It’s not because either of you thinks the marriage won’t last

To many, “prenup” (short for a prenuptial agreement) is a bad word. Why would any loving couple want to start off their marriage with a financial contractual agreement?

As a wealth manager, I counsel clients who have a large disparity in wealth to execute a prenup. Some are getting married later in life and have built up considerable assets, some started a company, some are getting married for the second time. Some have former children to worry about. Some clients have children with considerable trusts getting married.

We have all heard stories of happily engaged couples splitting up over prenup discussions. One side of the family requires it, while the other thinks it is a terrible way to start a marriage. So, should we even bring up the topic of a prenup?

Whenever there is a significant difference in the amount of assets each person is bringing to the marriage, a prenup should be drawn up. I advise clients not to look at a prenup as an implication that the couple does not envision the marriage lasting, but instead as an opportunity for both parties to define property rights. It helps set the terms and manage expectations. In some cases, it can help determine whether someone is marrying “for the money”. It can even protect a partner from the unknown debts of the other.

What’s covered in a prenup?

Prenuptial agreements protect separate property and cover spousal support – the amount of support that will be paid if the marriage should end. It spells out the debts and liabilities that parties are bringing to the marriage, details estate rights, separation of property and inheritance rights, and can detail future children’s rights. Some expire after a certain amount of time or are only enacted after being married for a certain amount of time.

The marriage should be entered with a good understanding of each other’s finances. A prenup gives both parties the opportunity to communicate about their financial future together. It can help avoid arguments later down the road or – if the marriage breaks apart – having a judge decide how assets should be split. A matrimonial attorney can help marrying couples discuss financial issues and come to an understanding prior to walking down the aisle.

When is the best time to execute a prenup?

It is my experience that the conversation needs to take place when a couple gets engaged and prior to planning the wedding. Having the conversation well in advance allows both parties to understand their financial future in terms of estate planning. It will also take the emotion out and allow both parties to be practical about the agreement. Prenups should be approached collaboratively and give both parties the ability to consult a third party for legal advice.

How do I proceed?

It is important to view prenuptial agreements the right way: as an opportunity to set boundaries and expectations rather than as a sign of trouble to come. Embrace the benefits that a clear financial plan can provide your marriage. Consult with a matrimonial attorney who can put a well thought out plan into place for you and your intended spouse.

 

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Certified Divorce Financial Analyst (CDFA™) professionals must develop their theoretical and practical understanding and knowledge of the financial aspects of divorce by completing a comprehensive course of study approved by the Institute for Divorce Financial Analysts.  CDFA™ professionals must have two years minimum experience in a financial or legal capacity prior to earning the right to use the CDFA™ certification mark.
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Aviva Pinto, CDFA®, CDS™

Aviva Pinto, CDFA®, CDS™ is a wealth advisor based in our New York office.