loved ones from financial strain.
You or your fiancé has significant debt
Whether it’s money owed on student loans, business deals, or real estate, you should protect yourself from your partner’s debts and protect your partner from your debt. In a divorce, courts don’t only distribute assets, they also distribute debt. This could be a scary proposition if you’re about to enter into a marriage with someone who has unpaid obligations!
Even if you’re blissfully debt-free, pay attention to your partner’s spending habits, gambling addictions, or propensity to be dishonest with money. Bad financial habits could end up draining you financially. Prenups can classify all debt incurred before or during marriage as the responsibility of the party who incurred that debt.
You own or have equity in a business
Without a prenup protecting your present and future business interests, your ex-spouse could end up with your shares, acquire voting rights, and could become an unwanted partner with influence over your company. Your business and business partners could suffer great financial harm, and you might end up having to pay an ex-spouse a lot of money to buy them out of the interest they receive in the divorce.
You will receive an inheritance
If you’re fortunate enough to have an inheritance in your future, that money could be at risk in a divorce. When a potential inheritance is involved, it’s not uncommon for the family members who spent generations earning and saving that money (i.e., parents or grandparents) to encourage you to sign a prenup before saying “I do.” A prenup can prevent an inheritance from being included in a divorce settlement. Sometimes family tensions stem from distrust or resentment regarding a family’s finances. An added benefit of a prenup is that it diffuses this anxiety by taking the financial and emotional risks out of the picture, leaving room for real relationships to form.
You or your fiancé intends to leave the workplace and be a stay-at-home parent
A prenup lets couples predetermine how to compensate a spouse who forgoes their career to stay home and raise the children. In this scenario, the non-working spouse gives up an income, career advancement, continued contributions to retirement accounts, and risks a long and potentially harmful gap in a resume to be present with the kids and save money on childcare costs. A prenup can make sure this spouse is compensated for their time and sacrifices which can lead to easier decision-making and reduced resentment in the future.
In conclusion
If you recognized yourself in any of the scenarios above, you should consult a family law attorney with experience in drafting prenups. An attorney can help make sure your prenup accomplishes your goals and abides by state requirements. A prenup encourages you and your fiancé to have important conversations about finances and expectations while providing peace of mind throughout your marriage. Prenups can protect your assets, business, and inheritance, and can prevent unwarranted debt obligations and familial conflicts. Get on the same page with your partner now and then get back to planning your beautiful wedding!
Jourdan Stewart is Legal Operations Attorney at HelloPrenup, and a Texas licensed attorney. Jourdan is experienced in drafting prenuptial agreements, and her legal expertise extends to other aspects of family law, business law and entertainment law. Jourdan earned her law degree from Pepperdine University, her MBA from The Acton School of Business, and her BBA from Baylor University. Jourdan’s favorite aspect of legal practice is helping clients fully understand and achieve their goals. She finds great satisfaction in tailoring solutions to each client’s unique set of wants and needs. When she’s not practicing law, Jourdan can be found in nature with her two children and their dog, Stewey.
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