By Eva Hibnick, JD, Guest Writer
Prenups are on the rise. According to a survey of US family law attorneys, prenuptial agreements have become much more prevalent in recent years. This is largely due to the fact that ordinary people, not just the rich and famous, are requesting prenuptial agreements. More young people are choosing to marry later in life, and when they do, they enter marriages with substantial assets. Personally, I explored the idea of getting a prenup not because the value of my assets was disproportionate to that of my partner’s, but because as an entrepreneur, I wanted to protect my business interests. Millennials who are entrepreneurs or creatives (actors, writers, social media influencers) are asking for prenuptial agreements to protect their equity interests and intellectual property. Despite the increase in demand for prenuptial agreements, there are still many critics.
Below is a list of the benefits and downsides of getting a prenuptial agreement which will allow you to make an informed decision about whether a prenuptial agreement is a wise decision for you or not.
Benefits of a Pre-Nup
First, the benefits.
#1 Transparency Around Each Other’s Financial Situation
A prenuptial agreement requires full disclosure of each party’s assets and debts. Having conversations about your finances with the person you are about to spend the rest of your life with seems like a wise decision. This conversation will naturally lead into talking about how each of you budgets, how much each of you spends, what each of you thinks money should be spent on etc. These are important topics to discuss with your partner so that you both can agree how to plan for your financial future together.
#2 Clarity Around Financial Obligations
Apart from listing current finances of each party, and specifying what is separate and what becomes marital property, prenuptial agreements can also determine what each party is responsible for. If the parties agree that everything is separate, who will pay the household expenses? Will you share a joint account from which you pay household expenses? Will you both contribute the same amount to the joint account or will the amounts be commensurate with your incomes? Will you be filing taxes jointly or separately? These are all decisions that you and your future spouse should discuss and decide what is best.
#3 Freedom of Choice
Prenuptial agreements enable you and your spouse to dictate the rules of your marriage and plan for how property should be divided if you decide to part ways. Without a prenuptial agreement, you are leaving it up to the one-size-fits-all laws in your state, and the judge, to tell you what is right for you and your family. Prenups provide you and your spouse with the power to set your own rules and clarify how those rules will govern your relationship.
#4 Decrease Legal Fees and Headaches in the Future
Divorces are expensive. The legal fees alone can cost anywhere from $15,000 to $50,000. In addition to legal fees, there are always ancillary fees related to buying a new apartment/house, selling your house, therapy for you and the children, financial planners etc. Having a prenup in place usually decreases your legal bills because it provides the court with a clear picture of what the parties intended to happen upon divorce.
#5 Address Spousal Support
Spousal support or alimony is the amount of money that one spouse is required to pay to the other spouse after divorce, so that the spouse receiving the payments can maintain the same standard of living as he or she had while married. Some states do not allow a waiver of spousal support, but more and more states have started to allow for it. For example, in California, spouses can waive spousal support as long as they are represented by independent counsel and it is not based on unconscionable terms. Many spouses prefer to have the structure of spousal support in place so that they know exactly what they will be responsible for paying and getting in the case of divorce. Some choose to waive it entirely. If you choose to waive it, you should both understand what rights you are giving up.
Downsides of a Pre-Nup
Platinum Level Scholarship Sponsor
Next, let's discuss the cons of a pre-nuptial agreement.
#1 Admitting to Yourself That Divorce Could Happen to You
Most people think of marriage as everlasting – that once they find their soulmate, they will be married to them forever. The romantic inside everyone believes that despite the divorce rate in our country, you and your spouse will be together “until death do us part.” Prenups talk about the white elephant in the room that no couple, especially months before the happiest day of their lives, wants to address, that of the divorce. When talking about a prenup with your spouse, you have to contemplate the idea of divorce and that it may happen to you. This is a touchy mindset for many. In comparison to health insurance, auto insurance, or hurricane insurance, insuring against some of the financial ramifications of divorce with the use of a prenup is still a very emotional topic for people to think and talk about.
#2 Spouse’s Reactions
Many people think of getting a prenup, but then second guess themselves when they realize they have to broach the topic with their spouse. You hear stories of the fiancée crying or becoming enraged when their partner suggests getting a prenup. Negotiating the terms in the agreement may also put unnecessary stress on your marriage. While planning a wedding and figuring out how to combine two separate lives into one, the last thing you want is to be in an adversarial position negotiating a prenuptial agreement with (or rather against) your future spouse. Of course, prenups can be a touchy subject for some couples, but there is always a way to bring up the topic and discuss the pros and cons in a practical sense.
#3 The “Silent” Party to the Prenup
Parents, particularly wealthy parents anticipating leaving large inheritances, are sometimes the reason their daughter or son asks their future spouse to sign a prenuptial agreement. This causes problems between both the child and the parents, as well as between the child and the spouse, because neither of the two parties signing the document may have wanted it.
#4 Sometimes State Default Rules Are Enough
Sometimes spouses that seek out a prenup, really just don’t understand what the default laws are in their state with respect to divorce and division of property. There are instances where the spouses actually like how the state defines marital property and separate property, and a prenuptial agreement is at the end of the day not really needed. Many attorneys have told me that couples will come in for a consult, and then end up not pursuing the prenuptial agreement after they come to understand what it is. In those instances, spending time negotiating or talking about the prenup may put unnecessary strain on your relationship, only to realize you don’t actually need one.
#5 Circumstances Change
When couples are negotiating a prenuptial agreement, they are young, in love and usually without children. As life goes on, people get sick, financial situations change, career paths change and children become a priority. All of these life events may impact the original plan set out in the prenuptial agreement and thus will require amendment. Some argue that because you can’t predict the future, prenups as a static document just don’t make sense.
Just like anything else, there are pros and cons to getting a prenuptial agreement. Today, many couples are choosing to avoid marriage altogether and remain in a committed relationship. This option results in everything inherently staying separate.
What do you think? Did you get a pre-nup? Why or why not? Do you regret your decision? Have you had to implement a pre-nup in a divorce? Did it work well to limit the time and costs of the divorce? Comment below!
[Editor's Note: Eva Hibnick, an attorney and the founder of the website Endure Prenups where prenuptial agreements start at $495. This article was submitted and approved according to our Guest Post Policy. We have no financial relationship. She's an attorney, but she's not your attorney, so she asked that this disclaimer run with the piece: The information in this blog post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Endure Documents Inc. or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.]
Is it true that a prenup can only protect assets prior to a marriage and not during a marriage? (I.e. – if a spouse’s business suddenly becomes successful during the marriage, the other half is entitled to half with or without a prenup?)
Also, can’t the terms of prenup be challenged in a divorce?
What you are describing is a post-nup. And yes both Prenup and post-nup) often get challenged in a divorce.
A post-nup is an agreement entered into after a divorce.
Ha! I meant to say, an agreement entered into after a marriage has occurred. Hence, post-nuptial agreement. Usually a prenup is no big deal, but a post-nup is comparatively rare since in most states it requires court appearance and approval.
This depends on the laws of your state and the terms of the prenup. In most states, what you described is a poorly drafted prenup.
My father is an attorney and in the state we live in he said that a Pre nup basically gets thrown out of the window once you have kids. For example, if you agree to no alimony and then have kids…you’re still paying alimony. He also said once you pass a certain amount of time married it holds a lot less weight too. I’m still getting one though for piece of mind.
Child support is generally a separate issue from alimony, and child support is not waivable in any state that I’m aware of. (But I’m only licensed in Pennsylvania!) The addition of children or the passage of time might affect the enforceability of a prenup (or just certain provisions of it) because of changed circumstances the prenup didn’t contemplate, which could make the old agreement unconscionable. But the more flexible your arrangement is, the less likely that is to happen. And, of course, you may amend your prenup with a postnuptial agreement to suit your new needs!
+1, child support is separate from alimony. Child support is in theory only for the benefit of the children, and the duty of parental support cannot be contracted away.
No, a prenup can be written in any way you like that both parties are willing to sign, but of course it can always be challenged. Anything can be challenged just like anyone can be sued. Whether that is successful or not is another story.
A prenup should be able to state (but may be contested) eg that “all future inheritance from her parents remains separate and not to be considered marital assets”. But when my kid gets married we’ll change our will to either make a trust or bypass her and go to her kids or something if we have any qualms about the in-law. Will recommend they do a prenup but avoid in-law having any dishonorable claim on our stuff through more certain means in our wills etc. I’m not saying he’s a gold digger… but he won’t benefit from our deaths.
WHen I inherited and purchased a share of my family farm I had my husband sign a postnup so to speak (we were in TX so otherwise half of it was his) that he had no claims to it and that in the event of my death my kids (or if none my siblings) would inherit it, none to him. But he didn’t retain council so no doubt if they discover oil there in SD (hah!) or build a trillion $ wind farm on it he should contest that.
When my wife and I were engaged to be married, neither one of us had significant assets. I thought I might want a pre-nup, but from what I read, the value of my education and training didn’t mean much since it wasn’t a hard asset.
Out of curiosity for what divorce can do to a couple chasing financial independence, I requested and received this very entertaining guest post from a family law attorney: http://www.physicianonfire.com/divorcecourt/
He is pro pre-nup for reasons I hadn’t considered.
Cheers!
-PoF
Interesting story. However I thought that IRAs/401Ks cannot be touched in a divorce?
Ha ha, that’s funny. No. Assets are generally split in half and so typically the larger IRA/401(k) is subdivided proportionally and is literally moved into a new spousal IRA.
So you can’t move money between IRAs while married, but can during a divorce. Makes perfect sense.
Talk to your Congressman. Not my monkeys, not my circus.
Actually, the IRS made it incredibly easy to divide IRAs in divorce. Most retirement assets will require a Qualified Domestic Relations Order to be split; IRAs can be divided, usually, by the filing of a simple form that says “move this much money to this account, no tax and no penalty.” It’s called a transfer incident to divorce – a simple name, for a nice change of pace from most legal jargon.
And don’t get your hopes up about changing law on this any time soon, or perhaps ever – there’s a very good reason the government is interested in allowing transfers during divorces. Imagine yourself as a stay-at-home parent to a high wage earning spouse, who saves $2M in various retirement accounts over a long 30 year career during which you provided all kinds of support – sharing in expenses through odd jobs, raising the kids almost single-handedly, cooking all the meals and doing all the housework, etc. Imagine that spouse decides to leave you at age 60 for a nice young piece of ass. Your government, in a moment of unusual clarity and forethought, has decided not to leave you destitute and starving on the streets in this scenario.
I hear you on this point, but let’s be fair. There is a special class of stay-at-home spouses that aren’t exactly carrying out the traditional “stay at home” work that the law is assuming. For instance, there are nannies for the kids, housekeepers, cooks, accountants, gardeners, etc that some, not all, of these stay-at-home types can employ since their high wage earning spouses can afford this sort of lifestyle. So when the divorce happens, they are granted half of the retirement accounts despite not having had to lift much of a finger before or after the divorce.
The assumptions used to come up with these dumb laws are poor. PoF’s post highlights this quite well.
From the author of that post, I agree! The assumptions of the law are sometimes silly and far from reality, and that’s a great reason to consider a prenup. But then, the fact that sometimes the transfer of assets isn’t necessary or beneficial doesn’t mean that we shouldn’t be able to transfer assets without tax/penalty in the event of a divorce!
Whoops sorry! Meant to say your post, not PoF.
I agree that this is a good law. I’ve known people in situations where the spouse drained the account before it could be split in court, opting to take the penalty rather than split the money. I have no idea where they hid it after that. Is this legal? It always felt more than wrong to me. Asking because you seem to have some expertise–especially in PA.
The answer – as with so much of law – is that it depends. Every state is different, but in Pennsylvania we have “equitable distribution,” which essentially means we look to certain factors to help guide us in determining what distribution is fair – 50/50, 60/40, etc. – and we try to place assets/debts in each party’s column to reach the desired distribution after taking into account things like tax ramifications and the transaction costs for the sale of a home.
I find myself fighting hard over actions taken to hide or spend assets, but depending on many factors that often is considered a dissipation of marital assets. There are many times where even though an IRA has disappeared, we place the ending value in the party’s column as though they had it, which results in that person getting a proportional amount less of the overall marital estate. There are some times when the actions were so bad or the reluctance to provide information so egregious that we obtained attorney’s fees from that party, too. In the end, it’s a really, really bad idea to try to pull that crap, because the only people who win are the divorce attorneys who suddenly have to spend a lot more time on your case to figure it all out.
Craziness. I guess it’s not as “against the law” as I would have assumed. Good to know there are good attorneys out there who would fight it. My friends should have gotten a better one, it sounds like…or they had one, but, as you referenced, couldn’t afford to fight it out.
We are not married but plan to in the future. My fiance is divorced so he is well aware of how much money can bleed from a divorce. He also has a son from that marriage. Pre-nups definitely make sense for blended families.
For us, it was a very easy conversation to have and straightforward – we get to keep our retirement accounts (and to that end, we make sure we each max our accounts yearly). Re: spousal support would be limited or he’d waive it, but he jokes why would he give it up? Lol (he had to pay support when he got divorced).
There is nothing that says “I love you forever” like pre-planning a divorce before you even get married because that is exactly what you need to do with a well-written prenup. Yes, they have become more common and they are definitely the preferred choice to pre-plan who gets the dog, but they also create subconscious doubt and resentment over the long-term that in many cases preempts a divorce and they do not provide 100% asset protection. The wealthy fiance is better off to creatively use an irrevocable trust than a prenup to protect assets based on the last 50 years of court cases. See this article that outlines 25 actual cases comparing irrevocable trusts vs a prenup. http://www.ultratrust.com/l/j3l6B2/25cases.pdf
The good news is that most docs go into a marriage with a very negative net worth. Perhaps a prenup could arrange for continuing student loan payments after divorce.
But seriously, if possible it’s best to be “all in” with a marriage. That means finances too. Life will present many challenges to a couple along the way. I wouldn’t want to plant the seeds of an escape hatch.
+1, though it’s unrealistic for everyone, personally I want to go all-in and never let the idea of divorce enter my spouse’s mind, nor do I want her thinking about some easy way out of the relationship.
That’s a romantic thought but at the end of the day you need to insure against catastrophe. I read it on this blog all the time. I also read that divorce is a financial catastrophe, even a financial weapon of mass destruction. The last thing I want to do is go through the training to become a physician, live like a resident to plow through debt, live below my means to build a nest egg, and then watch it all be for nothing when my wife divorces me because I work too much or something. I mean, why not? If she gets half of my net worth and alimony for the rest of her life why not be with a low earning employee who has a bunch of time to spend with her?
Obviously no one wants to divorce but statiscits don’t lie. More than half the couples in America divorce. It is obviously better to pick the right spouse the first time and put time into your marriage but why not just set out the terms of your divorce in a fair way while you still love each other? I have seen nasty nasty divorces in my friends and family and it’s honestly something I wouldn’t wish upon my worst enemy but I think a Pre nup might help.
The good news is, according to a recent Harvard study, that the prevalence and incidence of divorce among US physicians in 24% (compared to non-healthcare professionals at 35%).
Female physicians, particularly those who work the most, were the most likely to face a divorce, but still at a rate much lower than 50%
Reference: http://www.bmj.com/content/350/bmj.h706
Best,
-PoF
Interesting! I wonder why the lower divorce rate? But man, I’d still want a prenup if I had a 25% chance of being set back, financially, by decades in a divorce.
It’s because most doctor’s wives know they have a good thing going, and are willing to put up with excess marital issues because they are receiving a lifestyle of excess. Plus, most of them knew what they were getting into when they were going into it.
The pressure to hook a doctor is tremendous, and the societal and familial pressure to keep said doctor hooked is even more tremendous, especially once kids are put into the equation. Moreover, the chances of landing a similar spouse substantially diminish with each passing year, male or female, while said doc can fairly easily start over with a new pretty young thing.
Actually, divorce is not and never has been the outcome for half of marriages. Even in its height during the 80’s, divorce rates never got up to 50%, and those rates have declined since. When you only look at first time marriages, divorce rates go down even farther.
I do not have a prenup and I Imagine if my wife and I are divorced, then I many of my assets will be hers. In California it is very much a pro-sharing assets state….so my plan is 1 wife. I already screwed up the 1 house and 1 job part of the equation. So the 1 wife is a must…
Pre-nups are like Leonardo Dicaprio’s character in the movie Inception: they plant the idea in your subconscious that divorce is a real and even likely scenario in your future.
My net worth was around -$100,000 when my wife married me, so I knew she wasn’t a gold digger (her net worth was about the same too). Suffice to say we did not have a pre-nup. Will one or both of us regret it one day? Perhaps. But does the mistrust and uncertainty it can engender at the very beginning of a marriage actually affect the chance of that marriage surviving? I would think it does, but it would be interesting to know if there is data on this.
Financially, there are obvious advantages to a pre-nup, but in my opinion they don’t outweigh its potential emotional damage.
Dr. C
For someone like you or me, I think you are correct. But some folks would never get married if they didn’t have one. 🙂
I understand the way you think, but I disagree strongly. I think the prenup and the discussion it generates is incredibly helpful to trust and relationship-building, when done correctly. Think about it: You can approach it as though you are both promising to one another and guaranteeing to one another that you aren’t in it purely for financial gain, planning to screw the other over if something goes wrong, or hiding anything. You’re open to discussing every aspect of the life you plan to live together, and open to working together to make sure you are each cared for in the event of a separation. It’s sort of…romantic, isn’t it? 🙂
We have a prenup and it actually made our marriage stronger. I think these preconceived notions are person or couple dependent.
I can certainly understand both points of view. One’s own view on a prenup is shaped by personality, relationship history, prior divorce, parental divorce, views on marriage, culture, and a myriad of other factors.
My visceral negative response to the thought of a prenup is some combination of conscious and subconscious thought reflective of these factors, rather than a purely rational decision. I don’t know if I could ever see a pre-nup as romantic, but never say never, right? 🙂
Ahhh, this is a sticky one. Mr. Picky Pincher and I didn’t get prenups because we don’t believe in them. Call me old-fashioned, but I believe that marriage is about being one entity with your partner, and that includes financially. I think too often people pair up with a partner before weighing how they’ll actually be as a partner, and that’s how you get into sticky financial situations.
But hey, maybe the situation would be different if we were millionaires. I can see the benefits of a prenup if you have assets you want to protect. But since I’m an Average Jane, I didn’t opt for a prenup.
I have a seven-figure net worth. My parents divorced after twenty years and are on their third and second marriages, respectively. My brother is on his second marriage. Of the five aunts and uncles I have who have gotten married, four have gotten divorced. I can think of three cousins who have gotten married. One is divorced, and another is going through a separation at the moment. In most of these cases, children were involved.
If anyone wants to convince me why I should get married without a pre-nup, I’m all ears. I’m not interested in setting my retirement back another ten years to financially support an ex who decides to commit infidelity or develops a drinking problem. I think that would be certifiable idiocy, but to each their own.
In your situation you would probably be well-suited to a pre-nup. Then again, many might argue that you would be well-suited to avoiding marriage indefinitely.
Haha, that’s exactly what I was thinking! If that was my personal history/experience with marriage I don’t think I’d ever try it myself. Yikes!
Lithium, if you do ever get married, may your relationship be the exception to the rule in your family.
It’s funny that people are able to plan for their own mortality dispassionately by buying life insurance, but “divorce insurance” is a verboten topic. My wife and I had equally small assets and no looming inheritance when we married, so default rules seemed adequate, which is probably for the best.
The truth! And the fact is you’re more likely to get divorced than you are to have some early death.
My wife and I didn’t have assets when we got married that we needed to protect. Whatever we have now was built together, so she certainly is entitled to her 1/2. :O)
What are the statistics? As it is, about 1/2 of all marriages end up in divorce. Is that number so high because of all the pre-nups people are getting? I doubt it. With or without one, humans are prone to failures. Do you take your commitment serious enough to work through those together?
One poster noted not wanting to support an ex that was the problem. However, statistically, we ourselves are as likely to be the problem. Would you want your spouse to stand by you?
If you know you do want one, than that conversation should probably happen pretty early in the relationship. That way expectations are known. Just like whether or not you want kids or whether you are a cat person or dog person. :O)
We didn’t consider a prenup because there was no reason to get one. Luckily we are still happily married so we haven’t tested that decision. However, having said that, I absolutely think some sort of legal protection should be in place for a 2nd+ marriage, whether prenup or trust, if there are children involved from a prior marriage. I can’t recall if it was on this site, but wasn’t there a poster a while back who had to pay the mortgage for his step-mother’s home because his father didn’t protect his assets prior to his death? He wasn’t doing this lovingly and she certainly didn’t treat him lovingly either.
There’s always a reason to get a prenup: You can address the issues of spousal support and alimony, and you can protect assets or distribute debts earned during the marriage, not only the ones you have coming in!
I am a family law attorney, and met my Husband after he was a practicing surgeon, we marred in our 30s after he was divorced in residency and my parents faced multiple divorces- and after all that there was no question of getting a pre (or post) nump. What I have learned from working with extraordinarily high and low incomes and uneven matches and very background is that your marital success comes from learning from your own and family’s past mistakes and the best practices of happy marriages. It does not come from a magic legal document. So many people put things in prenumps that aren’t enforceable in court, and you never know what is or isn’t till you filed and are arguing that part in front of a judge. spemd the time and money you have for a prenump on good premarital counseling. This is root cause analysis instead of putting a splint on a structural problem.
My one caveat is when there are third parties that have an interest- i.e. low class or manipulative relations may leave well alone if a prenump makes it clear the spouse in their family who “struck it big” with a dr won’t get a windfall if they split up, and the only way this lifestyle continues is if it continues as a marriage.
To clarity- we did NOT get a postnump
Out of curiosity, why “nump?” Or is it a recurring typo? Or a unique verbiage in your state’s law?
While I cannot imagine having had a prenup when I married my first husband (a med school classmate) at age 25, I wish we had had some kind of financial agreement to see that we were both on the same page. I brought 17K of student loan debt to the marriage, he brought 30 K of credit card debt from “living large” as an undergrad. Coming from a family of modest means, I was concerned about this, but his answer was ‘eventually I’ll be making more than I’m spending and I’ll pay it off then.’ Red flag! That never happened. He opened his practice and spent an insane amount on overhead. Got annoyed whenever I brought up the “b” word (budget), refused to set aside anything for retirement, would not consider buying a practice location and preferred instead to pay exorbitant commercial rent monthly, etc. After 15 years of marriage, we were 500K in debt (almost 200K of which was my med school loans, barely any of which got paid down during those 15 years). Five years after divorcing I am doing well (net worth approaching 500K) but still feel bitter when I look at my comparatively small retirement savings and the pile of student loan debt that I am still paying down. Meanwhile, he is still in debt, has little retirement savings and has not paid his state or federal taxes in five years. Some people do not/cannot change. Not having a financial agreement of some sort (perhaps laying out how much we would save vs spend, how debt would be managed, etc) is a major regret of mine that is going to continue to impact me for years.
“has not paid his state or federal taxes in five years”
Yeah you did good getting out. Wow!!!
I don’t think any document would have changed him, but discovering this ahead of time may have helped scare you away to begin with.
Regarding “state default rules being enough”… I’m sure nobody would ever move to a new state after marriage, right?
I also had this thought.
We did, and considered changes in state law governing any possible divorce or death when arranging our wills and ownership of or beneficiaries of various accounts.
Of course not! 😉
Some people move to a new state and have no idea of the implications.
The commonly used “50% divorce rate” is actually a relative risk projection of divorce for first time marriages, and it’s trending down. The precise number is 42%-45% of first time marriages are extrapolated to end in divorce. It is not the current divorce rate. More encouraging numbers are the percentage of the US population who have ever been divorced (21.5%), the percentage of those who are currently divorced (10%) and the annual rate of marriages ending in divorce (1.9%). Fortunately, many physicians have personal factors that reduce the risk of divorce: college education, marrying at an age older than 18, annual income > $50,000, having children after marriage, and non-smokers. Traditional religious values also appear to reduce the risk of divorce: avoiding cohabitation before marriage, having parents who did not divorce, having a strong conviction of a lasting marriage, strongly sharing a common faith, sharing a desire for children, and marrying as virgins. For more information, feel free to read this excellent article.
http://www.thepublicdiscourse.com/2015/12/15983/
RE: #3 downside: the silent parents. My husband and I are the high asset parents anticipating leaving lots behind to 3 children. We have a trust, for which they will each be beneficiaries; their spouses will never be beneficiaries. My understanding is that the trust will be protected from any divorced spouses. Our son will be the first to be married. I will explicitly explain to our lovely daughter-in-law-to-be that 1) the trust will not activate until we are both dead, and 2) she will never be a beneficiary, although her husband, and natural born children will be. She and our son can plan accordingly.
My grandfather left a very significant sum of money to his children (7 or more figures each). A prerequisite of getting any of the money, according to his will, was a post-nup of sorts (a legal document making my dad unable to ever stake claim over or make use of that money). This was never explained before his death and was only found out when his will was read. It really didn’t seem to be a big deal to my parents. They found a lawyer, had the document made and notarized, and boom it was done. So, you COULD lay it out in clear terms early on, or you could just let it happen after you’re gone and out of the picture.
“I will explicitly explain to our lovely daughter-in-law-to-be that 1) the trust will not activate until we are both dead, and 2) she will never be a beneficiary, although her husband, and natural born children will be. ”
Sounds like you’ll be a real peach of a mother in-law. Why have a conversation with your daughter in-law that is basically, “I don’t trust you, and never will, even when I’m long gone” (a day which, I suspect based on your post, she’ll eagerly await).
Here you’ve amassed great wealth, more than you anticipate spending in life, and the joy you derive from it is to imply that your daughter in law is a gold digger, but you’ve got enough money to higher an attorney to ruin her crafty plan. Money certainly does strange things to family dynamics. I suggest displaying a little class commensurate with your wealth and simply letting the trust instrument become known at that time of its activation.
Kind of brutal. But I think I agree with you that it might be better not to bring up these provisions early on.
Agree. This is a discussion we will have several decades from now. On the other hand, she and my son deserve time to plan. …………not a surprise on the day of my death.
The advice above promotes the ” Pop-surprise-on-execution-day.” This is in contrast to advice from the estate lawyers. The recommended strategy is for the trustee to make his/her plans known in advance to the beneficiaries. Preemptive discussions to ward off family splits.
As to the criticism of not including my children-in-laws: My critics would recommend including them. How about the second or third wives/husbands? The step- and half- grandchildren?
The fact is that a line must be drawn somewhere.
My best friend views her children-in-law as equal to her kids, and leaves them equal shares with their spouses and siblings in law in her will. Gotta verify if she already added the newest less enthusiastically welcomed DIL…
I think all these comments that one is contemplating divorce by doing a pre-nup are really short sighted and miss the point. If you really think about it, you can really make sure both parties are taken care of if things don’t work out. Divorce rate isn’t 0, it’s not 50% anymore, but prolly 20-30% depending on socioeconomic status, prior marriage etc. You’re more likely to get divorced than be disabled or die (using respective insurances). But when it comes to marriage, pre-nup, etc all logical reasoning seems to go out the window. Divorce is a financial catastrophe for doctors. My fiance was not maxing out retirement accounts before we met and now he is – because I want to make sure he is taken care of things don’t work out. I obviously don’t think it won’t, but I’m not naive either. Every couple needs to thoroughly discuss & disclose their finances and discuss their goals together. Divorces are harrowing enough emotionally and financially draining w lawyer fees. I don’t why anyone would want their loved one to subject to that.
Thank you for this comment, Miss Bonnie. Wise words! (Because they agree with me, of course.)
I approach the risk of divorce in combination with the risk of disability and widowhood- my tired response to women who assure me they don’t have to plan for the loss of their husband’s support at the current levels because of x y or z. (And so many of them end up with no option for earning over minimum wage, in their 50s or 60s!) I actually give out The Price of Motherhood by Anne Crittenden and Getting to 50/50 How Working Couples Can Have It All by SHaron Meers and Joanna Strober to (female) graduating seniors.
POint being we carefully make a legal contract for starting a new job, buying a home, etc etc. Yet the marital contract has no guarantees or redress. Sure you also can’t sue for damages if your spouse gains weight, chooses or through misfortune loses their high paying job, etc etc. But I know so many women who trade off the possibility of top level career success and wages to enable their husband to reach his peak while having children as well, and then of course some of those women are rewarded by no or minimal alimony and their kids spending weekends with Dad and the new wife. A friend is a radiologist instead of her top choice because that supported husband’s choice to be IM. Problem is she’s in Rad for life but was only married 20 years.
If my husband ever leaves me I’ll argue (ok would’ve been worth a lot more 10-20 years ago) I’d have a private practice in the posh neighborhood in Pgh where I grew up had I not given that all up for his military career and to raise his kids. And so he owes me the purchase/sale price of such a practice. We’ll see how far that argument goes if it ever arises.
I wanted my kid to do a prenup spelling out increasing share of each other’s premarital fortune (and debts) until 50-50 in year 10 of marriage, with spelt out plans for support of any kids to custodial parent if not joint. Fairness to both of them.
And the women who might be working minimum wage in their 50s may be doing so when husband is disabled or laid off, not leaving them. It’s unfair not to plan to take better care of the family/ couple in case his wages are ended, especially if one commanded high salary potential when first married. And don’t even get me started on couples where he works 3 jobs and never sees his kids so she can stay home full time with them- that can’t be best parenting.
Hey, whats wrong with being a Radiologist!!
Life is a gamble. You can try to insure yourself against every peril, but in the end, something you never thought of will get you.
I may make 300% more than my wife, but how much of that would have been saved and used to build net worth if she wasn’t both working and doing 90% of the kids stuff. I can’t imagine trying to parse this out and negotiate a prenup first year of med school! God bless those of who can.
Now I get if one spouse brings a large net worth or inheritance into the marriage. That is different.
I also get those for whom divorce is very common in their immediate families.
I often wonder if the most predictive factor of divorce is simply if your parents got divorced. Normalizes it or makes it taboo.
I know Physician on FIRE expects a blog post of a comment here, but unfortunately I have to disappoint. This a well thought-out, reasonable view of prenups, absent the usual biases and misinformation!
I’d only like to point out that, with regard to Con #2 (concerns with strain on the relationship from the conversation), it is also entirely possible that the experience may be positive. It was for me and Mrs. Vigilante, and it usually is for my clients. And further, if your spouse has a strong negative reaction to discussing finance or with realistically approaching the idea that sometimes marriages don’t work forever, that person is most likely not someone you want to marry – and most likely isn’t a person you’d find on a FIRE blog!
I think you also have to take cultural expectations in to account. When I got married we were both 22 and only had a few thousand dollars in assets between the two of us (but a positive net worth!) That, in combination with being very good mormons (we were married for time and all eternity, not just until death- so I feel like a prenup would have been frowned upon), pretty much ensured that a prenup was not even on our radar. I’m not sure what I think about a prenup now being older, wiser, richer, and way less mormon. Like if I was getting married for the first time at this stage in my life where I had more assets and did not have that same cultural framework in place, would I want one? I have no idea. It’s interesting to hear the different viewpoints on it though. Nicely written post!
I can relate. While we didn’t even consider a pre-nup when we got married, both of us would probably get one if we were to get married again! Mostly it’s probably an asset thing though. We just didn’t have any pre-marital assets or children.
Excellent insight. Although many couples might feel skittish about even broaching the topic of a pre-nup, the reason why it is important is that it establishes how the marital assets would be divided in the unfortunate event of the death of either spouse or a divorce. But this is not all, you can also have an agreement where each spouse’s separate assets remain separate, while also determining what should be done if the value of the separate assets were to appreciate. Some even cover other issues that are likely to arise after marriage, such as child support or spousal support, religious upbringing of children, etc.
I’d be interested in those who re-married in their late 50s….did you get a prenup? Having rebuilt before from a destructive spouse, who left me essentially at a “zero net worth”….I’m skittish.
Millenials even non-high income earners have shown to get pre-nups. Less above love nowadays, more about being realistic and practical and care for both sides.