Do we need a prenup?

Kevin at Thousandaire would say yes! (and in video form, too). Before I actually got engaged, I was a big proponent of prenuptial agreements. Throughout my childhood and teens, I’ve witnessed some rather unhappy marriages (fortunately, not my parents’). So I was quite hung-ho on getting a prenup and defining the financial terms if my marriage were to end. Well, now I am engaged to the man I’ve known for 10+ years, a supporter, a friend, a confidant, a partner. We are getting married in 8 months. Drafting an enforceable prenuptial agreement in California will cost thousands of dollars even for just-starting-out folks like us. Suddenly the issue is less theoretical and more practical. I still think that a prenup is important for many people with more assets, but we aren’t rich. In fact, we are going to be broke grad school students pretty soon. So, is a prenup for us?

7 questions to ask when you ask yourself “Do we need a prenup?”:

• What does your state law say (and do you agree with it)? In 41 states, assets are split via “equitable distribution.” In 9 community property states (California included), everything acquired during the marriage is automatically split 50/50 if the marriage ends.
• Do you have substantial assets or expect to come into substantial assets in the future? Bottom line, I don’t think we’re rich enough for a prenup. No millions in the bank, no ownership in businesses, no stock options at hot startups. Our career salary trajectories are roughly similar, and while I make more money now, either one of us has the potential to out-earn the other in the future.
• Do you agree with splitting assets acquired during marriage 50/50 if you split up? Both of us agree that all assets we acquire during the course of the marriage – outside of inheritance – should be split 50/50 if we were to get divorced. I am more likely to receive an inheritance in the future. If I were to receive an inheritance, however, it would likely be structured in a trust and so would remain separate, not community, property. A prenup can reaffirm that separation, but it’s not critical.
• Do you have similar levels of debt? We are coming in with roughly equal amounts of student loans.
• Do you have children? Is this your second or third marriage? This doesn’t apply to us, but I’ve read that a prenup is exceedingly helpful for protecting the interests of children in a remarriage.
• Do you want to have provisions where assets distributions are used to punish infidelity? If you want to make sure that your spouse’s share goes from 50% to 10% (or 0%), if he/she cheats, then a prenup is necessary. Cheating is so prevalent nowadays that courts don’t really look upon that as a consideration in terms of determining asset splits. Be sure to define what constitutes infidelity and what level of evidence is necessary. That must be a fun conversation.
• Do you plan to have one person stay at home with the kids? Do you want to figure out the terms of alimony? Some people say that if one person leaves the workforce to take care of kids at home, it’s best not to have a prenup or to have a prenup that says assets will be split 50/50 (to protect the interest of the stay-at-home parent).

Our decision

The bottom line for us is, for the duration of the marriage -which is hopefully forever- we see whatever money we make as “our” money, no matter if he makes more or I make more. Furthermore, I cannot imagine CB behaving in an dishonorable manner.  I’d like to think I would never behave that way either. I love him for his humor, his good looks, his kindness and quirks. But almost above all I love him for his character – he would have to become a whole different person for him to become bitter and spiteful. (Though of course, the nature of divorce means that people have changed, and often into someone unrecognizable to the other).

So, I don’t think we are going to get a prenup. Given all of the above considerations, I’d probably take the money we would have spent on a prenup and spend it on a big vacation instead! I hope our marriages lasts and lasts until one of us is called to the Big Gathering Place In The Sky. But baring that, I trust that we will both try our hardest to remain civil and amicable even if we were to separate. I believe we will be good partners to each other, and if we fail at that, I believe we can be good ex-spouses. It’s probably not a terribly romantic way of arriving at what is the “more-romantic” decision to not have a prenup, but it works for us.

Would you sign a prenup? I’d love to hear from anyone who has gotten a prenup or who has considered one, especially if you don’t have millions in the bank!