Updated on Tuesday, November 24, 2020
While a prenup may not seem romantic, getting a prenuptial agreement â€” which details how youâ€™ll divide money and property if you get divorced or one spouse dies â€” can be an important financial move for some. In general, young couples without children who donâ€™t have many assets likely donâ€™t need a prenup. People who are older, have significant assets and/or want to protect the inheritance of children from a previous relationship stand to benefit more from a prenup.
Here are the specifics of prenups, including pros and cons to consider and how to get one.
A prenup is a legally binding document signed by both spouses-to-be that outlines how assets owned and debt accumulated before a marriage will be treated in the case of death or divorce.
If you donâ€™t have a prenup in place, the laws of the state in which you live will determine what happens to your assets and debts. That said, a prenup alone is not enough to ensure a healthy estate plan; youâ€™ll also want to make sure you have documents such as wills and living trusts in place.
Areas a prenup can cover include:
A prenup doesnâ€™t include child support or custody decisions. Additionally, a prenup also may not contain any kind of incentive for divorce, and it cannot dictate how matters like who is going to wash the dishes or where youâ€™ll spend which holidays will be handled.
How long can a prenup last? In general, prenups are good for the lifetime of a marriage. Some provisions, however, may be more specific. For example, a prenup may state that, if you donâ€™t stay married for at least 10 years, you wonâ€™t receive spousal support, and others set provisions that a prenup will expire altogether after a certain date.
Melissa Sotudeh, director of advisory services at Halpern Financial in Rockville, Md., said there are several compelling reasons to pursue a prenup. For example, a premarital agreement may protect a debt-free spouse from having to assume the debt of the other, she said.
Additionally, Sotudeh said, â€śif you plan to give up a lucrative career after the marriage, a premarital agreement can ensure that you will be compensated for that sacrifice if the marriage does not last. Conversely, a premarital agreement can limit the spousal support one spouse would have to pay the other in alimony after a divorce.â€ť
Is a prenup a good investment strategy though? Charles C. Weeks, founding partner of Barrister Wealth Management in Philadelphia, said, from an investing standpoint, a prenup is important because it lets the wealthier person know what kind of risk they can take with assets that are deemed â€śprotectedâ€ť from divorce. â€śYou may not want to take a ton of risk if you could potentially lose half of your net worth through divorce,â€ť Weeks said.
In general, you may benefit from a prenup if you:
You probably donâ€™t stand to gain much from a prenup if you:
Do prenups start your marriage off on the premise that itâ€™s not likely to last? Not necessarily, but every couple has to weigh the pros and cons for themselves.
Once you decide to get a prenup, you have to decide whether youâ€™re going to do it yourself or hire an attorney to do it for you. If you choose to do it yourself, there are forms available online to help with the process. Either way, youâ€™ll need to make lists of each spouseâ€™s assets, debts and other financial information, and discuss how they should be handled in the case of divorce or the death of one spouse.
Provisions may address the following topics:
Again, the legal requirements for prenups vary by state, but in most cases, to ensure itâ€™s valid, youâ€™ll need to make sure the document is in writing and signed and dated by both parties. In some cases, youâ€™ll need witnesses to sign it in addition to having the document notarized.
You donâ€™t need an attorney to get a valid prenup. As noted, there are DIY forms readily available online, and as long as you follow the instructions thoroughly, the prenup should stand. However, most financial experts say hiring a lawyer to draft a prenup is the safest way to go.
Michael D. Whitty, a partner at Freeborn law firm in Chicago, said he would always advise using attorneys â€” one for each spouse â€” to be sure the prenup is properly and thoroughly designed and executed. In particular, if the less-wealthy person is not independently represented, the agreement can be set aside later.
â€śItâ€™s essential that the agreement be fundamentally fair, that full disclosures be made and that both spouses have independent representation,â€ť he said. â€śIt canâ€™t be rushed.â€ť
The cost of a prenup is extremely variable depending on the couple, their respective assets and liabilities and how extensive their negotiations are.
While the nationwide average cost for a prenup is around $2,500, the costs can be less if the estate is smaller and less complicated. On the other hand, Whitty said heâ€™s seen prenups cost as much as $25,000.
In short, yes, you can get a prenup after youâ€™re married, though in that case, itâ€™s called a postnuptial (postnup).
A postnuptial can cover the same items as prenup. In some cases, couples who didnâ€™t get a prenup later decide it would be a good idea and get one after they say â€śI do.â€ť In other cases, circumstances may change after the marriage, such as one spouse inheriting money or taking on more debt. Other couples may choose to get one if theyâ€™re considering getting a divorce, in order to help streamline the process.
The steps and considerations to get a postnup are largely the same as for a prenup. While you can handle the process yourself, most financial professionals suggest employing the help of an attorney.