Before the Bells: Prenup Protection

I’m roughly halfway through my summer 2023 “wedding tour,” and I always enjoy seeing my friends’ countless hours of planning become a reality. I’ve been to black-tie weddings, as well as those a bit more casual. Some couples hire bands to perform, while others opt for DJs. There is one area of pre-wedding planning that’s often not publicized (nor as fun to celebrate, I’ll admit) but could play a crucial role in a couple’s future: prenuptial agreements.

Do I need a prenup?

Here are three scenarios where executing a prenuptial agreement may make sense:

1. If one or both spouses are expected to receive a large inheritance. Note that inheritance laws come into play here as well and will vary by state. In these cases, prior generations have likely executed trusts to provide additional layers of protection, but don’t assume it.
   
2. There may be a “monied” and a “non-monied” spouse in the relationship. For example, one spouse may be worth $5,000,000 when they marry, while the other may be worth $500,000.
3. One spouse owns a business that may not be worth much today but has the potential to grow significantly and result in a windfall at a later date. Another option in this scenario is a postnuptial agreement, which the couple could execute if they come into significant wealth during their marriage.  

That being said, a prenup might not be critical in every relationship. If there’s no significant family wealth, and you’re marrying someone who is in a similar financial situation as you, a prenup may just cause disagreements, unnecessary headaches and harsh feelings. Couples in that situation may be better served by building a life together without a prenup and, in the event of a divorce, could look to divide assets evenly.

How do I convince my significant other to sign a prenup?

To many people, it’s quite easy to understand why there may be hesitation prior to signing a prenup—or even the urge to avoid the discussion of one altogether. It’s often a conversation that removes romance from marriage and could make it feel more like a business transaction. Instead, I think about prenuptial agreements as another form of insurance. As advisors, we recommend appropriate amounts of life, disability, property & casualty and umbrella insurance to protect our clients against various risks and undesirable outcomes. We’d be remiss if we didn’t discuss prenups as another form of protection, especially knowing what today’s divorce rates are.

In many cases, the parents are the ones who require their soon-to-be-married children to put a prenup in place. For the spouse marrying into a given family, this might be disappointing, but from our experience they should  to understand that satisfying their future spouse’s parents may be important to their personal and financial relationship. I also believe that strong, open communication prior to meeting with the lawyers is valuable. If you can hash out what conditions you want in the prenup, it may make the process smoother and much less contentious. 

Keep in mind that prenups set the minimum bar in terms of what an ex-spouse receives. If the divorce is amicable, the monied spouse has the right to give more than what’s spelled out in the legal agreement. For those who believe “time will tell,” you can build in sunset clauses or nullify a prenup down the line. Nothing is guaranteed to be truly permanent in life, including marriage and prenups.

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