Marriage is a big step. Whether you're marrying your high school sweetheart or a celebrity, you or your intended may have circumstances that make a prenuptial agreement a good idea.
A Contract by Any Other Name
A prenuptial agreement is a contract entered into before marriage setting out what the couple plans for their separate and joint finances. It can also be called a premarital agreement or antenuptial agreement. They're very useful, but not very popular.
Couples in love don't want to think about an endgame other than "happily ever after." Prenups shouldn't be looked at only that way: During marriage they can also help shield the wife's assets from the husband's debts, and vice versa. This can be a big benefit during good times as well as bad.
What a Good Prenup Can Do
Some of the features and benefits of a prenup are:
- Protect separate property. Property you bring to a marriage remains yours. But if you sell that property during the marriage the proceeds may become marital property if you're not careful.
- Debt protection. The parties can agree to keep their debts separate: Debts created before marriage (law or medical school student loans, for example) as well as those afterwards (business debt guarantees, for example).
- Breakup/end of marriage. This is what everyone thinks of. A prenup can be a sort of preplanned property settlement agreement in case of divorce. Of course this goes for support too. It can also cover support for the surviving spouse if the husband or wife dies during marriage.
- Special situations. Sometimes one of the partners gives up a career or relocates as part of the marriage. A prenup can reflect this special situation and acknowledge a right of compensation for what can be a hard-to-value circumstance.
Prenups aren't all about the bad things that can happen or the selfishness of separate property and debts. Couples can agree up front to share and share alike. This can be done immediately from marriage or can be phased in over time. The sky's the limit when it comes to writing prenups to suit individual wishes.
So Why Don't More People Do Prenups?
There are three reasons. Most or at least many people don't feel they need them. They may feel their marriage isn't that complicated financially or otherwise to do them. Most people understandably don't want to think about these things while they're romantically so happy.
Not only do they feel the marriage will last, but may also feel it's bad karma or getting things off to a bad start by doing a prenup.
Finally, there's the cost. To have an enforceable agreement both parties should have lawyers. In theory one lawyer could draft the agreement. To enforce it when it's needed though the agreement has to prove fair at the time of breakup unless both parties were adequately represented when it was made. A simple agreement might cost $1,500 to negotiate and prepare, but some might cost much more.
Getting Down to It
Negotiating a prenup should be together. So you can shop for lawyers together. This is not a bad idea at all. If you find lawyers who have worked often and amicably with each other on prenups things can go very smoothly. This can also speed the process if the couple agrees to meet jointly with their respective attorneys to hammer out the details.
Even if a lawyer comes with a personal recommendation or solid reputation, it pays to ask questions about the specifics of the lawyer's practice. For example, what does the lawyer's basic prenup agreement look like?
A very long agreement could mean just a very thorough lawyer, but it could also be overkill in your circumstances. On the other hand if the lawyer doesn't have a template to start with this could be a sign of inexperience or perhaps inefficiency to be avoided.