“Prenup” may no longer be a dirty word. Long considered a cynical contract–and one exclusive to the ultra-rich–the prenuptial agreement has recently become more popular.
As we addressed in an earlier post, the prenup’s rise in popularity owes largely to the different ways that millennials look at marriage. They’re marrying later in life. They’re accumulating more assets before they marry. And they’re more likely to have seen their parents get divorced. As a result, they’re more likely to see prenups as a solid contingency plan. So here are 10 tips for making a plan that works.
The best prenups are the enforceable ones
A prenup is only good while it’s valid. If the courts can throw it out, then it’s not much help. Among other things, these mean your prenup should:
- Make sure both parties work with a full and clear understanding of each other’s finances. This includes income, existing assets and debts.
- Focus on financial matters. Michigan law allows prenups to address real property and spousal support. Trying to set guidelines for child custody and child support could get the prenup tossed out.
- Aim toward a level of fairness. The courts may throw out any agreement they find “unconscionable.”
- Account for changes over time. The longer a marriage lasts, the more the courts may expect the higher earner to owe the lower earner. Accordingly, the nature of “unconscionable” may change. A forward-thinking prenup may include a schedule for adjustments to the original terms.
- Avoid any appearance of coercion. This often means drafting the prenup well ahead of the marriage.
- Be understood and signed by both parties. Each should work with its own counsel.
Making sure your prenup is valid is always the first step. After that, you want to turn your attention to the specific terms.
The hallmarks of a good prenup
Forbes reminds you that your prenup is a business contract, and you should treat it as such. This means you want to:
- Keep your feelings out of the way
- Tend to the details–including a thorough review of all your assets and debts, not just your income
- Think how your prenup can double for estate planning should your marriage end with one partner’s death
- Acknowledge the appreciation or depreciation of stocks and other assets
There are plenty of other things you may also wish to consider. Prenups aren’t one-size-fits-all. Every couple approaches marriage with unique goals and circumstances.
Conversations about money
As Forbes notes, prenups force couples to talk frankly about finances. But these conversations don’t have to be cynical. They can be clarifying. You may avoid future fights about money. And that’s likely worth some temporary awkwardness.