Do You Need a Prenup?

Nothing I had ever written about prenuptial agreements — and I’ve written plenty — prepared me for doing my own. I knew the rules; top lawyers had taught me, in interviews. But to understand the emotions, you gotta be there yourself.

See also: Marriage and Money: Talk before taking the leap.
 
Prenups aren’t for sissies. What seems to one of you like a perfectly logical financial choice might feel like a snub to the other. Feelings can easily be hurt. Nevertheless, money talk is critical if you have any savings or assets at all — especially in later marriages like mine where adult children are involved.

Second marriages may need a prenuptial agreement to protect children and savings. — Getty

If you’re at the prenup moment, it means that you’ve decided to marry rather than simply live together, a choice I discussed in my column of June 2011. Marriage brings financial rights and responsibilities. If you divorce, you can be required to share marital property and perhaps pay alimony. If you die, your spouse might be able to claim one-third to one-half of certain of your assets, depending on your state.

A prenuptial agreement frees you from these general rules. It’s a legal contract, between you and your spouse-to-be, setting forth what will happen to the money when you die or divorce. You can divide it (or not divide it) in any way you want. Prenups make sense if you have assets you want to preserve for children from a previous marriage, own a business that you want to keep in the family or have endured a costly divorce that you don’t want to risk again.

Prenups aren’t necessarily set in stone. If the marriage is going well and circumstances change, you can write a postnuptial agreement with different terms. For example, you might begin by deciding that, at divorce or death, you’ll each keep the assets you brought to the marriage. That way, your entire estate would pass to your own family, not to the family of your spouse.

Then, maybe a few years later, if you’re financially strong, you might decide to leave your spouse some extra money in your will. Or you might leave money in trust for your children, with the income going to your spouse for life.

The emotional problems arise when you’re not in similar economic circumstances. An implicit part of the marriage bond is that you’ll take care of each other, meaning that one spouse shouldn’t be left to struggle if the other one dies. To address this, your prenup might create two plans — one financial agreement in case of divorce and another one in case of death.

A particular point of contention might be the family house, especially if it’s your major asset. You might want your spouse to continue living there if you die, with the property eventually passing to your kids. But what if your surviving spouse wants to sell and live somewhere else? What if you’re marrying someone younger, potentially forcing your kids to wait many more years to inherit the property?

Next: How to get started discussing your prenup. >>