Should You Get a Prenup? Here's When We Vote Yes
While wedding planning, you may ask yourself: Should I get a prenup? While every couple's situation is unique, a sturdy prenup will benefit and protect both parties in the event a marriage ends. For example, certain parties will enter a relationship entitled to multiple assets, while others may face a sizeable debt from grad school (or an unsightly shopping habit). Plus, Boomers are transferring their wealth and assets over to Millennials and Gen Z over the next few decades, prompting further questions about who's-entitled-to-what in the event of a separation. A prenup prevents the uncertainty that may accompany an emotional divorce; in fact, this legally-binding agreement provides clarity from day one of marriage.
Indeed, parents are requesting their children sign prenups before the wedding, though it remains–for many–a conversation that's hard to broach. Thankfully, the stigma once associated with prenuptial agreements is diminishing over time. Rather than leaving critical decisions up to a judge, working through the conversation of should I get a prenup will give both you and your partner the clarity you need to align on decisions for the future.
"The act of discussing and negotiating a prenup gives engaged couples a platform with which to open up in-depth communication about important topics they may not have touched on before," says family lawyer Julia Rodgers, CEO of HelloPrenup. "Many couples find that through the process of negotiating a prenup, they learn about one another's needs, boundaries, and life goals. This structured inquiry into planning the future of their relationship leads both partners to a deeper understanding of one another." If you're asking the question of should I get a prenup, we've laid out several scenarios that may speak to you.
One of you is wealthier or has assets that are expected to appreciate.
You may want to protect your assets if you come into the marriage with a higher financial worth than your spouse. An example, says Rodgers, is seen through an engaged couple in their early 30s. "Lisa purchased a condo a year before she met John. Since she and John have been dating, he moved in and now pays 'rent' to Lisa. Lisa wants to make sure that even after they are married, her condo remains hers, and hers alone. She wants to protect both her initial investment of the down payment, as well as any appreciation that may accrue on the condo during their marriage, even while John is living there," she explains. "In their prenup, Lisa can list the condo as her separate property, and specify that any appreciation on the condo, as well as her initial investment, should remain hers and hers alone. If the condo gets sold in the future, the proceeds will be Lisa's separate property. If the proceeds from the sale get rolled into a joint marital home that Lisa and John buy together, her prenup can specify that the funds from the sale of her condo should remain her separate property, and not become marital (or community) property. Why does this matter? Depending on what state the couple lives in and the length of the marriage, the condo that Lisa bought could become marital property and subject to division in a divorce. A prenup allows the couple to prevent this scenario."
One or both of you receives sizable gifts from loved ones.
Let's say your parents, or Lisa's parents, generously and regularly bestow monetary gifts. "They plan to continue doing so after Lisa and John are married. John is excited because he could really use that money for a Caribbean vacation," says Rodgers. "Lisa thinks those monetary gifts should be considered her separate property, and not marital or community property. Lisa and John can decide how monetary gifts should be considered in their marriage, and are free to choose whether those monetary gifts should remain Lisa's separate property or become marital or community property. Why does this matter? Without a prenuptial agreement, in most states, monetary gifts received during the marriage will be considered marital, or community property. A prenup allows couples to decide if they would like those monetary gifts to be considered separate property."
One or both of you will receive an inheritance.
Division of inheritance is one of the biggest and most common issues Millennial couples will face in marriage as their Boomer parents divide assets and the transfer of wealth is imminent. "Lisa's parents plan to pass down a significant inheritance to her in the future. Lisa's parents are excited to welcome John into their family, but ask Lisa and John to consider a prenuptial agreement to protect any inheritance they pass down to her in the future," says Rodgers. "Lisa and John agree that any inheritance from either of their parents should be considered the property of the spouse from whose family the inheritance came from. This arrangement of categorizing inheritance as separate property can be contracted to in a prenuptial agreement. This is becoming more common as an unprecedented generational wealth transfer is beginning to occur between baby boomers and their millennial children… Why does this matter? Without a prenuptial agreement, inheritance may or may not be considered marital property. In certain states, inheritance is automatically excluded from the marital estate… Many parents who are considering passing down their wealth to their children, either in trusts or other instruments, are concerned about the prospect of their hard-earned wealth being split during a divorce."
At least one of you has been married before.
Some circumstances may be different than they were in the first marriage. If you're bringing certain assets into a new marriage, like child support and multiple properties, you may want to ensure they don't get tangled in any other finances.
At least one of you has children.
Let's say one party has kids from a previous marriage. A prenup can establish what should be left to your children when estate planning, and also make sure that previous and current family members have a financial plan in the case of death. Wills are still necessary, but prenups can establish intent from both parties, experts say.
One of you has significantly more debt.
If your partner has student debt or acquires extreme credit card debt during your marriage, you probably don't want to take that on in the case of a divorce. "Let's say one spouse has significant student debt," says Rodgers. "Lisa has $200,000 in student debt from her undergraduate and graduate degrees that she accrued over the course of her education. She plans to enroll in a post-doctorate program after marriage, and will likely need to take out loans to do so. John, on the other hand, has no student debt. Lisa and John can specify in their prenup that any debt, including Lisa's premarital school debt from undergraduate and graduate school, as well as any school debt she accrues in the future, should remain her separate debt, and not be considered joint marital debt at any time. Why does this matter? In a divorce, judges in many states have immense discretion as to how debt should be distributed among the parties. In certain situations, a judge could choose to attribute some of one spouse's debt to the other, especially in the case where the other party directly benefited from the result of that debt."
Both of you plan to buy property together.
When purchasing a property together, it's still recommended you keep initial investments separate. "Lisa and John want to purchase a condo together once they get married. Lisa will contribute the bulk of the downpayment with her savings of $100,000. John does not have much savings, so he will contribute only $10,000. Lisa and John would like to protect their respective portions of the down payment," says Rodgers. "Lisa and John can specify in their prenup that their initial investments should be considered separate property and 'recaptured' and returned to them as separate property upon any sale of the property. Why does this matter? In a divorce, the money that Lisa and John contributed to the down payment, although not equal, would likely be considered as 'transmuted' or absorbed into the marital estate and split upon sale of the property."
One or both of you are small business owners or entrepreneurs.
Protecting your investments can be important if you own a closely held family business, a business with your name on it, or a business with other people. "Lisa and John are engaged to be married. Lisa is a W-2 employee and conservative with finances. John is an entrepreneur and much more of a risk-taker. John's decision to start a business may prove riskier, but may also have more upside," says Rodgers. "Lisa and John can stipulate in their prenup that any debt John incurs as a result of starting or running his business, should be solely his. In addition, they can agree that all income or equity derived from that business, should be solely his as well. Why does this matter? Without a prenuptial agreement, Lisa may be responsible for some of John's business debt, as well as entitled to some of John's business. The most extreme and perhaps more complex divorce cases arise when one spouse is a business owner, and the judge deems the other spouse entitled to some of that equity or the value of half of the business-owner spouse's equity." In short, it could get very expensive when the time arrives for divorce litigation.
You want your finances to remain quiet in the event your marriage ends.
Nobody wants their personal matters to be leaked to the public, and a prenup can ensure that that won't happen. For example, confidentiality clauses are now becoming standard in many prenups. It makes sure that neither party could disparage the other on social media, television, in any publication (including a memoir) or publicize any negative aspects of their marriage or financial or personal lives.
You were engaged for a very short period of time.
Some couples meet and get married quickly, so a prenup is good if you don't know each other that well. Other couples don't want to talk about it while wedding planning and instead sign a postnuptial agreement after the marriage is legalized. (You can get a postnup anytime after you get married or make amendments to your prenup after the wedding that can change it into a postnup, Wallack notes).
One of you doesn't work or doesn't plan to continue working.
If one party will be staying at home to raise a child, for example, the couple can agree on financial provisions so the party in question (not the child) can have a financial plan in the event of a divorce.
And if you're still on the fence about signing a prenup, we recommend seeing a marriage counselor to talk through any issues or confiding in others going through the same thing on our community boards. While we're not saying you have to get a prenup, we do know a lot of couples who have confidently signed them and are still happily married.
We Want a Prenup. What Now?
You've decided one (or multiple) of the aforementioned circumstances applies to you. Between wedding planning and other commitments, you may be limited in time or financial resources as has traditionally be in the case when couples turn to a marriage lawyer. Since Millennials and Gen Z are a financially-savvy generation, with many preferring to complete everyday tasks from the comfort of their homes, HelloPrenup is a resource for couples who want to protect their wealth–with ease. At $599 per couple, the digital prenup service is co-founded by a marriage lawyer and can be customized.
The process begins with a questionnaire filled out by each respective party. From there, the couple works through their proposed prenuptial agreement digitally and legally. What the process prompts is a dialogue that otherwise may not have been broached by future spouses–working through everything from debt to estate planning.
If you're both entering marriage with tricky inheritance expectations, child custody agreements or other bespoke needs, it's best to turn to a marriage lawyer in your state so both you and your partner can take time to work through an iron-clad prenup–that works with both signatures.