Prenuptial Agreements - True Love or True Greed?
By Ric Edelman
Premarital contracting doesn't mean you don't love each other. In many ways it can show how much you really care.
Prenuptial agreements don't sound like a way to bring couples closer, but they just might help you and your partner be a lot happier and better prepared for marriage. Jacqueline Rickard, the author of Complete Premarital Contracting: Loving Communication for Today's Couples, was a recent guest on my radio show. Below is some of what we discussed. You might be surprised by what you learn.
Ric: The prevailing attitude about prenuptial agreements is that they throw cold water on the whole concept of marriage, love, and trust. How do you counter that?
Jacqueline: First of all, most of us hear about prenuptial agreements when someone rich and famous gets divorced and about all the battles they are going through. I know when my husband and I decided that we wanted to have a prenuptial agreement, my son said, "Gee, why are you guys doing that; don't you trust each other?" So it's not surprising that people's initial reaction is a negative one. But in fact, prenuptial agreements and premarital contracting is the way that we can learn more about each other, make each other feel more comfortable about issues that are of concern, and certainly clarify money concerns. This way, we can talk about them, decide together how we want our marriage to work, and if necessary -- and only if necessary -- we put it in a prenuptial agreement, a legal document.
Each year, there is one divorce for every two marriages, and a substantial portion of those who have divorced, remarry. Is the notion of a premarital contract simply for those who are entering second marriages, or is it also something for people getting married for the first time?
Premarital contracting is a communication process. I think all of us, whatever age we are, whatever financial bracket we're in, we have things to talk about, and if we avoid doing that and waiting until there are problems, it's almost too late. On that premise, I think that no matter what age, whether we've been married once or not, whether we have stepchildren, whether we have assets, it's important to communicate and consider a legal document.
The predominant reason why we in the financial planning profession raise the subject of premarital contracts with our clients who are facing subsequent marriages is people getting married the second time around are often in their 40s or 50s, and they have assets that they are bringing into the marriage, or children from a prior marriage, and without a prenuptial agreement, it's quite possible that those children could be excluded from assets should you die. And one of the key ways to protect your kids is a premarital contract.
That's a very important point. A prenuptial agreement is not just for divorce. A prenuptial agreement is good estate planning. I'm not an attorney. I wrote this book as a "happy user" of a prenuptial agreement. I have written and included not only examples of other couples and what they've done in general with their marital structure, but also prenuptial agreements which I hope will give readers some ideas. But is it very important that they satisfy the requirements of their state as to what goes into a legal contract. One of the issues usually is that they use an attorney.
Another key point is that married couples can't do this; you've got to do it prior to the wedding, right?
A prenuptial agreement is what it says; it's before the marriage, and it becomes in effect once you marry. On the other hand, once you're married you can still get a legal contract called a post-nuptial agreement.
It's very important to note that any time you change jurisdictions, you must verify that your legal documents are valid in the new state where you live. In Chapter Seven, "But Why a Legal Contract?", you ask three questions: 1) "Would you obey an outsider who told you where to spend your money?" 2) "Are you willing to work as hard as you do now for less pay?" And 3) "Would you listen to a stranger ordering you how to run your life?" Those three questions help clarify the whole conversation very well.
Our marriage is our responsibility. Roles are changing, situations are changing, and the traditional marital structure is not working, as you highlighted before, with 50% of marriages ending in divorce.
But does saying, "Honey, I love you, sign here," contribute to a loving relationship?
It forces you not to just talk over the issues, but to come to the realization and then agreement on how you want to handle your marital life, including issues of money. If, for example, one partner makes a great deal more money than the other, how are they going to feel as equal partners in decision-making? They can decide that they'll give, for example, equal percentages into the marriage bank account and there are other issues, too -- and all this can be written up in the prenuptial agreement. What happens if one person is the primary child care provider and because of that cannot spend as much time on career advancement? How is that person going to feel during the 10 years when he/she is spending more time with the children than the other? Resentment can build. Well, the prenuptial agreement can help you reflect those kinds of concerns.