Couples don't get married with the intention of breaking up. They enter a marriage with the intention of staying married and spending their lives together. With that being said, it is very difficult to spend time during an engagement discussing the "what if's" of divorce. The unfortunate truth, however, is that the divorce rate in the United States is between 40% and 50%. While we all strive to find happily ever after, just like anything else in life, marriage is not certain.
While couples do not enter marriages with the intention of divorcing, a prenup can serve as an insurance policy against the worst-case scenario. Just like with any type of insurance, if the worst that could happen did, it helps to protect you. People do not buy their homes assuming that they will fall apart, but they buy homeowners insurance for the worst-case scenario. A+ drivers with no tickets or accidents still buy car insurance. Healthy people still buy life insurance.
70% of engaged couples do not want to discuss money because they feel it will lead to a fight. However, 70% of divorces are related to monetary issues. More fights in marriage occur over failed expectations regarding money than anything else; more than sex or in-laws.
A prenup forces you to have a clear, straightforward conversation before you get married. You would have to discuss how much money you are both bringing into the relationship, how much you stand to inherit, what your debts are, and what your financial goals are. It also will help you understand your own and your partner's view on money and what it means to both of you. Many religions and cultures encourage talking about finances before marriage. One of the main topics in Catholic Church Pre-Cana classes includes matters of money and personal finance. In Persian culture, Baleh-boran is a meeting where the families of the prospective bride and groom discuss the future marriage, and specifically discuss financial matters.
It is widely believed that prenups only exist to protect the party that enters a marriage with money, leaving the other party with nothing. This is not the case. Prenups can be customized and negotiated for each unique situation, and can actually leave both parties in a better situation than they would have otherwise been. Divorce is hardly ever considered a win, but preventing massive fights, court proceedings, legal fees and emotional trauma can certainly be considered a step in the right direction.
In divorce proceedings that occur without a prenup, you are obligated to distribute wealth in a way that the court decides. The judge, a stranger that does not know you or your family, picks how much money you give or take from your once spouse and how much money your spouse has to provide to your children.
In a prenup, you can outline, in detail, how your money can be handled in the case of a divorce. You can be as creative and detailed as you like, and you can set it up so that it benefits both parties.
For example, imagine a couple that decides to get married. The wife has a substantial amount of family wealth, and the husband comes in without any money. One way to set up the prenup would be to limit the husband's claim on the wife's family assets to a certain dollar amount that would allow him to continue his lifestyle while he was married. This is good for the husband, who would be able to continue his lifestyle, and good for the wife and her family, because it limits their liability. It prevents them from putting all that they have worked for at risk.
Another reason it makes sense to sign a prenup is because they are negotiated during times of peace and love. We all want to believe that we can separate our logical self from our emotional self. Even the strongest of people, however, can make irrational decisions and take action when their emotions are heightened. You can say things you don't mean, and take action out of sadness, anger, or for revenge.
While engaged, couples are in a progressive mode. They want to do anything they can to make the relationship work and to make their partner happy. They are thinking logically, and are acting in the best interest of themselves, their partner, and their relationship.
During divorce, couples can fall into destructive mode. The effect of divorce on the human personality can make both parties unrecognizable to themselves and to each other. They are hurt, disappointed by failed expectations, and often angry, either at themselves or at their once partner. Mid divorce is the absolute worst time to make logical decisions regarding money. You've seen the movies of people wanting to "take their ex for everything they're worth". We all have that in us if we are angry enough.
Try to remember your most recent break up or fall out with a friend. There is always that thought that goes through your mind about how now that you are distanced from them, you think they are so different now. Your emotions play tricks on your mind and cause you to act on your emotions, which can often end up in the worst decisions.
Prenups are not just for people with astronomical wealth. A prenup can protect even the smallest savings accounts, and can also protect against the limitless worth of future investments. Many people enter marriages at early stages in their career. The median marriage age is 25 for women, and 26.8 for men, while careers are believed to peak at age 35. It is important that there is clear, written outline, before marriage, to the entitlements of money as it grows.
Imagine a couple where a husband is getting an MBA, while the wife is working for those two years in order to support the family. The husband then goes off to use his education to start a highly successful business. Without her hard work in the years that he was in school, he would not have been able to go back to school, achieve the education he did, and start such a successful business. In a prenup, the wife can actually specify how much of the future earning of her husband's business she is owed, and for how long. The husband can protect himself as well, by putting time, dollar or percentage limits on what he would owe.
Another example is handling savings that is earned before a couple gets married, but that is invested while they are married. In this example, a spouse has a 401K plan that is worth $50,000 when they get married. This can easily grow to be worth over $1MM by the time they start withdrawing from it (assuming an average of 5% growth per year). A prenup can specify if your spouse is entitled to none of the 401K, only parts of the original investment, or part of the future wealth or growth of the account.
However uncomfortable the conversation, and unpleasant the process, a prenup can be a great source of protection and stability in a time that is likely unstable and sad. The unpleasant moments are actually very healthy for your relationship, and can strengthen it by forcing you to have inevitable conversations early on. Prenups can be customized to suit the individual needs of the couple, making it a lot more flexible than the "one size fits all" mentality that would be the alternative.
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