It's completely normal to feel like bringing up a legal contract might dampen the romance of your engagement. However, if you're getting married in your 30s or later, you're likely bringing a history of hard work, assets, and perhaps some debt into the relationship. Viewing this process as a way to establish total financial honesty can actually strengthen the trust in your partnership rather than diminish it.
What is a prenup?
A prenuptial agreement is simply a contract that dictates how you'll divide assets and debts in the event of separation, death, or divorce. While we never want to imagine a marriage ending, having this clarity is a helpful safety net.
At one time, these agreements were reserved for the extremely wealthy. Famously, Jeff Bezos and his now ex-wife MacKenzie didn't have one, which led to a very public settlement. However, that perception is changing. A Harris poll reported that 15% of all newlyweds now have their own prenuptial agreement.
This legal step is particularly helpful if you fit into one of these categories:
- High-net-worth individuals
- Spouses with significant debt
- Spouses entering a second or third marriage with separate property
- Owners of a business established before the marriage
It can also protect against issues regarding inheritances or alimony payments. Essentially, it helps you sustain individual financial control and balance power dynamics.
What goes into the agreement?
The short version is that almost anything financially-based can be included. However, there's a major exception: you strictly can't include child-related issues such as custody or child support.
There's no standard template because every couple has a unique financial roadmap. In general, your agreement can cover:
- Pre-marital property and debts
- Spousal support or waiving the right to alimony
- Daily financial responsibilities like household expenses
- Business ownership and earnings
- Disposition of property like primary and secondary homes
- Retirement accounts
State laws matter
While all 50 states recognize prenups, local laws can limit them. For example, some states have a sunset provision law. This means the prenup phases out or ends after a certain period of time or a specific life event, such as the birth of a child. Additionally, a court may decide an agreement is invalid if it blatantly favors one partner's interests over the other's.
The pros and cons
Because a prenup has significant financial and emotional consequences, you should discuss it long before you step into an attorney's office. It helps to look at both sides.
The benefits
- You can divide assets according to your specific preferences rather than state default laws.
- You can agree on asset division in a calm setting before emotions run high.
- It protects one spouse from the other's pre-marital debts.
- It can define protection for pets, heirlooms, and collections.
- It can provide compensation if a spouse engages in harmful behaviors like gambling or drug use.
The drawbacks
- The conversation may cause discomfort or hurt feelings.
- It may cause friction with extended family.
- Partners may have unequal commitments to the process or different desires regarding why it's necessary.
Remember that this document is a safety net. It doesn't mean you don't believe in the marriage. In fact, some couples feel it strengthens their bond because it removes ulterior financial motives. A therapist can often help couples work through the emotional side of these practical decisions.
How to prepare a prenup
Since this is a legally binding contract, it's imperative to have an experienced attorney prepare yours. In fact, for the contract to hold up, each person must retain their own lawyer to advise them. Using the same lawyer is considered a conflict of interest.
To be legally binding, the agreement must meet these requirements:
- It must be written, not oral.
- It must be signed voluntarily.
- Both parties must fully disclose assets before signing; hidden assets discovered later can render the agreement invalid.
- It must be fair; many states won't honor an agreement that leaves everything to one spouse and nothing to the other.
- Signatures must be witnessed and signed by a notary public.
Also, remember that prenuptial agreements can be revised later. Couples can even prepare a similar document called a postnuptial agreement after they're already married.
How much does it cost?
The price tag varies greatly depending on where you live and how complex your finances are. According to ContractsCounsel's marketplace data, a prenup costs an average of $690.00 in the US. However, if you live in or near a big city, you can expect to pay much more. Costs can go as high as $10,000 in states like California and New York.
Alternatives to consider
A prenup might not always be necessary to protect your interests. An attorney or financial professional can help you explore other options, such as:
- Keeping pre-marital property as sole and separate assets rather than jointly owned.
- Creating separate trusts.
- Purchasing life insurance with children or dependents as beneficiaries.
- Preparing estate documents that leave assets to someone besides the spouse.
Even if you do sign a prenup, you should consult an estate planning attorney to ensure your prenup doesn't conflict with your estate desires. If the documents treat assets differently, you need to explicitly state which one takes precedence.
Sunset provisions
You can also include a sunset provision where portions of the agreement no longer apply after a certain time. For example, some couples agree the prenup ends after 20 years, or when they accumulate a certain amount of money.
The Facet difference
At Facet, we believe that your financial life is about more than just protecting assets; it's about using your money to live the life you want. Our membership-based service includes a team of CFP® professionals who look at your overall financial picture. We charge a flat fee, so our advice is objective and focused on your best interests.
Whether you're merging finances for the first time or protecting complex assets, we help you build a financial roadmap that aligns with your values. We act as your knowledgeable guide, helping you make informed choices that build a strong foundation for your future together.
