This week on Money Matters, I had the privilege of sharing some thoughts on prenups, which are a growing trend among young professionals– and no, not just those with trust funds. Why are so many looking into a prenup before they say “I do?” Easy– because these people are smart enough to pay attention to the stats, which confirm that at least 50% of U.S. marriages will end in divorce. It’s not that they want the marriage to fail, but rather that they want to (1) clarify upfront what will be marital and (2) minimize the damages in the event the odds do not play out in their favor.
We all spend a lot of money on insurance to protect our major assets, including our house, car, health, and even life, so why not spend a minuscule amount for a prenup to ensure a smooth dissolution of your partnership in the unfortunate event that this happens? Think of it this way: when you get in a car and put on your seat belt, do you think the car will crash? Of course not, but you take this precaution just in case. Well, to me the same concept should apply to a prenuptial agreement.
Simply put, a prenup is a legal contract that governs what a couple will define as marital vs. separate property. There are other things we can also include that I think are important, such as (1) alimony limits; (2) requiring life insurance; (3) addressing the issue of who will move out if things don’t work out or how quickly you will list a house for sale; (4) requesting mediation prior to any contested court filing; (5) confidentiality clauses; and (6) absolute protection of intellectual property rights.
Generally speaking, for these agreements need to held valid there are 3 basic requirements: (1) was each party represented by counsel; (2) was there enough time to review and negotiate the provisions; and (3) was there complete financial disclosure? Of course you need to check with local counsel to see what your specific state requirements are to uphold a prenup aka an ante-nuptial agreement.
Ultimately, each engaged couple will have to do their own analysis of whether they want to get a prenup finalized before the wedding, but the question I would ask is this: what is the downside? I don’t see the downside at all, in fact all I see is tremendous risk if things go south. Why would you do that when it is so easy to avoid chaos and financial disaster?
For those interested in further info, here is the link to the podcast from this week’s radio show on prenups: http://directory.libsyn.com/episode/index/id/2864452
By Regina A. DeMeo, Esq.
