The prenup process isn’t as grueling as one may think. In fact, with HelloPrenup, you can get the whole thing done and dusted within an hour and a half! However, there are some things you should know about the prenup process, including the in-depth discussions you’ll be having, the importance of financial disclosure, discussing how to manage finances during the marriage, and much more. Keep reading to learn more about the prenup process.
Having in-depth discussions about hard-hitting topics
First and foremost, you can expect in-depth conversations about money, divorce, death, family, children, goals, roles, expectations, and much more. Prenups don’t only plan out what happens in case of divorce; they also plan out financial obligations during the marriage as well. This can help the two of you align on questions like:
- Will we have a joint bank account?
- How much will each contribute each month?
- What will our spending habits look like?
- Will one of us stay home with the children?
- And many more.
The prenup process fosters deep communication about those sometimes-tough topics. The end result? Alignment. You two should be able to come to terms with your life and financial goals, roles, and expectations of each other. This is an excellent way to strengthen your relationship and really get the marriage started off on the right foot.
Along the same vein of open communication and the in-depth conversation comes disclosing finances. And we’re not just talking about some of your finances… we’re talking about every last drop. If you withhold even one bank account, you could risk throwing out your entire prenup. Financial disclosure requires full and fair disclosure and 100% honesty throughout the whole process.
How does financial disclosure work? You two will include a snapshot of all of your finances on a financial schedule which will eventually be attached to the back of your prenup.
This is crucial to the prenup process because it gives each partner a full picture of their spouse’s finances. Without fully understanding your partner’s finances, how can you make financial decisions?
Determining what to do with assets and debt
The crux of most prenups is the division of assets and debt. What happens to your STUFF? This may include houses, cars, bank accounts, retirement funds, rental properties, artwork, crypto, NFTs, beanie babies, etc., etc. Basically, anything with economic value needs to be included in your financial schedule (as discussed above) and then assigned ownership. Is it yours, mine, or ours?
Generally, the way to do this is to define separate property and marital/community property. What is deemed separate property is generally yours and yours alone (not subject to division upon divorce). What is deemed marital/community property is subject to division upon divorce and may be divided up between you two. So, to get the brain juices flowing, start thinking about whether or not you want to keep the following separate property or not:
- Gifts and inheritances
- Earned income (salary, bonuses, commission, etc.)
- Appreciation on separate property (i.e., your separate property house gains $100,000 in value, is that $100,000 in increased value separate or joint property?)
- Pre-marital debt (any debt that you incurred prior to the marriage)
- Debt accrued during the marriage
Determining if alimony is an option (or not)
Will you or won’t you… keep alimony on the table? As a refresher, alimony, also known as spousal support or maintenance, is financial support paid from one ex-spouse to another. Each state has its own formula on how calculating the amount and duration of alimony. Alimony can carry on for a short period of time or a long period of time; it really depends on your state’s divorce law and your case. Now, the question becomes will you waive alimony in your prenup or not? This is a conversation you need to have with your boo about whether or not to keep alimony as an option or remove it altogether.
Outlining financial obligations during the marriage
One way to ensure you both are on the same page is to discuss financial obligations during the marriage. For example, will you two have a joint bank account at all? If so, then you two need to have a conversation about how expenses will be paid from that account and how you each will contribute. It’s important to discuss this because if you do get divorced, this joint account will usually be considered joint property and be split up. Oftentimes, a prenup that includes a joint bank account clause will stipulate that you two must come to terms on how much each will contribute and what expenses will be paid from the account. And if you don’t hold up your end of the bargain, you will not have a claim against your spouse. Confused? Okay, let’s break it down with an example.
Let’s say Patrick and Claire plan to have a joint bank account. They write into their prenup the following:
- They will have a joint bank account,
- This bank account is considered marital/community (i.e., joint) property subject to division in a divorce,
- They’ve come to a private agreement on expenses and contributions, and
- They further agree that neither of them can argue that the other didn’t contribute enough–the bank account will be considered joint property regardless of contribution.
They agree that they both must deposit $3,000 per month, and only the mortgage, car loans, and utilities should be paid from this account. Great. The marriage goes swimmingly…for a few years! Both Patrick and Claire are depositing their money and spending it as they agreed. A couple more years down the line, Patrick loses his job and doesn’t contribute to the account for months on end. Financial problems lead Claire and Patrick to a divorce. At the time of the divorce, the bank account had $30,000 in it and is set to be divided between them in the divorce, even though Claire clearly contributed much more than Patrick. Remember, they agreed in their prenup that neither could argue that the other didn’t contribute enough–it’s marital property regardless.
Moral of the story? It’s important to plan out how expenses and contributions shall be made into this joint bank account and revisit this frequently! Don’t just talk about it once at the time you make the prenup and forget about it. Maybe have an annual meeting with financials and reevaluate. Things change, and that’s okay, but you and your spouse need to constantly pivot and stay on the same page. Otherwise, the bank account may become one-sided but still be split between two.
Debating different miscellaneous clauses
Outside of the “bread and butter” of the prenup, which is asset division, debt allocation, and alimony, there are other additional clauses you can add (or not add), depending on your wants and needs. This is something you’ll need to think about and discuss with your partner. Here are some clauses you may include in your prenup:
- Lump sum clause (will one of you pay the other upon divorce a lump sum payment?)
- Confidentiality clause (do you want to require your spouse to keep certain information private?)
- Non-compete clause (great if you are a business owner)
- Social image clause (restricting your spouse from posting “bad” content about you on social media)
- Sunset clause (basically an expiration date for your prenup)
- Infidelity clause (no-cheating clause, but keep in mind this may only be enforceable in some states)
- Health insurance clause (what will you do about health insurance if you divorce?)
- Life insurance (will you require each other to maintain life insurance with each other as the beneficiary during the marriage?)
- Pet clause (who gets to keep Fluffy?)
- And more.
With HelloPrenup, all of the options are on the table for you to modify to make your own or completely leave out (if that’s what you want). If there is a clause you don’t like, you can simply skip it and not include it in your prenup. Simple as that!
Healthy negotiation is necessary to create a fair prenup. Why? Because if you just agree to everything your partner wants without negotiating, then you may not have a fair prenup. Remember, a prenup is legally required to be reasonably fair; it can’t be extremely one-sided; otherwise, it is at risk of being thrown out entirely by a judge. (On the flip side, prenups are not required to be 50/50, it just can’t be overly one-sided/unfair).
In the negotiation phase, you and your partner will discuss any discrepancies in your desired outcomes for the prenup. For example, let’s say one person wants to waive alimony and the other person does not. This is something the two of you need to hash out, negotiate, and come to a decision on. Maybe that means one of you will need to compromise on another topic. Regardless, compromise is a great way to help move the negotiations along.
With HelloPrenup, the negotiation phase is really clear and detailed for easy review and change. After both parties answer all of the questions in the questionnaire, the negotiation section will show you any discrepancies between your answers. You can walk through each discrepancy one by one and discuss how you want to come to terms on the topic. If you need some time to talk it out, you can always come back in a few hours or days; the platform will be there waiting for you!
The very last part of the process is simple. Notarize and sign the agreement. Some states require you to have one or two witnesses, as well. Let’s take a deeper dive into what that means. First off, notarization is the process in which a notary public verifies and authenticates the prenup. How it works is the notary public will quite literally watch you sign the prenup after verifying your identity. This can help avoid any fraud and verify that the parties are who they say they are. Nowadays, you can get notarization done from your living room! With companies like NotaryLive and Notarize.com, you can have a notary public notarize your prenup via video chat. If you require witnesses to the prenup, then they should also be included in the notary process, as well.
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]