Prenuptial agreements or premarital agreements (PMAs) are just for the rich. Premarital agreements breed or signal distrust. Premarital agreements bring damage to the relationship. This is a “common knowledge” about getting a prenup, right? Not so fast.
PMAs Are Only for the Rich
Yes, premarital agreements are for the rich. In the past, they were often used by the ultra wealthy to protect assets from a less well-off spouse-to-be. PMAs were often used by those who had sizable cash accounts, substantial real estate investments, or valuable businesses to protect if the marriage went south and came to an end. As of 2020, only 6% of Americans have a PMA in place.
However, premarital agreements are also advantageous for the not so rich or the “not so rich yet.” With the average age of first marriage in the United States currently at 28 years for women and 30 for men, many of those getting married for the first time may not have significant financial assets to protect…yet. They may have a well funded retirement account and perhaps a home, but it is unlikely that they will have amassed substantial wealth at their first walk down the aisle.
It is difficult to see very far down the road as a 20-something, or even a 30 or 40-something. Will our career take off? Will we launch a successful business? Or will our careers stall and then dwindle or our entrepreneurial venture go belly up? Will we choose a career or vocational path that pays substantially more or significantly less than the path our partner chooses? If there is a disparity (and those tend to grow over time) and one or both of partners choose to end the marriage, is one of us willing to pay alimony or spousal support to keep the other party at a lifestyle to which s/he may become accustomed to over the years? Many partners have no burning desire to send a former spouse a check every month to maintain a standard of living that the lower earning partner indirectly chose because they selected a lower earning path.
I did not ask myself or anyone else any of these questions when I married the first time. I was most definitely asking them over and over again in my mind when that marriage imploded 22 years later. I faced the choice of spending tens of thousands of dollars going to court and airing our dirty laundry in public, or agreeing to tens of thousands of dollars in alimony to protect my family from a long and contentious divorce settlement process. Paying five years worth of alimony was the best money I ever spent in my life. However, I wished that someone had asked me to consider a premarital agreement when I was 20 and convinced that — even though the divorce rate in 1994 was already around 50% — my marriage would be a happily ever after situation. This romantic optimism is one primary reason that premarital agreements are used so infrequently in the United States.
Further, many individuals and couples avoid the PMA topic because they think it will cost too much money. With the average divorce costing a whopping $15k-30k in legal fees, the cost of developing a premarital agreement with the help and expertise of a qualified attorney is a steal. This is particularly true if you and your partner work together, ideally over several months of discussions, to craft a high level or simple PMA covering the topics you think are important.
There are several great resources to help you get started on this. For instance, this checklist from the Willack Law Group offers a solid start. For a more in-depth approach, Prenuptial Agreements – How to Write a Fair & Lasting Contract will help you ensure you’re covering all the bases you want to and some you’d not even thought about.
PMAs Are Evidence of Distrust
Premarital agreements can signal distrust. It can signal that one or both partners do not trust one another. Or that they do not trust or believe that the marriage will last. Premarital agreements are seen as pessimistic about the ability of the two partners to make the marriage work over the long haul that often includes intense stressors such as raising children, caring for aging parents, job loss and serious health issues. A PMA can also be perceived as an unwillingness of one or both partners to share the wealth, assets and rewards they may accumulate during the marriage. This “negative signaling” suggests concerns related to trust/distrust, power, and is another major reason why so few couples use a premarital agreement before tying the proverbial knot…the first time.
However, a PMA can also demonstrate a desire to enhance trust. Having a conversation about developing a premarital agreement is awkward. If you can raise the possibility and your partner or betrothed indicates that they are amenable or even that they have considered it as well, you are one of the lucky few. However, it takes bravery and courage to float this topic with the one person in the world you love and cherish more than another. In putting the topic on the discussion table, they are showing you that they trust you to hear them out and to have an open and frank discussion. A discussion that for some people is even more uncomfortable and requires greater vulnerability than talking about sex – a discussion about finances.
If you are going to talk about a premarital agreement, then you are also going to have to be relatively transparent about your finances. Disclosing your financial situation — both assets like savings, retirement and investment accounts, stock holdings and liabilities like student loans, credit card debt, and mortgage balances — will be exchanged as part of the process. A PMA is incomplete without these disclosures and if an attorney is willing to craft a PMA for you without those disclosures, then it is time to find another attorney. Being more open and transparent builds trust between partners rather than undermines it.
PMAs Undermine the Relationship
Premarital agreements can bring harm to the relationship. Much of the mainstream commentary is that a PMA undermines the marriage before it even begins. However, much of a PMA’s impact on the relationship depends largely on how you engage with the development of the document. Broadly, there are two approaches used. The traditional process usually involves the partner who desires the PMA to have a lawyer craft the document and then the other partner signs it, which not surprisingly makes for a very adversarial and often unfair process.
The other approach is collaborative and focuses on joint goals. The collaborative approach sometimes uses a single attorney. Some attorneys will not be on board with that because each party to the PMA should have their own attorney representing their interests. However, others recommend each partner use their own attorney, but to have the two partners and their respective attorneys meet to hammer out any details, confusion or disagreements. From my experience, each partner having their own attorney is wise and meeting as a collaborative party of four is even better. This approach can be particularly effective in avoiding unnecessary conflict and misunderstandings, especially if one partner has substantially more experience or familiarity in the law or in dealing with legal issues compared to the other partner.
The traditional approach is likely to create conflict and feelings of fear, anxiety and resentment. However, the collaborative approach, if done well, can actually serve to protect the relationship from future conflict and smooth the process should the couple decide to divorce. Further, it can not only protect the longevity of the marriage but strengthen the relationship itself. Here is why.
Financial issues are a top source of conflict in most marriages and a major predictor of divorce. The process of developing a premarital agreement can help the couple engage in conversations about money and especially about expectations involving money early on and ideally before conflict arises and resentment grows. For instance, how would you divide various types of assets such as real estate, cars, retirement or investment accounts, and cash? Do you expect all of your assets to be shared assets or are some assets shared and other assets solely held by one partner? Similarly, discussions of these questions should also lead to issues of whether all expenses are shared expenses or if some are individual expenses.
Here is also where the relationship cannot only be protected but strengthened. For instance, in my romantic relationship, some expenses are shared like housing costs, grocery expenses, utility bills, etc. Others like clothing, dining out when we’re apart, travel that we do separately, outdoor or recreational equipment are individual expenses. Why? Because I don’t want to feel guilty or self-conscious when I spend money on clothing or getting my hair done, and I don’t want to feel resentful when my partner buys high end tennis or ski gear. Being explicit — and documenting it somewhere — has helped us create a life together while keeping some independence. It also helps avoid conflict and resentment that can stem from different ways that partners make, save, or spend money.
Bottom line: You, your partner and your relationship are worth the time, effort, and money that go into developing a premarital agreement. This is because the PMA development process sets you up for success in the marriage and helps protect against unmet expectations during the marriage and major legal fees should the marriage come to an end. Summon your courage and develop that PMA. You and your relationship are worth it.