- Prenups are becoming more common among millennials — should you be signing one too?
- Prenups are worth considering for various reasons, especially if one partner has more assets than the other, one or both partners have investments, or if you plan to have a family.
- Signing a prenup requires thought and consideration — they should never be signed at the last minute before a wedding.
More millennials are signing prenups — should you, too?
Short for prenuptial agreement, prenups are no longer reserved for the rich and famous or those marrying multiple times; Americans marrying later in life with more assets to protect and millennials who fear divorce look to prenups as a source of protection.
A prenup manages expectations of what happens during a divorce and post-divorce. "Without a prenup, the laws of the state determine what will happen to your future should you and your spouse split," Theresa Viera, family law attorney at Sodoma Law, previously told Business Insider.
"The largest advantage of a prenup is that the couple, not the court, decides what happens in the event of a divorce," Viera said.
But it's still not a decision to be taken lightly. Whether or not you get one depends on what you want to protect — if any of the following apply to you, you should consider getting a prenup.
One partner has more at stake than the other
If one spouse has more tangible value than the other, a prenup may be worth considering. This is especially true if you own real property or other high-value assets, or plan to acquire any during the marriage, Viera said.
"Usually, the things you owned before marriage will still be yours after the divorce," Leanna Johannes, senior wealth strategist at PNC Wealth Management, told Business Insider. "There are exceptions. By planning ahead about the disposal of specific properties, and the titling of assets, time — and stress — can be saved," she said.
Another thing to consider: If one partner earns significantly more income, especially if they want to pay little to no alimony. "If your take-home pay is far less than that of your spouse, it could be wise to make sure you'll have support in the future," Johannes said. "By agreeing ahead of time on the amount, duration and type of alimony, the prenup can help secure your financial future."
But value isn't limited to a bounty of assets or more money — it also counts when there's a lack of value, like debt, whether it's student loan debt or credit card debt.
As Johannes explains, if one partner has a high balance on their credit cards, you could find yourself responsible for debts you didn't know existed. You may even be expected to help shoulder the debt load if your partner has credit card or other installment types of debt, she said.
One or both partners have investments or plan to invest
You can also have more value at stake through long-term investments. If you have or plan to have any investment or retirement accounts or if you have vesting opportunities or stock options from your employer, it's time to think about a prenup, Viera said.
But investments aren't confined to traditional opportunities — if you're also a business owner, you'll want to think about the investment you've made in your business.
"If your marriage fails, a business owner could find themselves forced into the position of giving up shares of their business to their soon-to-be ex-spouse," Johannes said. "Without a prenup, your business partners could find themselves being partners with someone they didn't enter into the business with."
You want to have a family
Growing beyond a family of two can create complications during a divorce, so you'll want to think about how you'll be raising the kids if you decide to have them, Johannes said. For example, one spouse might become a stay-at-home parent and take time off work.
"It's not that uncommon that one partner will stop working outside the home to focus on raising the children. If divorce happens, the stay-at-home parent can find it difficult to jump back into the business and work world," Johannes said. "The custodial parent will probably get some form of child support, but child support will end when the children are 18 and that support was never meant to be the sole source of income in the first place."
And don't forget about the fur babies. If you have a dog, a custody battle is likely to ensue, Johannes said, adding that many couples view the pet as part of the family or even surrogate children.
"Legally, ownership of a pet is considered equal to owning a television or the refrigerator. It depends on who bought it," she said. "So as the divorce rate continues to increase, 'pet prenups' are becoming popular. Disputes over the family pet have become so extreme that one divorce case in New York saw an entire day in court devoted to the couple's dog."
Regardless of why you want to get a prenup, you and your spouse should make sure a lot of thought and consideration go into it and that it's not signed at the last minute. According to Johannes, presenting a prenup right before the wedding makes it appear as a "condition" of the marriage and pressures partners to sign it regardless of what it says.
"Last minute and/or pressured signings are more easily overthrown if and when it comes time to enforce the agreement," she said.