Girl, You Need A Prenup
Prenuptial agreements (aka prenups) are not just for the rich and famous. As more women, establish their careers, purchase homes, and start to build wealth--all before marriage--they have become popular among millenials too. Before your bae puts a ring on it, you both should talk about your finances. Strongly consider a prenup if either of you have kids from a previous marriage, significant debt, or a lot saved in savings and retirement accounts. Writing a prenup is a personal decision, and they are not meant for every couple.
What is a Prenup?
A prenup is a legally binding agreement that defines financial rights and responsibilities during a marriage. Although some famous couples’ prenups have also included required date nights and payments for having a baby, prenups should be limited to financial matters.
Discussing a prenup before marriage ensures you and your future spouse are on the same page financially. The agreement also helps reduce conflicts in the future, in the event divorce.
Do you need a Prenup?
To decide if you need a prenup ask yourself the questions below:
Do you have children from a previous marriage?
Do you have $50,000 or more saved for retirement?
Do you have over $50,000 in assets (think property, stock, cash)?
Do you have your own business or a family business you may inherit?
Do you own a home?
Do you or your partner plan to go back to school?
If you answered ‘yes’ to any of these questions, you need a prenup.
If you have children from a previous marriage, use a prenup to protect what you’ve saved for your kids. A prenup could safeguard your children’s inheritance from a divorce settlement and ensure your kids inherit their share if you died. However, a prenup doesn’t replace the need for you to write a will. Prenups can also protect you from your partner’s credit card, student loan, or other personal debt. Normally, any debt you have before marriage is yours to pay off and keep. On the other hand, debt accumulated in marriage could be both parties’ responsibility. This includes student loan debt your spouse incurs by going back to school. So if one of you plans to go back to school while the other works full time, your prenup could state the person in school is fully responsible for paying off the student loans in the event of divorce. It’s best to figure this out before any class or loan is taken.
By law a prenup cannot include issues that your state requires a judge or court settlement to define. For example, you cannot include child support amounts for future children or custody terms in a prenup. But you could include who gets to keep the dog if you split or an infidelity clause, to discourage your spouse from being unfaithful. A prenup goes into effect on your wedding day and is in effect indefinitely unless you decide to limit it to a specific time period. You could say your prenup is only valid the first five or fifteen years of marriage and then agree to equal division of assets if you divorce after that time frame. Setting a specific time frame for your prenup is completely up to you.
Ready to Have the Talk?
Depending on your partner there may never be a perfect time to talk prenup. Yet, it’s best to start the conversation well before you’re engaged. It’s important to talk about your finances and financial expectations throughout your relationship. Before you iron out details of what you each want, set some conversation ground rules. For example, agree to be honest and open minded. Talking about a prenup does not mean you are preparing for your marriage to fail. It just means you are thinking things through while you are both of a loving mind and happy heart. For some couples you need to have the money talk early in your relationship. This is especially true if you are considering moving in together, purchasing a home together, or planning to co-own a bank account.
If you agree a prenup is right for you sit down together and list all of your assets (what you own) and liabilities (what you owe). Don’t leave anything out because omission of information could make a judge determine your prenup is invalid. Make sure to discuss important issues--such as leaving your parents or kids from a previous relationship a portion of your wealth. That way there are no fights about these issues later. You could also include your goals. For example, if you want to start a business and plan to use only your money to do it, then maybe your prenup should limit the proceeds of this business to the both of you while married, but then only you if you divorce. Finances tends to be a major cause for couples to divorce and it helps to get what you both want or don’t want to happen on paper before the potential turmoil of divorce proceedings.
Already married? Get a Postnup.
If you are already married, all is not lost. You can set up a postnup, which is also a relationship agreement. It’s just set up after you are married. Visit an attorney to figure out the best terms for your agreement and what rules apply in your state. As your life changes revisit your prenup or postnup agreement to make updates. If you sell property or other assets you should update the agreement accordingly.
