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Should Couples Get a Prenup?

This article was written by in Family and Life. 18 comments.


Prenuptial agreements are on the rise, as more individuals are concerned about losing their assets in the wake of the recession. Prenups, when handled correctly, can protect an individual’s assets in the increasingly likely event of divorce. Without a prenup explicitly defining how assets should be divvied up, if a divorce occurs, any income earned during the marriage, including any money added to retirement accounts, could be split between the two individuals. Depending on the state, this split could be 50% to each or it could be some other method considered fair by the courts.

Regular earned income isn’t the only type of wealth that could be affected. Any increase of the value of an asset, whether stock investments or a business, that occurred during the marriage could be considered marital property and divided by a court. For example, even if one spouse purchased a house before marriage, the increase in the value of the house during the marriage will likely be distributed partially to the spouse who doesn’t own the house. A business that’s started years before the marriage but thrives during the marriage, even if the non-owner spouse is not involved with the business, could be split in the event of a divorce.

For someone who has worked hard his or her entire life to build a solid financial future, a divorce is one of the most financially devastating events one can endure. We buy insurance to protect ourselves against loss of health, we diversify investments and choose an appropriate asset allocation to help shield us from financial downturns. A prenup is just another way of protecting assets.

Although we don’t feel edgy about discussing insurance with someone we plan to spend the rest of our lives with, prenups are one of the most taboo topics within the broader taboo topic of money. No one wants to seem greedy. The point of marriage is to make two lives one, not to continue living two independent lives within the same household. A prenup would indicate that divorce is an option down the road, and many couples would not be interested in facing that possibility at a time, before marriage, when the only thought should be living a happy life together.

Classically, couples who opt for prenups usually have one or two individuals who fall into these descriptions:

  • Wealthy, either by inheritance or by effort. When one individual has a much higher level of wealth than the other, the wealthier spouse often wants to protect his or her money in the event of a divorce.
  • Unequal income. Like an unequal net worth, unequal income or income potential can tilt the balance of power within a marriage. A prenup can either protect the balance or protect the tilt.
  • A business owner. For someone who owns a business, a divorce could mean the end of that business. Selling the business is an option for liquidating enough cash to pay for the expenses of breaking up a marriage. If the business is location-based and the owner prefers to move, this, too, could have a devastating affect on the business.

State laws govern prenuptial agreements, and each state falls into one of two categories. In 41 states, divorce without a prenuptial agreement falls under equitable distribution, where the court considers the individual case, circumstances, and finances to determine the most fair division of assets. In the remaining nine states, courts divide all marital property. Prenups can override these state defaults.

Prenuptial agreements are often in the news when celebrity couples move towards marriage. Most recently, Kim Kardashian, who earns about $12 million a year according to Forbes and has a home in Beverly Hills, has signed a prenup with fiancé Kris Humphries, who earns only $3.2 million a year. Kim will be protected through the prenup; in the event of a divorce, she will keep everything she owns now in addition to any income she earns during the marriage.

For engaged couples whose wealth and income are already evenly split, there is still a case for a prenuptial agreement. The court system can be complicated and expensive. A couple that doesn’t discuss financial issues could have a harder time during a divorce. A prenup can smooth some of these difficulties and help both partners leave the marriage with most of their own wealth intact. While prenups have traditionally been instruments of the wealthy, the recession has affected many people’s approach to protecting their assets. More middle-class couples are considering prenups now.

Would you or did you consider a prenuptial agreement before getting married?

Photo: david_shankbone

Published or updated June 29, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 18 comments… read them below or add one }

avatar Krantcents

I was married before prenups, but we came into the marriage on an equal footing. I recommend to my children to have a prenup because of what they have already accumulated.

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avatar Joe

Great article Flexo…craxy timing too. Almost the exact same article was on CNN Money this morning. Which came first, the chicken or the egg?
http://money.cnn.com/2011/06/28/pf/marriage_prenup_agreement.fortune/index.htm?iid=HP_River

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avatar Luke Landes ♦127,373 (Platinum)

Cool, I usually write articles the at least the night before… I didn’t see the Fortune article, but I did hear about Kim Kardashian, which inspired this. Prenups are popular topics!

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avatar tbork84 ♦1,867 (Half-Dollar)

Great article, and it reminds me of a great Seinfeld episode involving George. I won’t be looking to set one up and I am now engaged, but I can imagine a scenario where I would want to set one up if either of use made a whole lot more or less then the other.

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avatar Amber, Blonde & Balanced

Personally, I think prenups are smart. My husband and I didn’t do a prenup, but our net worth’s are almost exactly the same and we earn almost exactly the same annual salary. So, there was really no point for us.

I can see how prenups can be a downer, but it’s important to protect yourself. I don’t plan on ever getting divorced, but I’ve seen plenty of friends and family who got divorced early on in the marriage and even very late in the marriage. You can’t predict the future but you can protect yourself.

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avatar The Borrower

I think a prenup is a way of truly saying I love you. No one knows what the future holds and everyone is “in love” when they make this journey. I don’t care who you are, people turn into the worst version of themselves when things turn towards divorce. They do and say things they never would in any other circumstance.

By taking this small extra step, while you still love and care for each other, it offers up a protection for that special somone in your life. Protection from that worst version of yourself, that you never want them to see, because you love them. Agree while everything is perfect – how you will handle the situation, who gets what, fair and equitable steps. Much easier when you love each other than when you don’t.

This will also save a BOAT load of legal fees, in the worse case scenerio.

After you have protected your precious love, then love each other. It is the best protection for all that ails you.

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avatar Kate Kashman

I think that prenups are essential for certain groups of people – second marriages, especially older ones where there are assets and children, and the other scenarios mentioned in the article.

Also, I think it depends a lot on how the prenup is written. If it obviously favors one party, then they are not coming into the relationship in good faith (or they are receiving poor legal counsel.) A good prenup protects both parties.

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avatar wylerassociate ♦906 (Dime)

it’s important that couples do get a prenup, nobody knows what the future will hold or how long a marriage will last so it’s important to be smart about financial assets.

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avatar Squirrelers

I think that prenups as such are not conducive to two people giving up independent lives and operating as one. To me, ideally, operating as one includes finances.

That being said, I grudgingly agree that in case of a big inequity in wealth coming into the marriage, and especially if not the first marriage and children are involved, a prenup is probably a wise move for each party. It is what it is!

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avatar qixx ♦1,817 (Half-Dollar)

I think we should do away with prenuptial agreements and replace them with marriage insurance. Even if the only change is the name i think it might make a prenu-er, i mean marriage insurance quit being a negative.

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avatar Bobka ♦13 (Newbie)

What an interesting concept! I’m sure the insurance industry would be more than happy to jump on this one.

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avatar qixx ♦1,817 (Half-Dollar)

The only thing i’m not sure is on how it would work. I guess it would be run more as a whole life/cash value type policy. I guess it might payout upon a divorce if you are not deemed not at fault in the divorce and it is not a no-fault divorce (we just don’t love one another anymore).

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avatar Cejay ♦1,521 (Half-Dollar)

I can see where and when a prenup would be needed, but I cannot say that I would appreciate being asked to sign one. I would sign it since I would not marry for money but it does indicate a modicum of distrust and a way out in the future. I do not think I could be so down to earth when crazy in love and floating on the clouds.

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avatar 20 and Engaged

We decided not to get a prenup. For one, we didn’t have many/any assets we were concerned about (perks of getting married young). For two, we felt it was anticipating a divorce. We plan on staying married, and therefore, have no need to be concerned about splitting things down the line.

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avatar Jai

A coworker and I were just talking about pre-nups. She was once asked to sign a pre-nup and the guy was shocked and insulted when she viewed that as a sign to get down to business. Her view, and I agree, is that if you want to bring a pre-nup in then it’s time to set aside emotion and talk numbers, begin negotiating. He thought he could protect himself, himself only, and she would so “in love” that she’d just roll over. Got his back up when she didn’t. That kind of attitude is when you know the pre-nup is not just a smart financial move for you both and is a sign that your future partner is maybe not as committed.

Otherwise, I think pre-nups are just fine. It’s not the most romantic thing in the world, but it’s not insulting in and of itself. I think they’re especially smart if you have dependents from your previous life, if this is a second (third, fourth, etc) marriage and if you have business interests to protect.

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avatar Just Another SAHM

I think pre-nups are a good idea. In fact, when I got engaged, I wanted to do a pre-nup to protect my now-husband’s investment in the house he bought before we married. Not that I was expecting to get divorced — in fact, I felt like my offer was a show of love for him. And since he’d been married and divorced previously, it’s clear that divorces happen to good people sometimes. We didn’t do a pre-nup, and we’ll celebrate our tenth wedding anniversary in September, with no signs of problems in our marriage. Which is good. :)

A pre-nup isn’t always going to protect people, either. I have a cousin who, when he got married, had no assets to protect. But he started a business that thrived and made him quite wealthy, and he was shocked to discover that when he got divorced, his (now-ex) wife had a right to half the business even though she hadn’t ever worked there. A pre-nup wouldn’t have saved him from having to sell his company to give her her share. (He’s an idiot and an asshole; my sympathies lay entirely with his wife, but that’s a whole nother issue!)

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avatar Linda Silvester

I agree with all the previous comments. I didn’t get a prenup the second time around when I married a Texan in New Zealand. In NZ all relationship property is split 50/50 under the ‘no fault divorce’ principle of the Property (Relationships) Act; which applies to all adult relationships – marriage, de facto, civil union – lasting longer than 3 years. There are some who will take advantage of their legal entitlements.

The consequence was, 6 years wrangling with lawyers, went to law school to get a degree, and to celebrate retaining my family land I have launched a website for Kiwis and a Guide to the law which opts a couple in. However, there is a opportunity to opt out or contract out and create a property sharing agreement, and get a PreNup.

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avatar Kathryn C

I live by the “what’s yours is ours and what’s mine is mine” theory on finances
ah ha just kidding! I would definitely sign a prenup or if I made gobs of money I would have someone sign one. I wonder if someones willingness to sign a prenup is correlated to their confidence in their own ability to make their own money if they had to.

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