Prenuptial Agreements: Do You Need One and How Do You Do One Without Harming Your Relationship?
Prenuptial agreements are a touchy subject for people considering marriage. Just asking for one can indicate distrust or problems with the relationship. I have done divorces for over twenty-five years and have seen some divorces that could have been prevented by a good prenup and others that couldn’t be, but a prenup would have made the divorce less expensive and stressful. This article reviews the pros and cons of a prenup to help you evaluate if a prenup would be helpful to you. It also reviews how to discuss a prenup and draft one that helps rather than harms your relationship, while still providing protection in the event of divorce.
PROS
The primary reason to do a Prenup is to protect assets in the event of a divorce or at death. If there’s a divorce, the judge has to follow the terms of the prenuptial agreement as long as it was prepared correctly. It’s also useful for those who want to be able to leave their assets to someone other than their spouse. In Colorado, you have to have a prenup if you don’t want to leave all of your assets to a spouse (though you can leave items like jewelry, and other special objects to other people). Couples often get a prenup if they have been married before and have kids from that prior marriage because they want to be able to leave some or all of their assets to their kids. This is often a mutual problem that has to be taken care of with a Prenup.
Prenuptial agreements can actually encourage people to marry, since it can resolve problems that would prevent people from considering it. For example, older people with children who have been married before are concerned about leaving assets for their kids. They may feel their partner is financially stable and they do not want to be required by law to have their partner inherit money that they intended to give to their children. They’re not wrong, since in Colorado, you can’t disinherit a spouse, so drafting a will that states the children inherit doesn’t work. However, with a prenuptial agreement, the parties can agree to waive their right to inherit, change their will and the problem is solved.
Another benefit of a prenup is to reassure people who have substantial assets or are likely to have them in the future. They are often afraid to get married because they (or their family) are concerned that failure of the marriage could mean loss of some of those assets. That’s a threat even in a state like Colorado, that protects separate assets to a degree since increase in value of the assets during the marriage is not protected. Additionally, in Colorado, a divorce court can consider inheritance that occurs after a divorce for purposes of changing maintenance even if that means using the inheritance to pay it. A prenup can allow the parties to agree that increase in value of the assets isn’t marital and that assets owned by a party remain theirs and can’t be awarded through maintenance.
For people who have been through a difficult divorce, a prenup can be a means of eliminating some of the barriers that keep them from remarrying. The prenup can deal with hotspots such as how to deal with debt and what property belongs to each person and can even have mediation/arbitration language to assure that if there are problems, there is a way to deal with them short of divorce.
For people with a substantial inheritance or who are likely to inherit, a prenup can prevent a divorce court judge awarding maintenance based on the inheritance although the prenup has to be properly designed and fair to work.
Most people get a prenup in case the relationship doesn’t work out. However, one of the best reasons to do prenups is that they can prevent trouble in a marriage and avoid divorce. If people work through how they will handle important issues like finances and bills, they can be sure they are on the same page and have a strategy that is mutually agreeable. Are the bills to be paid fifty/fifty from a joint account? Which bills are joint and which are the responsibility of a specific person? These are issues that can be resolved at the very start instead of becoming a sore point later. Likewise, if children are expected, is one person going to stay home with them? Are both parties going to work part-time or do they intend to use daycare as much as possible? These are critical issues that exist in any relationship that should be dealt with fairly and sensibly. At best, it preserves marriage but even if the marriage doesn’t work out, the parties have made the decision rather than hoping a judge will reach conclusions they can live with. If properly designed, a pre-nup is a more precise agreement that has the same effect as if the judge had held a hearing and issued an order. Good agreements save court time and expense as well as reaching a result tailor made for the parties.
CONS
Prenups should not be an attempt to micromanage a relationship. If a prenup attempts to address every conceivable situation that might arise, it is a sign that the relationship is not advanced enough for marriage and likely would do better with counselling.
Prenups should not be a way to evade any attempt to assist the other person and in fact, prenups that are worded that way often don’t survive judicial review because they are deemed ‘unconscionable’. Sometimes, the process of drafting indicates there is only a desire to protect the parties against any possible cost and no desire to be kind or supportive to the other person. In that case, it’s better to recognize that this is a relationship with some benefits but that marriage isn’t advisable since it’s misleading. Does that sound harsh? Marriage usually implies a serious, ongoing commitment; in sickness and in health, etc. But consider a prenup where the parties agree there will be no maintenance (alimony), that all current and future assets (like inheritance) are separate property, all bills are to be divided 50/50 for marital expenses and any other bills are the responsibility of the person who generated them. Then imagine a situation where the parties have been married twenty years, have raised children together and one spouse gets terminal cancer and the other spouse wants a divorce. If dying partner stayed home and raised the kids, they might have no pension because they weren’t working. Is it right that the dying spouse is completely on his or her own without any assistance from the other spouse? It would have been fairer to be honest that the relationship provides benefit (shared bills) only if the parties are happy and only if the relationship lasts but that it could end at any moment. Then, both parties could have prepared accordingly. For example, the partner who stayed home with the kids might have refused to marry and stuck with their career which might mean they had savings, retirement and a viable career.
That’s not to say that prenups shouldn’t protect people’s inheritances, etc. but it’s also an opportunity to consider what you want to do for the other person if the relationship doesn’t work out and under what circumstances. For example, the parties might agree to waive maintenance, unless a partner is seriously ill or otherwise unable to work through no fault of his or her own. If a partner is incapacitated the parties would either agree on a reasonable level of maintenance for a reasonable period of time or go to mediation/arbitration.
It’s important to add that a prenup that is too harsh may not withstand scrutiny by a divorce judge. Judges review prenups during a divorce and in some cases will throw them out. There are various ways a judge can find to do this so it’s best to have an attorney who is aware that judges hey have a considerable amount of power and creativity to get rid of an agreement they feel is harsh or unfair. Never underestimate an irate district court judge or forget that a prenup removes all their power. Prenups need to be reasonable and be carefully drafted if you want a judge to accept and sign off on them.
HOW DO I DO A PRENUP?
Be sure both parties have an attorney review all assets and debts. You must include the key items that belong in any prenup: 1) how bills get paid and by whom, as well as a plan to handle debt; 2) whether any assets will be marital and how that would occur; 3) whether there will be maintenance if there is a divorce and under what circumstances; 4) whether the parties intend to leave any property or money to one another if they die or if it all goes to someone else like children; 5) what will happen if there are kids (who stays home with them or if there will be daycare, how you will parent them if there is a divorce) and 6) a mediation/arbitration clause in case there are problems during the relationship or if there is a divorce.
DIPLOMACY AND THE PRENUP
If you decide a prenup might be a good idea, it’s best to raise the topic carefully and with some tact. Even if it seems like a good idea to you and perfectly reasonable, it’s all too easy to offend or hurt your partner by asking for one. Having heard good and bad openers on this from clients, I strongly suggest bringing up the topic in a way that emphasizes you’re serious about the relationship and want the agreement as a way of strengthening and protecting it.
ALTERNATIVES TO A PRENUP
If you have concerns about marriage but don’t think a prenup will work, a long engagement can give you an opportunity to work through the issues and see if the framework you have set up is working. It’s also an opportunity to see how honest and trustworthy your partner is. Of course, marriage can change people and unforeseen things can arise, so if a prenup doesn’t seem workable, consider the advantages of marriage relative to the disadvantages, since marriage isn’t the best option in some cases.
A FINAL WORD ON THE ADVANTAGES OF MARRIAGE
Marriage and prenups are complicated so many people don’t do either. However, there are some distinct benefits to marriage. For example, if you are married, you have legal rights if the other person becomes seriously ill or injured. The hospital has to let you visit if your partner is really in trouble and they may listen to you as to the best options for their care (it’s still better to have a Medical Durable Power of Attorney and Advanced Medical Directive). Also, if you aren’t married and the person with the property dies without a will, ugly things can happen. I consulted with a woman whose long-term partner died climbing one afternoon. By the weekend, his family had shown up and served her with eviction. There was an issue even getting her own property out since it wasn’t clear what was his and what was hers. It goes without saying that she had no help of any kind financially. It’s hard to say what he might have wanted to do to help her but odds are he didn’t expect to die so young and would have been horrified at the thought of her being homeless and without even her own property within a week of his accident.
The power of a marriage is that it protects you and your partner. Those in committed relationships really ought to consider marriage or get good estate planning to protect their partner to the degree that they value them. When a partner dies, it is like a bomb going off for the survivor, even if they’re married and there’s a good will and related documents. It’s not just the pain and shock, but what will happen economically short and long-term to the survivor. Many partners want to provide some sort of assistance to the survivor unless they both have enough income and property that it’s not an issue.
Marriage can also be useful because it creates a framework to deal with life’s realities and it makes people focus on them. That’s clearly true for an issue like death, but there are many other issues as well. Couples who aren’t married and have no plan will find the same issues will still come up and they wind up dealing with them piecemeal and hope it all works out. People who get married but haven’t thought through these issues are protected in many ways but they may or may not agree with the protections provided by law. Those with a pre-nup who are married are protected in precisely the ways they want to be.
