The Beatles sung that “all you need is love, love, love is all you need” but to make a marriage work you need more than love. You need trust, communication, and financial disclosure. Many a marriage has fallen apart when one spouse was a saver and the other one a spender. As unromantic as it sounds, before you tie the knot talk about your finances. Find out how your partner feels about the money, and talk about how much you each have and how much you each owe.
Prenuptial agreements are not just for the rich and famous. “Normal” people now realize that a prenup is simply an agreement between two people that deals with the financial consequences should their marriage end. Since statistically many marriages do end up failing, it makes sense to plan for that eventuality. There is nothing wrong with being prepared. True, prenup is not necessary for everyone. A young couple entering a first marriage with very few assets and debts may skip this expense. Prenups are not cheap, but neither are contested divorces when there are disputed assets. As such, prenup has a potential to save a substantial amount of money in legal fees in the event of such a divorce.
So who should get a prenup? In my opinion, getting a prenup is advisable when:
You are significantly wealthier than your soon-to-be-spouse. A one-sided money situation can foster jealousy and discontent. A prenuptial agreement can ensure that your partner is marrying you for love, and not for the love of your money.
You are much poorer than your soon-to-be-spouse. Just as a prenuptial agreement can be used to protect a richer spouse against a gold-digger, a prenup can also be used to protect the interest of the poorer spouse. No one wants to end up getting replaced with a younger spouse with nothing to show for the 30 years of marriage, particularly when one spouse was a household caretaker, and the other spouse was earning big-bucks.
You plan to quit your job to take care of the household. Again, no one wants to end up getting replaced with a younger spouse with nothing to show for the 30 years of marriage… Quitting your job will negatively impact your income and your wealth. A prenuptial agreement can ensure that your interests are protected.
You earn much more than your soon-to-be-spouse. A prenuptial agreement can be used in many states to limit the alimony.
You have children from other relationships. If you have children from a previous relationship, you may have support obligations. A prenuptial agreement can ensure that all your children’s’ interests are protected.
Your partner has a high debt. If you are marrying someone with a significant debt, and you don’t want to be responsible for any of that debt if your marriage ends, then a prenuptial agreement can help protect you.
You are going to support your spouse while he/she is pursuing a degree. That is very noble of you, but that $100,000 loan can easily outlive your marriage.
You own a business. Without a prenuptial agreement, when your marriage ends, your spouse could go after a share of your business. A prenup can ensure that your ex-spouse does not become your new partner.
To strengthen your estate plan. A prenuptial agreement can ensure that your estate plan works, and that a specific property will end up with your chosen beneficiaries, and not your ex-spouse.
You are significantly older than your soon-to-be-spouse. If you end up getting a divorce, and your assets are split 50-50, you may not have enough time to recover financially to ensure a secure retirement.