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The “P” Word: Should you Have a Prenup?

By Michael Callahan | September 5, 2018

Question. My fiancé and I had been dating for years, and we’ve recently gotten engaged. Everything is great, and we’re planning our wedding for next summer. I’m wondering about a prenup – should I have one? Some of friends and family are encouraging me to get one, and others dismiss it as a bad idea. I haven’t discussed it with my fiancé yet, so I really don’t know his thoughts about it either. Do you have any advice for me on how I should proceed?

Answer. First and foremost, a prenup, or more formally a prenuptial agreement, is a legal document which should be completed with the assistance of a lawyer. Furthermore, the decision on whether or not to enter into a prenuptial agreement with your partner is a highly personal decision – each individual and each couple has their own unique circumstances. Again, this decision should therefore be made with the assistance of a lawyer or other legal professional.

Prenups – Top 3 Advantages

How can a prenup help you? While there are many reasons and many different scenarios where prenuptial agreements can help, some of the most common include:

1. Protect your loved ones

Prenups can protect children, grandchildren, parents, or other dependents in the event of death or divorce. A prenuptial agreement can also help determine how each partner’s individual finances will be managed during the marriage. In particular, a prenup provides a means of documenting each spouse’s separate property (in order to protect it as separate property), and distinguishing between what is marital versus what is individual property in order to avoid court involvement on decisions of property distribution.

2. Save time and money

Divorce can be messy, costly, and time consuming. A well-drafted prenup can help provide an expedient resolution upon death or divorce. Unfortunately, when couples disagree (which is quite common at the time of relationship breakdown), divorce can cost tens or even hundreds of thousands of dollars. On the other hand, a properly drafted prenup can save significant time and thousands of dollars in legal fees.

3. Start talking about money

Creating a prenuptial agreement, or even just talking about it, fosters a healthy discussion about money. In particular, a prenup encourages couples to deal with important money discussions in a timely fashion, including conversations about a division of wealth related to investments and savings, potential spousal support payments, and debt such as student loans, lines of credit, and credit cards that have been acquired jointly. Given that money is cited as a leading cause of divorce, young couples would be well-advised to have an in-depth and meaningful discussion about finances before saying “I do.”

Prenups – Top 3 Excuses

Despite the obvious benefits, many couples still forego a prenuptial agreement. Why? Common pushback includes:

1. “It’s like planning our divorce before we even get married.”

This is perhaps the most common pushback. But ask yourself, does buying life insurance make you die faster? Does buying medical insurance make you more likely to get sick? Of course not. Similarly, a prenuptial agreement does not make you get divorced. Rather, a prenup, like an insurance policy, protects you in the event of unforeseen scenarios.

2. “My partner would be totally offended if I ask for a prenup.”

Prenuptial agreements are a difficult topic for many couples to discuss, and they can indeed temporarily drain a little romance from your relationship. One potential solution is to ask a financial advisor, legal advisor, or other professional to broach the topic, if you are uncomfortable initiating action. True, a prenup isn’t romantic. But then again, neither is taking out the garbage, paying the bills, or mowing the lawn. In short, deeming a behaviour to be “unromantic” is not a valid reason to avoid it.

3. “We don’t need a prenup because we don’t have much money.”

Although prenups are more important for couples who have significant wealth, they are by no means irrelevant to those who have smaller amounts of wealth or income. Prenuptial agreements aren’t just for millionaires, but rather, can help virtually any couple save time and money in dealing with real estate and property holdings, business interests, family inheritances, and potential spousal support claims.

Do you need a prenup?

Is a prenup right for you? Again, as everyone’s situation is unique, independent legal advice is strongly suggested. In the meantime, start by asking yourself the following:

  • Do you earn more than $100,000 a year?
  • Do you have a net worth of over $100,000?
  • Do you own a house or other real estate?
  • Do you own your own business, or are you a part owner of a business?
  • Do you wish to leave assets to beneficiaries other than your partner?

If you answered yes to one or more of these questions, it’s likely that a prenuptial agreement makes sense for you. At the very least, the discussion makes sense. In fact, even if you answered no to all of these questions, it’s still a good idea to speak with a legal professional on whether or not a prenup is right for you.

Bottom Line

As with most other conversations between romantic partners about finances and money, the conversation about a prenuptial agreement can be awkward and uncomfortable. Nonetheless, an open and honest discussion about finances can help foster a healthy relationship, and a prenup can help protect you against the unforeseen.

If you have any other questions about finances related to your relationship, or about any of our other products and services at ModernAdvisor, just ask us.

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Michael Callahan