Love is in the Air: 3 Things to Consider before a Prenup
“Do you know of a good lawyer to do a prenuptial-agreement?” the email from a young, engaged friend of mine seemed simple enough. However, the question lead me to discern that there are several essential discussions needed before they contact a lawyer for a prenup.
Pre-nup agreements are all the talk in certain circles. You need to ascertain if it is for you – not because you both read it somewhere. (Or God forbid saw the advice from someone on Social Media who was not a financial or legal professional.)
Discuss these questions together:
Do you need one? Why?
Have we communicated honestly about all our financial information?
Is a prenup recommended by a legal or financial professional who has both of our interests in mind?
Motto for the bride and groom:
We are a work in progress with a lifetime contract.
- Phyllis Koss
Step 1 – Understand Why You Want a Pre-nup
The typical reason is a disparaging state of life either financially or personally between a couple. One person has deep wealth, ownership in a family business or children, and the other doesn’t. Or one person was married before and feels uncomfortable without one as a result of that settlement. Consider your special circumstances as a couple to understand if you have a valid reason for a legal document.
Then, understand the laws of your state of residence. Most recognize that each person’s assets are their own coming into the marriage and even in the case of a divorce will be able to keep those assets.
In addition, review the federal laws of marriage. The Government Accountability Office did a study in which they concluded over 1,100 rights were part of the marriage legal relationship.
Step 2 – Sharing All Financial Information With Each Other
Before you commit to a lifetime of marriage, take these steps:
Discuss how we are going to handle money, investments and planning for the future- and most of all financial on-going communication. (More on that later.) Put the plan in writing.
Change beneficiaries on retirement plans, life insurance and unearth any joint property with someone else so you are both aware of the others financial situation. This also allows for true confessions on debts, savings and other financial commitments.
Check credit reports and share with each other. These are the story of your potential spouse before you met. Start your search for the three main reporting agencies and free reports at: www.Annualcreditreport.com
With the expectations clearly laid out for your financial lives together, you will start to understand your pending spouses financial ideas and past. Plus, you will both understand each others financial life.
Step 3 – Consult an Objective Professional
A lawyer or CERTIFIED FINANCIAL PLANNER™ who is hired by both of you is the best resource before your marriage and to guide you through your years of life together. Having both types of expert as a resource will serve to ease your transitions in the coming years.
A CFP® who both have hired will discuss your concerns around a prenup agreement. They will want you to share the financial plans and goals you have together for an understanding of your situation. Having an objective opinion will allow you to decide how to proceed.
Even before you are married, meet with a lawyer to lay out what your estate plan will say post-marriage. The documents for your will, power of attorney, health care directive and trust if needed can be drafted. Then, you will have had many conversations to get to this point and feel confident about your next steps in marriage and life. (You cannot actually sign it with the lawyer until you are married. I am such a financial nerd, we had ours signed before we went on our honeymoon.)
Also, you may want to consult a pre-nup specialist who serves more as a mediator/consultant to counsel you both. They can draw up the pre-nup if necessary. Laurie Israel is one such specialist, whose book The Generous Prenup discusses what she calls “the prenup myth” – that they are necessary and make marriages better. www.laurieisrael.com
Once you understand your situation and more about prenups, decide what to do next. If you proceed, you will not need one lawyer but two lawyers for a pre-nuptial agreement. Each of you must have your own lawyer to make this a legal document. Essentially, you are two sides of the contract and you will both need to seek representation, which is different from the estate plan you will need to create together for your married life.