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Should everyone have a prenup?

Personal-finance personality Suze Orman says prenuptial agreements are for everyone contemplating a marriage. Good advice?

By Stacy Johnson May 27, 2011 2:45PM

This post comes from Stacy Johnson at partner site Money Talks News.

 

When you hear the word "prenup," what comes to mind? If you're like most people, you probably picture an old rich guy about to marry a young, not-so-rich gal.

 

While that's one traditional use for a prenuptial agreement, there are some personal-finance pundits -- notably, Suze Orman -- who  insist that prenuptial agreements are something virtually everyone considering marriage should have. In fact, in articles like this one, she says that even those who just want to move in together should consider a "cohabitation agreement."

 

We'll get more into Orman's logic for universal prenups in a minute. But first, let's get a lawyer's take on the subject. Check out the news video, then meet me on the other side for more.

What's a prenup?

A prenup is essentially the same thing as the property settlement agreement associated with divorce: a legal document detailing a couple's assets and how they should be divided if the marriage ends. In addition to keeping assets separate, a prenup can also keep debts separate, as well as provide for spousal support and even dictate behavior during the marriage. For example, the bride might say that if the husband gains too much weight, he forfeits money. Or the groom might stipulate that if the wife cheats, she loses.

 

You'll need a lawyer to do a proper prenup, and as you learned in the video above, they're not cheap: The lawyer I talked to said $1,500 minimum. Not only that, your partner will need the final agreement reviewed by a lawyer, too.

 

Does everyone really need one?

Orman bases her belief that prenups are for everyone on two primary arguments.

The first is the high rate of divorce. In this Yahoo article, for example, she says, "The national divorce rate is roughly 50%." In this article on Oprah.com, she says, "North of 40% of marriages end up in divorce."

 

But is the common belief that half of marriages end in divorce even true? Not according to some people. From this 2005 article in The New York Times:

 

The (50 percent) figure is based on a simple -- and flawed -- calculation: the annual marriage rate per 1,000 people compared with the annual divorce rate. In 2003, for example, the most recent year for which data is available, there were 7.5 marriages per 1,000 people and 3.8 divorces, according to the National Center for Health Statistics.
But researchers say that this is misleading because the people who are divorcing in any given year are not the same as those who are marrying, and that the statistic is virtually useless in understanding divorce rates. In fact, they say, studies find that the divorce rate in the United States has never reached one in every two marriages, and new research suggests that, with rates now declining, it probably never will.

Of course, even if Orman is wrong on the percentages, divorce is still common. So let's move on to the second reason she thinks prenups are essential. From the same Oprah article cited above: "Drawing up a prenuptial agreement together is a sign of incredible trust and financial openness -- you're fooling yourself if you think you can achieve complete intimacy without it."

 

What she presumably means is that if you're going to share your life with someone, it's important to share your financial life as well. I agree. Who wouldn't? But sharing financial intimacies with your partner isn't the same as sharing them with your partner, your lawyer, and your partner's lawyer, then paying thousands of dollars to have them converted into a binding legal agreement.

 

Who does need a prenup?

As you've probably gathered by now, I think Suze Orman's suggestion that every engaged couple should have a prenup is silly. Two engaged people without any money starting their lives together shouldn't create a $2,000 legal bill. And if they eventually split up, they should be OK with equally splitting what they made together. But there are, in fact, lots of people who should explore a prenup:

  • People with money, at least if they'd like to leave the relationship with as much as they came in with. It doesn't have to be big money. If I'm marrying someone with $100 million and I come in with $25,000, I still might want to protect my $25,000.
  • People who might inherit, at least if they want to make sure family property, heirlooms, or money stays in the family.
  • People whose partners have debt, at least if they want to make sure their partner's debt problems will never become theirs.
  • People who own a business, at least if they want to make absolutely sure that the business remains entirely theirs no matter what.
  • People whose income might radically increase, at least if they don't want to potentially share it with anyone in the form of support after divorce.
  • People with children from other marriages, at least if they want to make sure certain assets pass to their kids upon death or divorce rather then their partner.
Saving money on prenups

It's possible to begin the prenup process -- and save some money -- by drafting it yourselves, then taking it to lawyers. Nolo's Prenuptial Agreements: How to Write a Fair & Lasting Contract is one of many books that might help. (You can also learn more about prenups at this page on Nolo's site.)

 

Bottom line? Prenups aren't nearly as simple as people like Suze Orman suggest, and they're not for everyone. But if you decide  they're for you, remember what the lawyer said in the video above: Be clear on your reasons, start early, and work together.

 

And as you approach marriage, remember this too: Honest communication is not the main thing in a successful relationship: It's the only thing.

 

More on Money Talks News and MSN Money:

10Comments
May 28, 2011 7:15AM
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YES...YES...YES...you can be very faithful but remember that people change like the weather. While it may not be "sexy", you have to protect yourself...furhtermore, it can take the divorce incentive away from your spouse if they change their mind into the marriage...Hey, its just a sign of the times, unfortunately.
Jun 6, 2011 4:49PM
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If you can afford to get married, then you should have a prenup, don't get married without it. Unless you have a BIG income and you can afford that big-time divorce attorney, DON'T get married, it is not worth it.
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When will people realize that the state should not be licensing marriage at all.  It is none of the state's business who you marry and its just causes disdain.  I think a state's recognition of families seems reasonable as a family unit needs to be promoted and nurtured in any society.  As it stands, seems like marriage through the state is just a contract on how to divide assets when you separate anyways.  Why not write a pre-nup and have a say in how the dividing of assets will work in your relationship.  Otherwise you're just agreeing with what some politician wrote a several decades/centuries ago in your state's family code.

Jun 12, 2011 2:40PM
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Pre-nups guys, get them, we all know how high divorce rates are, and most of them are initiated by women(recent study). And since cheating is becoming so accepted and because its just been proven women cheat more then men its best to sign one. And before anyone says im wrong about the cheating, no im not, a recent study says women have cheated more because they hide it better while men get felt up with guilt or blab it out.  Also the divorce courts are so biased against men because then the woman gets the house,the cars half, your money, while your left with what? Literally nothing. Alimony my ****. So guys make sure you sign this thing so you don't get end up getting screwed over. 

Im getting a pre-nup, not because I don't trust my wife but because its a insurance backup type of thing so incase things do go sour i don't get left with nothing.
Jun 6, 2011 8:33AM
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So how do the wedding vows go? "with all that I am, and all that I have (except for the assets set aside in sections III.67 through III.83 of our prenuptial agreement, filed in the Family Court of South Carolina, May 23rd, 2011), I honor you" ?
Does a prenup invalidate these wedding vows?

Jun 12, 2011 4:00PM
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I always grew up thinking that pre-nups were for people who believed divorce was an option for "getting out of the marriage clean" or weren't fully committed to their marriage... and then my parents got divorced after 30 years of marriage and my father's abandonment, even after years of love and commitment. Fortunately, there was no squabbling about the details between them and also fortunately there was some inheritance for my mother to survive off of because my dad just left without providing anything and really can't (he's a job-hopper). But I can't imagine how messy things would've gotten if we kids were minors or if my dad actually cared about anything during the split.

When I get married, I will do so with the mindset that option of divorce isn't one. However, I'm also not naive enough to believe that even after 30 years of commitment and working things out, someone will mess up or change or whatever. I agree with Suze Orman (which is a rarity) and think everyone needs a pre-nup. It's not selfi**** not dooming the marriage, it's reality, and it's wisdom. And I fully plan on bringing one into my marriage, no matter what anyone else says.

And honestly, what you choose to do or not do with your money is really just between you and your spouse (much like a lot of your marriage); if you choose to get a pre-nup or not, it's your choice,and anyone who condemns you for it isn't thinking of you, but instead of their own personal bias on this semi-political issue and trying to force their opinions on your marriage... but did you marry them as well?

If your fiancee does ask you to sign a pre-nup, just sign it and then prove to them for the next 60 years of your life why they never need to use it -- consider it motivation to maintain and cherish your spouse for as long as you both shall live...
May 29, 2011 1:39PM
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Why even get married. Why ruin perfectly good relationships? News stories suggest that be married is not good for tax write-offs. We obviously live in a non-trusting and promiscuous society.
Jun 7, 2011 11:00PM
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when a prenup is signed that just states that im selfish and i dont trust you, so imma take whatever i have now when this all over!!!
so sad, whats the point of getting married if you feel you have to sign a prenup??? theres not trust!!!

Jun 12, 2011 5:46PM
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Marriage itself is a pre- and post-nuptial contract.  Wherever divorce is legal, marriage already has a built-in separation agreement dealing with property and so on, based on either common or statutory law. Marriage licenses, certificates, or other proofs of marriage, combined with the body of law governing divorce, form the universal equivalent of nuptial contracts.  Marrying couples who feel able to bear the natural risks of partnership, and who choose to abstain from "if-but" marriages, nevertheless are behooven to gain an awareness of the inherent terms they automatically agree to in their legal jurisdiction.

 

Personally speaking, I would never throw a $1500 attorney fee at a nuptial agreement, and I agree with some others here that the very notion of a split-up clause is a perversion of what marriage is.  Given modern society, I wouldn't marry a person in the first place if I didn't know them well enough to have total confidence in a permanent union.

 

Still, such agreements can offer couples the chance to alleviate some of the stresses of differing financial assumptions, to safeguard the vulnerabilities of each party in a committed way, and to decide their own reasonable conditions of unity and disunity (including death, and even married life; contracts need not ONLY dictate divorce), instead of leaving them, in the event of a dispute or disaster, to the biases of past and present judges, who may also be deceived by disaffected individuals.  If directed by intimacy instead of suspicion, marriage contracts can potentially be crafted into healthy supports of wedded commitment rather than detractions.  On the other hand, if such topics have not been broached in a relationship, the mere conversation about pre-nuptial contracts may be valuable.

May 28, 2011 3:21AM
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I think we have to ask ourselves, WHY is divorce common?  Maybe in part because people expect it to happen?

 

I don't see the point of a pre-nup.  If you have so little faith in your commitment that you absolutely must have a safety net, maybe you don't need to be getting married.

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