Reasons to Get a Prenuptial Agreement and Common Myths Debunked

A prenuptial agreement (a/k/a “prenup” or “antenuptial agreement”) is an agreement between two people that generally addresses the resultant financial consequences of the end of their marriage. Without a “prenuptial agreement” the parties are left with the sometimes uncertain and always stressful “divorce law.” Divorce law standing alone leaves the parties with little direct and unilateral control of their lives, financial and otherwise, leaving the ultimate decisions the parties will have to live with, possibly forever, in the sometimes unsteady hands of the government. Some situations in particular lend themselves to a strong consideration of entering into a prenuptial agreement.

A prenuptial agreement is particularly important in the instances below:

• One of the parties is remarrying. In the case of a second or third marriage, that party’s legal and financial concerns are typically much different than in a first marriage. There may be children from a prior marriage, support obligations, and assets, including a home or other significant assets, may now be owned. Pre-planning by way of an antenuptial agreement can ensure that when the parties to the agreement pass away, the assets are distributed according to their wishes and that neither the first or second family, nor your new family, are cut off unintentionally.
• One of the parties earns much more than the other. In this case, a prenuptial agreement can be used in many states to limit the amount of alimony that is payable or, likewise, to guaranty a minimum amount will be paid.
• One of the parties is much wealthier than the other. In this case, a prenuptial agreement can ensure that the non-wealthy partner is marrying for all the right reasons.
• One of the parties owns part of a business. In this case, if the marriage ends without a prenuptial agreement, the non-owning spouse could end up directly owning a share of the business. Obviously it’s likely the business partners would not want this to happen. A prenup can ensure that the non-owner spouse does not become an unwanted partner in the business.
• One spouse is much poorer than the other spouse. In this case, and like a prenup can be used to protect a spouse who is well off, a prenuptial agreement can likewise be used to make certain that the partner who is less financially sound is provided for upon a termination of the marriage.
• One of the parties has a high debt load. In this case, if either party is marrying someone with a significant debt load, and doesn’t want to be responsible for these debts if the marriage ends, then a prenuptial agreement can help ensure that this does not happen.
• To prevent one spouse from overturning the estate plan of the other spouse. In this case, a prenup can ensure that the estate plan works, and, by way of example, will make certain that a family heirloom remains in the family.
• If one spouse plans to quit his or her job to raise the children. In this case, quitting a job will certainly negatively impact the income and wealth of that party. A prenup can provide that the financial burden of raising the children shall be shared equally and fairly by both parties.

For all of the above situations it is highly recommended that a prenuptial agreement be strongly considered. Notwithstanding the obvious utility of entering into such an agreement, there are many myths that dissuade individuals from doing so. Some of those myths are detailed, and debunked, below:

• Prenuptial agreements are only good for men. Not true. Prenups are a good way to set expectations for the relationship. Certainty oftentimes eliminates fear which, as we know, often drives actions and decisions that have a negative impact on situations. Prenups are not generally biased in either partner’s favor but, instead, simply spell out the parties’ rights with respect to certain delineated financial aspects of the marriage. For instance, a woman may insist that if she is going to forego her career for the overall and agreed upon benefit of the marriage that her prenuptial agreement include provisions to compensate her for this interruption in her career through spousal support or a lump sum payment or payment for her marital interest in a business at some specified percentage or agreed upon calculation.
• Prenuptial agreements have a purpose and are useful only if the marital relationship falls apart. Not true. Prenuptial agreements can be used for estate planning purposes. Specifically, without a prenuptial agreement, a spouse may be able to invalidate carefully thought out estate plans. Prenups can be particularly helpful where children from a previous marriage are involved or where there are historical or family artifacts that a party may want to keep in the family.
• Prenuptial agreements are only for wealthy individuals. Not true. Prenuptial agreements are for ordinary people. In light of high legal fees, the stress involved in divorce proceedings, the frequency of divorce, and the increased financial sophistication and independence of individuals, a prenuptial agreement can benefit most anyone.
• Prenuptial agreements are cold and callus. Not true. Although potentially a difficult conversation, being able to sit down and discuss familial future financial plans and expectations for the relationship will inevitably create a solid foundation for the relationship.
• Prenuptial agreements are unenforceable. Not true. Typically, so long as there is no coercion or duress by one of the parties, prenuptial agreements are valid and enforceable just as any other contractual agreement would be.
• Prenuptial agreements are expensive. Not true. On a relative basis and compared to the cost of an average wedding or an average divorce, prenuptial agreements are very reasonable. In light of all the foregoing, there seems little reason not to consider entering into a prenuptial agreement. The reasons are many and the myths unfounded.