No one wants to think of the end at the beginning. But more and more, women are needing to be thoughtful about protecting their wealth in the case of divorce. Considering a prenuptial agreement can be a sticky conversation with your partner. But, it’s important to understand when it may be critical for your relationship’s financial well being. If you can answer yes to any of these 4 questions, you may want to consult a lawyer for greater detail on your options around prenuptial agreements.
1. Are you a business owner?
If so, do not pass go, do not collect $200! You know the drill. This is one of the first and foremost questions you’ll want to address going into a marriage. Again, it’s not about thinking your new spouse is out to get you. It’s about protecting the business that you’ve built. Things to think about include how self-sustaining your business is, or, if as a new partnership you’re also going to have major investments to make to keep it afloat.
This becomes even more important if your business is structured as a partnership. In that case alongside a divorce, your ex-spouse may end up being entitled to an ongoing share in your business. Alternatively, they could end up needing to be bought out which could wind up being a significant expense for even a profitable up and coming business to absorb.
2. How significant are your own personal assets?
Do you already own a home or have other major property in your name? Especially as women are beginning to marry later in life, it’s more likely we’ve racked up some wealth along the way. If you’ve been working toward a major investment, have significant savings, or major material assets, it’s worth chatting further with an attorney. Communal property laws in many states mean that you may not be able to completely retain the assets you have today post-divorce, so it’s worth understanding how your wealth may have to be divided. This becomes especially relevant if your asset base differs greatly from your new spouse’s.
3. What is the status and extent of your debt?
Millennials are going into marriages with greater levels of debt than any generation before us. So it stands to reason that you and your loved one might be tying the knot with either a load of student debt to look forward to (hooray college) or other consumer debt. A prenuptial agreement can help navigate and establish who owes what in the case of a marriage ending. Topics like debt splitting and financial responsibilities for shared debt accrued during a marriage will vary based on state law and a host of other factors, so you’ll want to be sure to consult an attorney to understand those details.
4. Is a big life change on the horizon?
This category is a bit murkier, but often times marriage accompanies other major life changes, like your new partner going back to school, one of you perhaps pausing their career to stay home, or even relocating to another state and taking a break from income-producing activities. You may also be planning on children and would want to think about how your finances could change in that case. If you find yourself staring down any of these scenarios, you’ll want to think about the extent of the financial implications for these choices.
If you decide that you’re going to school full time while your new spouse keeps working, that could create a serious financial strain in the case of divorce. A prenuptial agreement can help lay out expectations of cash flow, even temporarily, for a partner to get back to a situation that can sustain their lifestyle if things don’t go as planned.
Well, This Conversation Sounds Awful. How Do I Talk About This?
Raising the possibility of a prenuptial agreement is definitely a difficult conversation to have with your intended. And of course, don’t let it be first major chat you’ve had about finances, money, and how you envision building your wealth together over your lives.
So start small, and be sure that you’re already making finances a part of your wedding and new life planning in the same way you’d pick out a china pattern (ha!) or couch for the apartment. You should already know how much debt your partner has, as well as their spending habits and views towards savings. These early conversations can start to help you identify differences and understand where major gaps in life circumstances and lifestyle may lead you to wanting to tee up the protection of a prenuptial agreement.
Ultimately, deciding whether or not you and your partner need a prenup is an incredibly personal decision. Most research, however, shows that women fare far worse financially in divorces than men do. And even more, money tends to be one of the greatest stressors in relationships. So prenup or not, start your new life off together on the right foot by having thoughtful, thorough discussions around your finances.