As young couples redefine the rules around marriage, millennials are embracing prenups in large numbers. In fact, according to the American Academy of Matrimonial Lawyers, 62% of lawyers saw a rise in prenups from 2013 to 2016. Many are encouraging their young clients to think of prenups as a financial planner; just another way of mapping your economic strategy over the course of your relationship.
This spike in prenups is driven by two factors. First, couples are waiting longer to get married meaning they’re entering many of their relationships with established assets. As such, many couples want to be clear between themselves on how these assets will be treated in their relationship.
Secondly, millennial couples are learning from their parents' mistakes. After watching their parents get divorced and navigate messy financial arrangements, millennial couples are keen to avoid those issues. As such, children of divorce have certain reservations about marriage, and are predisposed to protect themselves in the event of a dissolution.
So do you need a prenup? This guide will dispel myths and get into the nitty gritty of what it all means.
A prenuptial agreement can be a useful financial planning tool for you and your partner. A prenup is a written agreement a couple creates to protect their respective financial assets and gain a sound understanding of how they’ll co-mingle their assets. A signed prenup overrides the marital laws that govern division of assets, property, savings and retirement benefits.
In the past, it was assumed that only the rich and famous exercised their right to prenuptial agreements. And yes, traditionally, these agreements were used to protect family wealth, trust funds, inheritance, or children from a previous marriage. But in recent years, as couples redefine the rules around money in a relationship, couples of all types of financial backgrounds have chosen to utilize a prenup.
Young couples are waiting longer to get married, they’ve often acquired financial and/or professional assets by the time they enter their unions (think personal brands, debt and even pets).
For these reasons and more, there’s an emerging trend of couples who are adding prenups into their marriage and shattering the stigma around this practice.
The Emotional Side
The hardest part about getting a prenup is the act of asking your partner for it. How do you approach the awkwardness of asking your partner for one? How will this make them feel? Will it be upsetting or send the wrong message? More importantly, are we setting ourselves up for failure?
Although the subtext around prenups are actively changing, it’s possible that your partner could interpret a prenup the wrong way. Because the prenup itself is a “plan B” if the marriage doesn’t work out, it’s understandable that your partner might be taken back, at first. But fret not, there’s a way to have this conversation without sending the wrong message.
That said, prenups do not (in any way) worsen or weaken your chances at a long and happy relationship. If your partner displays some of the financial resistance or has an emotionally-charged response, be patient. Talk through it the way you would about any other part of your relationship. And in many cases, because the public response is shifting so much, you might find that your partner is more open to the idea than you think.
The Financial Side
The most important thing when deciding to get a prenup is understanding the financial implications of this agreement. Once a prenup is in place, you're making it clear that the agreement will override state laws in the event of death or a divorce. In some instances, that can work against what you originally intended. For example, if you and your partner both have family wealth, your prenup could stop you from inheriting either person's estate upon their passing.
One way to resolve that is to be explicit about what happens in these events or create an estate plan to plan thoughtfully for those circumstances. In another instance, say if you contributed to your partner's growing success in their business while married, you may not reap the rewards of their success because your prenup was agreed upon before their accomplishments.
The point here is to know explicitly what you're getting into and thinking through the possible outcomes that you might face.
In the end, deciding to get a prenup or not is entirely up to you and your partner. In fact, a prenup is just one of several things you might want to consider when typing the knot.
Just remember, you and your partner get to design exactly the wedding - and the marriage - that you want, prenups and all.
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