Prenuptial agreements aren’t just for the rich. See what you should know

Few people get married thinking they are going to get divorced. Or how to divide money or possessions after a marriage has ended.

But more brides and grooms are considering this scenario, especially when it comes to prenuptial agreements.

Prenuptials are often faced with preconceived notions of a lack of trust or a way to protect wealth when the partners’ wealth is out of balance.

But divorce lawyers and financial planners argue that the prenuptial agreement is a way to clarify financial matters and open up communication before marriage vows are exchanged.

These agreements aren’t just for the rich and powerful — 62% of divorce lawyers said they’ve seen an increase in clients applying for a prenuptial agreement, with a significant increase in millennials signing them, according to a 2019 Academy study. American Matrimonial Lawyers.

Here’s a rundown of prenuptial agreements and why you might need one.

The basic

A prenuptial agreement outlines certain property rights and financial assets that each person owns before getting married and sets out how those assets are to be divided in the event of separation. If a prenuptial agreement is in place, it supersedes the couple’s state divorce laws.

“Basically, it’s a divorce settlement that you come to before you actually get married,” said David Storobin, a lawyer and former New York state senator. “So the advantage of doing this is that you have some goodwill at that point.”

These agreements only cover financial matters: children are off limits. While children can be financially provided for in a prenuptial agreement, couples cannot change child support or custody.

Divorce lawyers warn that putting together a prenuptial agreement shouldn’t be a task left for the week of the wedding. Three to six months before your wedding date is a good window to complete one because it can take time.

“When couples start planning a month or two before their wedding date, it ends up being slow because it takes a back seat to the wedding cake and the flowers,” Storobin said.

Not just for the rich

While a prenuptial agreement can easily be thought of for wealthier people, lawyers said it could also work for couples who don’t have a lot of assets — like those who want to protect a business they own or just want to work out finances before marriage.

In general, prenuptial agreements can be helpful for couples where there is an existing wealth imbalance – or there can be one later.

Even if people aren’t wealthy now, some customers have reason to believe they will be — for example, if they’re in medical school or expecting an inheritance.

Storobin said he is seeing more and more middle-class clients seeking prenuptial agreements. Often, they don’t want to lose half of what they have or lose a specific asset, like a small business, if they get divorced.

Julia Rodgers, CEO and founder of HelloPrenup, an online platform for creating prenuptial agreements, said agreements can be beneficial for both sides, not just the wealthier spouse.

“If one party is very, very rich and the other party is not, there are mechanisms you can put in place to ensure that there is some financial equality in the marriage,” Rodgers said.

That’s one reason prenuptial agreements are becoming more popular with younger people, Rodgers said. The vast majority of HelloPrenup users are millennials — the average age of the site’s users is 34, she said.

Women, especially, have “incredible earning potential” compared to previous generations, Rodgers said.

“The reality is that people, specifically millennials, are entering marriages as a partnership,” she said. “So they don’t have this 1950s-style expectation that one person is going to work and the other is going to stay home.”

And the ongoing pandemic also makes many young people realize that their savings and assets are not as stable as they thought.

Bringing up a difficult subject

While not an easy discussion, Rodgers advised bringing the prenup early — ideally before you get engaged, even if it’s just hypothetical. That way, both people are prepared for the discussion when the time comes.

“You go into the engagement with that expectation and understanding that this is something you’re going to talk more about,” Rodgers said.

It’s not about trust, she said, it’s about fears around divorce — especially for younger couples.

Only 62% of millennials were raised by both parents, according to the Pew Research Center, a lower percentage than previous generations.

And it’s important to have open, honest conversations about these fears, both with yourself and your partner.

“Is it because your parents went through a messy divorce?” said Rodgers. “Would that help make you feel really comfortable and give you a sense of clarity with finances?”

The hardest conversations to have in a relationship can be about money, Rodgers said. But it shouldn’t be taboo.

“As much as a legal document, it’s an emotional document,” Rodgers said. “So a prenuptial agreement can really help facilitate these conversations about money.”