One of the most misunderstood elements of a marriage is the prenuptial and postnuptial agreement. Popular myths and assumptions include thinking these agreements spoil a truly romantic marriage, or are only for super-rich celebrities who want to avoid situations where people marry them for their money.
In actuality, prenuptial and postnuptial agreements are simply the business side of a marriage contract. They are usually put in place to financially protect people with specific types of income and assets. Even the best marriages are risky, and so it's reasonable for people to protect themselves with these financial arrangements.
Our clients often ask a lot of questions as they consider prenuptial or postnuptial agreements. Here are six most common questions.
1. What is the difference between a prenuptial or postnuptial agreement?
A prenuptial agreement (also known as a "prenup" or marital contract) is a contract between two people getting ready to marry that determines how financial and other matters will be settled in the event the marriage ends. A postnuptial agreement is a similar contract signed after the marriage has taken place.
2. Doesn't a prenuptial or postnuptial agreement show a lack of trust—when that's what marriage is all about?
Romance and emotion are wonderful, and many marriages stand the test of time. But here's the reality: about 50% of marriages end in divorce. There's a risk that the marriage won't work, so prenuptial or postnuptial arrangements can help a couple understand their rights and obligations
3. But what income and assets are so special that they need to be protected?
It depends on each person's situation, but here are some common things that people often like to protect through a prenuptial or postnuptial agreement.
- Property—especially primary homes, vacation homes, and rental properties.
- Businesses—especially when the couple wishes to separate business assets (and debts) from other finances.
- Wealth—especially when one spouse holds this wealth through savings, stocks, retirement accounts, or inheritance.
These assets and income are often protected out of a sense of fairness. But there may also be other reasons such as wanting to leave money to children from a previous marriage, or needing money to take care of sick or elderly family members.
4. What if I'm the one at a financial disadvantage? Can I get a prenuptial or postnuptial agreement?
Yes. In some situations, we see prenuptial or postnuptial agreements that create a fair outcome ahead of time for those who stay at home to raise kids, take the time to earn a college degree, or who earn significantly less money than their spouses. Instead of letting the courts decide alimony through a contested divorce, you can create a prenuptial or postnuptial agreement that outlines how your more financially secure spouse will take care of you in the event of a divorce.
5. What do I need to do to complete the prenuptial or postnuptial agreement?
The process involves making a detailed inventory of you and your spouse's income, assets, and liabilities, then determining each spouse's rights and obligations. You and your spouse will want to retain attorneys to ensure you both completely understand the details of the agreement.
6. What if my marriage ends up working out? Won't the prenuptial or postnuptial agreement seem rather silly?
A prenuptial or postnuptial agreement is similar to an insurance policy in that it provides peace of mind, even if you never use it. These agreements can also be adjusted over time. If there are significant changes in income, if you've begun to help your spouse run a business, or if you and your spouse simply want to share income and assets differently, then you can revise your agreement.
Try to deal with these business matters before you get married, if possible. And once they're out of the way, you can concentrate once again on the romance and fun of being married!