Getting engaged often means a long ‘to-do’ list of exciting events: booking your honeymoon, creating a registry, planning a wedding.
But one item on the list might look a little less romantic: getting a prenup. How do you know if you and your spouse-to-be need a prenuptial agreement? We’ll explain what a prenup is, why people decide to get one and three signs a prenup could be right for you.
What is a prenuptial agreement?
A prenuptial agreement, also called a marital agreement, is a document that lays out the financial terms of a marriage. Although “prenuptial” makes it sound like you have to do it before the wedding, actually, you can do it anytime before or after you get married. These kind of agreements typically identify all of the assets each person owns and specifies what each person’s rights will be when the marriage ends, either due to divorce or when one of the spouses die.
Although a prenup often gets a bad rap – as if one partner doesn’t think the marriage is going to last or questions their fiancee’s motives – getting one can actually be a healthy move for the relationship, says Austin lawyer Colin Newberry.
“One of the best benefits of a marital agreement isn’t the protection or the disproportionate division of assets that people imagine,” says Newberry. “It is the full disclosure and conversation prior to marriage about what you have going into a relationship and what you expect to share throughout that relationship.”
And prenups are on the rise. A recent survey of divorce lawyers showed that 63 percent say they’ve seen a dramatic increase in prenups in the last three years. Another 44 percent of those attorneys say more women are initiating prenuptial agreements as well.
Why do people get a prenuptial agreement?
There are two reasons why prenups are becoming more common: people are getting married later, and second marriages are becoming more common.
“These couples not only are going in ‘eyes open’ about marriage, but they also have amassed more significant separate assets prior to the marriage to maintain and protect,” Newberry said.
Three signs you may need a prenuptial agreement
A prenup might be a good idea if any of the following situations apply to you or your intended spouse:
- Either of you have significant assets, like bank accounts, stocks, bonds or real estate.
- If either of you have debt or loans in your names.
- If you or your spouse owes child or spousal support from a previous marriage.
These three situations could mean a prenuptial agreement would be the best decision for your future marriage. Of course, an attorney can give you the best advice on your personal situation and whether a prenup could be a good idea.
In addition to these three situations, a prenup can help clarify some of the following questions about how you and your spouse want to handle money. Since money can be such a stressful issue in many marriages, talking about these issues beforehand can strengthen your relationship and help you avoid future problems. Some questions to consider are:
- How do you want to handle assets accumulated together, like a house bought in both partner’s names?
- Will you have joint bank accounts, separate bank accounts or both?
- What are your views on non-monetary contributions, like raising a family or managing the home?
How much does a prenuptial agreement cost?
Although it can vary from lawyer to lawyer, in Texas, a prenuptial agreement costs an average of $1200. And to be most effective, a prenup should just be a part of an estate planning package – a will or trust, a living will, and powers of attorney. Those documents cost an average of $1,500.
If you think you and your spouse could benefit from a prenup and a will, but you don’t have that kind of cash to spend on legal documents, consider how a legal plan might help. A legal protection plan, like Texas Legal, will often cover the cost of estate planning documents in full, leaving you to only pay the low monthly premium. Make sure when you’re shopping for a plan that you ask specifically about what’s covered and if there are any deductibles and/or co-pays you are responsible for.
No matter what you decide about a prenup, it’s important to go into marriage with your eyes open. Make sure you and your spouse are as open as possible about your finances and attitudes about money before you tie the knot.