Yes, you read the title correctly - you need a prenup. If you're ready to commit to someone for the rest of your life, your relationship should be mature enough to tackle this topic. And, if you’re already married and without a prenup, then you should get a postnup. For simplicity, I’ll refer to prenups throughout this post; a postnuptial agreement serves a similar role for those that have already walked down the aisle.
When a couple decides to marry, divorce is often (understandably) the furthest thing from their mind. However, data suggests that divorce rates range from 38 - 50%, depending on the source. Humans have an optimism bias; each of us tends to believe that we are less at risk of experiencing a negative event compared to others. It’s a beautiful term that puts our financial health at risk. Our optimism bias makes us less prone to expect (and prepare for) events like disability, illness, divorce, and death.
Ladies, I urge you to hope for the best marriage you could ever imagine, but plan for a worst-case scenario, just in case. The data backs up my suggestion. Women’s finances are hit disproportionately hard by divorce; on average, their income drops 40% (while men face a smaller decline of 25%). Infuriatingly, the standard of living actually rises for many men in the first year after a divorce. Women face a 27% decline, while men may see an increase in up to 10%. Note that most of the data on women and divorce is for heterosexual couples.
Further, there has been a marked increase in divorces among couples fifty years of age and older; the divorce rate in that age range has doubled between 1990 and 2010. The data suggest that divorces happening later in life have an even more devastating impact on the finances of both parties.
There are also many women who remain trapped in marriages for financial reasons. While a prenup doesn’t alleviate financial anxiety, it does provide a set of legal agreements that can simplify the path to a divorce and prevent surprises for women ready to leave their relationship.
Like other forms of legal risk management tackling a prenuptial agreement isn’t fun, but can be invaluable should the worst case occur. You’re ready to get married? Congratulations! There’s a lot of fun to be had at your engagement party, bridal shower, bachelorette party, and wedding; tackle this less-fun topic like the adult you are, in order to future-proof your relationship.
Here are some of the objections I hear when I bring this topic up with friends. (Yes, I am the person who eventually asks, “Are you considering a prenup?” My friends know I love talking about money; they expect it.)
We don't need a prenup, we aren’t rich and don’t have many assets. That means your prenup will be simple, but it doesn’t mean you should avoid it. A strong prenup can cover other important topics like:
Who gets first right of refusal to stay in the house you own, or apartment you rent?
How will joint household goods, like television sets and furniture, be divided?
Will splitting the home 50/50 upon sale be fair, or is another arrangement required?
Will your grandmother’s jewelry collection stay with you upon divorce?
Who gets custody of Fido, who your partner adopted two months before your engagement?
How will you split your joint bank accounts?
If you divorce, would you expect to split your 401k or other investments with your partner?
Given you currently out-earn your partner, can they expect some sort of alimony? If so, how much and for how long?
What about children, if you have them? How will their custody be managed?
Further, you might not have many assets now, but do you plan to stay married for a long time? Do you plan to grow your income over time? I encourage you to think long-term and put an agreement in place today to address your earnings, investments, and savings.
Legal agreements like this are too expensive for me. This is tremendously short-sighted thinking that puts your future self at real financial and emotional risk. My fairly complex agreement cost $2,677 in the expensive DC area. Your partner may also engage a separate attorney to review and suggest changes, which could contribute to higher costs. However, consider the financial impact of a 40% decline in your standard of living post-divorce; that puts the prenup investment in context, doesn’t it?
My partner makes more than I do, a prenup would only hurt me. In a situation where you’re enjoying a higher standard of living due to your partner, a prenup could play a critical role in creating predictability if your marriage ends. Further, there are plenty of non-monetary questions that need to be decided when a relationship ends, as outlined above. Do you simply want to roll the dice and hope your partner would be completely fair during the difficult and emotional divorce process? Do you know, with complete certainty that you both have the same definition of fair?
We have a strong marriage; I don’t think we need a postnup. I'm happy for you; truly, I am. But remember your human optimism bias; and the statistics on divorce. How many divorced women say, “I knew walking down the aisle we were headed for divorce.” Not many. Instead, family law attorneys I know are regaled with, “I never saw it coming,” and “I never thought this could happen to me.” And that painful realization that a marriage is ending completely, totally sucks. So, further strengthen your great marriage and force a conversation around the worst case scenario. The opportunity cost of a few difficult conversations and the legal cost is worth it.
If you decide to pursue a prenup or postnup, seek out a family law attorney to put the right legal agreements in place to manage your risk and preserve your wealth. Friends, family, and local services providers (like doctors, insurance agents, and financial planners) can be a great source for recommendations.
Importantly, how can you start this dialogue with your partner? It can be a sensitive topic. You could share this post. If you have a regular money check-in, you could bring it up then. Use words that reinforce you aren’t worried about your relationship but want to smartly plan for the worst, while hoping and working towards the absolute best.
I found that Mr. Financier responded well when I talked about a future situation, “Imagine how much stress we’d save our future selves if, God forbid, our marriage doesn’t work, and we’d already thought through all the really hard stuff ahead of time.” During the process, I also found we had different assumptions about money and property that we’d never spoken about. Working through the details together helped strengthen our understanding of one another, not weaken it.
Some amazing, strong, powerful divorcées have offered to share their perspective on prenups with you, below. If you’re partnered have you put a pre- or postnup in place? If you have, what advice would you give others? If you don’t have one, why did you feel it wasn’t necessary?
xoxo, Ms. Financier
My divorce, which was two and a half years ago, left me almost penniless since I paid for the whole thing...despite my ex making twice what I did. I was left with my pre-marriage retirement savings intact, thank goodness!
I would not get remarried without a prenup. It will be non-negotiable and part of my safety net in case something happens. I wish I had done that with my first marriage (and small bungalow that I owned at the time). Having that house to sell or as an income stream would have helped prevent some of the financial difficulties I’ve faced since the dissolution of the marriage. - T.A., Georgia
My divorce was a horror story. Truly. If I told you the gory details, you'd think that I was making it all up. But let's just say that I don't plan on getting legally married ever again (even if it's Ryan Reynolds.)
I was 23 when I started dating the man that would become my husband. It never occurred to me to have a prenup. In hindsight, the investment in a thoughtful and thorough agreement may have saved me three years of divorce hell; emotional and financial.
It's taken me three years (post-divorce) to just begin to bounce back and there is still so much that still isn't and probably won't ever be "right." Even if you think you don't have enough property or assets to warrant one, there are so many other considerations that may impact your post-divorce quality of life. - The Lady in the Black
I'm divorced and didn't have a prenup. Had I thought to have one, I think I would have learned a lot about my soon-to-be husband during the process of creating the agreement.
I won't get married again without one. I see it like planning for a business; people don't usually think about how they will want to exit the business. How would you want things to go IF you get divorced? Plan for that before it happens. - P.L., Colorado
I remember going out for lunch with a group of women about five years ago, just weeks after my wedding. All of them were divorced and the entire conversation was them talking about their divorces and ex-husbands. I remember judging them because they were divorced; this would never happen to me because I did everything right. I married a man whose parents were still together, like mine. One could say I married down, so he wouldn't leave me. No one in my family was divorced, so in my opinion, we were not going to be another statistic. Fast forward not even two years and he left me for another woman.
After the birth of our second daughter, my husband shut right down. He had an affair and I forgave him the first time but then he started another one. Throughout our marriage, I managed our finances, not because I wanted to but because I had to. I guess I have him to thank for my interest in personal finance and financial independence.
My now ex-husband was an impulse spender and had a lot of debt from before we got married. I spent the first two years of our marriage paying it off. Conveniently, when he no longer owed any money on his debts he left. He demanded half of everything, though I paid for every item in our home with a few minor exceptions. Luckily we settled our financials within six months of our separation.
My ex-husband was impulsive, so I dangled a buyout of the family home in front of him for a fraction of the equity knowing he would jump at it since he had no savings. With that, I consider myself very lucky as it set me up to be more financially responsible while he spent all that money and more - he is now $80,000 in debt with nothing to show for himself and he doesn't pay child support.
A prenup would have saved a lot of money on lawyers fees and would have set us both up to know what would happen in the case of a separation. Had I had a prenuptial agreement I would have likely been able to keep most items in our home which I acquired prior to us getting married. I ended up having to sell the home my girls spent their first years in to access equity in the home. That home was supposed to be a rental and part of my retirement plan due to its desirable location.
Currently, I have a home and have rental property. I will not enter into another marriage without a prenup in order to protect both myself and my daughters. It is my future, my retirement and their future that is at stake.
I've seen other friends go through divorces and most of them are financially ruined. Most will likely have to declare bankruptcy. My custody battle took almost three years and cost $50k in lawyers fees. Most individuals cannot afford that. I drained my savings and had a mere $6,000 in my retirement account.
Luckily, I am young and have been able to rebound well considering as I no longer have to deal with an impulse spender. That said, my career affords me more than most and I have made decisions that set myself up for career success.
My partner and father of my son understands what I’ve been through with my ex, and we talk openly about this. He came into the relationship with his own savings and home. He is a child of divorce and witnessed his parents’ financial hardships firsthand. We both understand and respect each other enough to agree with this idea in case the unimaginable happens to us. - Courtney, @splitfinances