Once considered a quirk of high-powered matrimony, prenuptial agreements are becoming more mainstream. Take it from a celeb – prenups are not just for the rich and famous.
In the aftermath of her divorce, MC Lyte is recommending more people, especially those in the Black community, sign a prenup before saying their vows. Americans may be warming to the rapper's advice. A Harris Poll from last year showed that 15% of Americans signed a prenup, up from just 3% in 2010.
Besides growing interest among younger couples, there is also an awareness that this legal framework can protect women as much as men. This post will ask financial advisors what they advise their clients on when considering a prenup and how to go about it the right way.
A prenuptial agreement (or “prenup”) is a contract signed by a couple before they are officially wed that delineates how assets should be split in the event of divorce. They also may cover property rights, spousal support, or other financial aspects of the relationship, but typically not custody or matters related to their children.
Most couples don't want to split hairs when they're getting ready to tie the knot, but in hindsight, many admit setting guardrails can provide much-needed clarity in case things go awry. Many divorcees, like MC Lyte, say they provide necessary transparency.
“If you have anything to protect going into a marriage, get a prenuptial agreement so there's no confusion if it comes to an end,” the rapper wrote in an Instagram post last month. As a matter of fact, make sure you protect all of your assets with proper insurance, financial and estate planning.”
The musician may be in her 50s now, but her advice resonates with the younger generation.
The typical prenup signatory is changing. No longer the abode of older men in their second (or third) marriage, prenups are increasingly sought after by young people and women. Although prenup adoption is rising among Americans as a whole, millennials are leading the charge.
The Harris poll found 40% of respondents between the ages of 18 and 34 who were married or engaged said they'd signed a prenup. Millennials are decidedly more pragmatic about money in marriage than previous generations, says Michael Waters, who investigated the issue for the New Yorker.
Facing rising debt and economic uncertainty, millennials tend to view marriage as more of an economic partnership, making prenups a less awkward topic.
“Done right, prenups can assure each party they will be treated fairly in a divorce, and so in place of worry or resentment, each person is freed up to give 100% to making the family as strong as possible,” Adam Kol, J.D., and CEO of Couples Financial Coach.
Without a prenup, the fate of the couple's assets will be determined by the courts.
“Your state already has laws and case law that dictate how your assets and debts would be divided in case of divorce, and at least with a prenup, you get to have a say and tailor an agreement to your needs and circumstances,” said Kol.
Prenups can take different shapes and forms, and there is no set template for the contract's contents. As they reflect personal values, a prenup is subjective and needs to feel right for the couple.
“While it's important to ensure each party feels they've in general been treated fairly in a prenuptial agreement, it's important to keep in mind that fairness is a construct with no true definition,” Kol added.
“I suggest rather focusing efforts on having the spouses-to-be feel understood by each other, cared for, and like they want what's best for both of them,” Kol said. “Practically speaking, it may be ideal for each party to (be) represented by an attorney who can advocate for an agreement that feels fair based on that party's wants and needs.”
Think of the Kids
Making provisions for next of kin in the event of divorce is another crucial function of a prenuptial agreement.
“Prenups are very important for second marriages, especially when there are children from previous marriages,” said Chris Berry, JD, CFP, and Chris Berry, founder of Castle Wealth Group.
When there are children from previous marriages, the prenup becomes more important because we don't want one spouse to take all of the marital assets upon divorce or death, leaving the kids from the previous marriage hung out to dry,” he added. “It's important not just for divorce situations, but also estate planning purpose to honor the wishes of both spouses and both spouses' families and children.”
Each couple's circumstances are unique, and prenups will be by no means needed by everyone. The process of creating a prenup requires open and honest communication between partners, so it's essential to consult with a qualified attorney to ensure that the agreement is legally sound and meets both partners' needs and expectations.
The reduced stigma around the topic means more couples can at least explore the possibility of giving them more agency in setting the financial foundation of their relationship.
This article was produced and syndicated by Wealth of Geeks.