Many of us love a good scare from time to time. If we didn’t, there wouldn’t be hundreds of horror films making people in movie land rich. Being scared connects us to some powerful primal instincts. We want to run, hide, cower and scream. In the theatre, those feelings are fun.
But we should be able to have conversations about the future with our significant others without eliciting the “fight or flight” syndrome. Unfortunately, the mere mention of a “pre-nup” scares some potential partners. Let’s try to clear up some of the misconceptions about prenuptial agreements.
Some people think a prenuptial agreement is a contract about the number of times spouses will have sex during the week, or which spouse will delegate the household duties. Both are false, almost always. In fact, “unconscionable” terms like these can invalidate the whole agreement.
Even attorneys have misconceptions. Some lawyers will not draft them because they believe that the agreements are difficult to sustain in court, especially if one of the spouses, during divorce, claims to have signed under duress (in order to get married), claims he did not understand the agreement or the agreement is one sided. Not so. In fact, it’s ridiculous. It’s like saying you won’t prepare a will because someone might challenge it.
Of course you should create a balanced agreement with reasonable terms. Both parties should have their own counsel. And you should do all this well before the wedding day.
Most pre- and postnuptial agreements primarily cover financial and guardianship issues. Financial data gathered from bank and investment account statements, tax returns and the like (from you or your financial planner) forms the basis for your prenuptial agreement. A prenuptial or postnuptial agreement can be so simple that all it contains is this: an agreement that defines the ownership of assets in the event of divorce. And you won’t have to search for documents to prove that your separate property is yours.
Of course, a prenuptial agreement can go further. It can define each source of future income as separate or marital. And it can specifically state how much money or property will transfer from one spouse to another in case of divorce, depending on the length of the marriage. It’s also flexible. It can address any investment or property you have or may acquire during marriage. It can be modified or amended as your assets grow and as your relationship changes over time. For example, in a community property state, a couple may agree that all income earned and all assets acquired during marriage are separate property. Forever. Or…not.
If you missed the chance to do a pre-nuptial agreement, a post-nuptial agreement may be an option. All of the above still applies.
It’s not complicated, but it is critical. Work with a financial planner or a Certified Divorce Financial Analyst and an attorney to create your prenuptial agreement. This will leave you free to enjoy the simple pleasures of being in love, protecting your partner, and being protected from at least some of the scary things out there!
Silicon Hills Wealth and Divorce Planning of Austin work with clients and their attorneys to help insure that financial accounts are allocated or divided in the most efficient manner possible. Please contact Pam Friedman, CFP®, CDFA™ at email@example.com or firstname.lastname@example.org
Neither Silicon Hills Wealth Management nor Divorce Planning of Austin are accountants or attorneys and we do not provide tax or legal advice. Please consult with your tax professional or attorney regarding your specific circumstances.
*This is a hypothetical example. It does not illustrate any investment products and does not show past or future results.