“We didn’t need a prenup because we won’t get divorced and we don’t have much money,” a friend recently told me when I casually asked if she’d drawn up a prenuptial agreement for her upcoming marriage.
Her first argument induced an immediate eye-roll. But the second point -- that they’re not loaded -- isn’t necessarily a reason to dismiss a prenuptial agreement. Here’s what every newly engaged couple needs to know (and consider) before saying “I do.”
Why Get a Prenup?
You’re in love! What would ever come between that? Then life happens, people change and sometimes divorce comes knocking on the door. Getting a prenup forces couples to confront important money conversations early, because you're discussing future equitable split of wealth related to investments and savings, possible alimony payments and debt – which could include student loans, especially if you co-sign or continue taking out student loans after saying "I do."
“A prenup eliminates the opportunity for a peaceful divorce to turn into a bloodbath,” says Matthew Zubricki, a 28-year-old CPA based in Chicago, who is currently drawing up a prenup with his fiancé. “It seems insane that anyone would sign into a partnership where one partner could hypothetically leave at any time with the incentive of claiming half of the partnership's joint assets.”
An important thing to remember about debt: What you bring into a marriage is often viewed as each person’s separate property, but debt (including student loan) accumulated during the marriage could be viewed as community property for which you are both responsible. A prenup could help offset this potential issue.
Yeah, But Isn’t My Future Spouse Going to Be Offended?
“I originally asked my partner about the prenup even before we got engaged,” says 26-year-old financial analyst Michael Estabrooks. He says he’s saved a “comfortable amount” through work, early investing practices and starting a side-business. But he admits his now fiancée felt the conversation drained some of the romance out of the engagement process. But after the initial awkwardness subsided, it proved to be beneficial.
“I explained that it would never be that my assets are restricted in anyway once we are married and was not an attack,” he says.
Conversations about money between partners are rarely comfortable, especially when it’s a prenup conversation. Be sure your spouse understands first and foremost that this isn’t a judgment of his or her behaviors, but rather a practical conversation about the future. And the sooner you start, the better. Don’t wait until days before walking down the aisle to broach the subject.
Start by positioning your prenup talk as a more general financial conversation as a couple. Then, transition into specifics like splitting wealth, alimony and debt. And don’t forget to emphasize how a prenup gives you both control instead of just letting the courts decide your fate.
“View it as a way to draw your own rules instead of relying on the default legal system which may or may not accommodate all of your individual circumstances,” says Zubricki.
And it might even bring you closer.
“My husband isn't normally a big what-if, future scenario person so it was really great to see that side of him,” says Tara Clark, a 28-year-old software engineer based in Seattle. “All of those conversations serve as a really great foundation to how we talk about money in our marriage.”
What to Put in a Prenup
Prenups aren’t solely used to outline the splitting of assets, wealth and debt responsibilities after a conscious uncoupling. You may be able to dictate certain terms of life after divorce with lifestyle clauses.
Such clauses can range from relatively normal (e.g. who gets custody of the dog) to the intense (e.g. a lump sum payment if someone gets caught cheating) to the bizarre and perhaps not totally legal (e.g. how many times of week you are required to copulate). Before you dismiss these clauses, consider the three below.
You can consider having a "gag order" in your prenup. This might sound extreme if you’re just two normal people with no fame or brand to protect. But if you believe you may have an established brand, business or have some other need to protect your reputation, then it can’t hurt to have one in your prenup to prevent a scorned ex from dishing your dirt.
Another option is a goodwill clause, which similar to a gag order, prevents your ex from trashing you publicly and vice versa.
Increasingly common is what’s called a social media clause. These typically state that you and your ex can’t be sharing embarrassing photos or make disparaging remarks about each other on social media. Violating this clause could lead to a fine -- it's been reported it could cost someone $50,000 for a violation.
One thing to keep in mind is that sometimes having too many frivolous lifestyle clauses can be cause for a judge to invalidate a prenup during divorce proceedings as some of the clauses may not be considered legally enforceable or in opposition to state law and therefore will invalidate your contract.
Didn’t Get a Prenup? There’s a Postnup for That
A postnup is similar to a prenup, except it happens after the wedding. A postnup is not difficult to get; it requires couples seeing an attorney like a prenup, and you’d hash out the same type of contracts as in a prenup. And it’s not a bad idea to keep things updated as life moves along: life changes such as buying and selling property, moving to a new state, or having children are all reasons one might want to consider getting a postnup for.
Erin Lowry is a millennial personal finance expert, speaker, and author of the book Broke Millennial: Stop Scraping By and Get Your Financial Life Together.