Marriage, while a joyous and celebratory occasion, should also be approached with the same touch of practicality that would be recommended when entering into any legally binding contract. Couples undoubtedly don’t wish to think about the possibility of divorce while reveling in the glow of engagement, however approximately 48% of first marriages in the United States end in divorce and the probability increases for second and third marriages.
Prenuptial and postnuptial agreements, colloquially known as pre- and post-nups, have long been stigmatized, however recent reports show that they are growing in popularity, particularly amongst younger people. Approximately 15% of Americans signed one in 2022, with 40% of those individuals being between the ages of 18 and 34. The concept of a prenup dates back more than 2,000 years ago and were most often crafted by the parents of the bride and groom to ensure that the wife would have rights to property upon divorce or the death of her husband.
Today, marital agreements are typically associated with individuals seeking to protect their pre-marriage property, however prenups and postnups can offer these other benefits as well:
Financial Transparency
The process of creating a prenup often sparks open and honest conversations about finances, debts, and future expectations. It can help couples determine how they want finances to be handled during the marriage, from saving and contributing to retirement to putting one spouse through school. This transparency fosters trust and can lay a strong foundation for financial decision-making throughout the marriage.
Minimizing Costs and Contention
Should divorce occur, having a general agreed upon plan in the form of a prenup can greatly reduce the time, cost, and stress associated with the process for both parties.
Protecting Premarital Assets
Entering marriage with significant assets like a business, inheritance, or family heirlooms? A prenup can specify how these assets will be treated, and if desired, safeguard ownership for the spouse who brought them into the marriage. This prevents potential contention during a divorce and, in the case of business ownership, can provide protection for employees and business partners.
Clarity on Debt Management
Premarital debts can become a source of stress in a marriage. A prenup establishes how existing debt such as student loans or credit card debt will be handled within the marriage and outlines their division in case of divorce. This can protect marital assets from creditors when only one spouse is the debtor.
Second Marriages with Added Complexities
Second marriages can often involve children from previous relationships. A prenup can ensure inheritance rights are clear and that financial support for children is addressed, minimizing future conflicts.
Postnuptial Agreements: Adapting to Life’s Changes
A postnuptial is negotiated after the wedding and like a prenup, it outlines financial arrangements in case of divorce or death. However, postnups offer valuable flexibility for situations that evolve after marriage:
Shifting Financial Landscape
Financial circumstances can change significantly over the course of a marriage. Perhaps one spouse inherits a substantial sum, receives a promotion with a significant raise, or stops working to be at home with the children. A postnup can adjust how assets would be divided in a divorce to reflect these changes, ensuring fairness for both partners.
Unexpected Life Events
The birth of a child, caring for aging parents, or a sudden health crisis can significantly impact finances. A postnup can address these unforeseen circumstances and ensure both partners’ needs are acknowledged.
Evolving Priorities and Goals
As a marriage progresses, financial priorities and goals may shift. A postnup provides an opportunity to discuss these changes and establish a framework for managing finances moving forward, promoting financial harmony.
Seeking the Right Help
Pre and postnuptial agreements can be valuable tools for couples to build a strong financial foundation for their impending marriage and promotes fairness and protection for each spouse. At Vision Capital Management, your team has the experience and knowledge to provide you with confidential guidance through all stages of the prenuptial process. While a prenuptial agreement can’t prevent divorce, it can create a healthier and more secure environment for the relationship to thrive and Vision Capital aims to help our clients approach it with the honesty, integrity, and care it deserves.
