Saying ‘I do’ to a Prenuptial Agreement

Written by Katrina Daniel Thursday, September 09 2010

“It’s not the most romantic thing to do, but it just makes sense:” Overheard at an outdoor café in downtown Greenville, S. C. Two attractive, well-dressed women, obviously educated and well-employed, were dishing over the lobster Cobb salad. “I’m meeting Charles at my lawyer’s office this afternoon. I had my lawyer draw up a prenup.”

Comments Woman No. 2: “This way you get to keep what’s yours in case the marriage goes bust.”

One of those two women is a top-earning stockbroker with a 25-year-old daughter from her first marriage. The daughter is marrying a man who owns a business in Charlotte, N.C., and who has two children of his own from his first marriage. The three grown children between them represent three reasons for a prenuptial agreement, or prenup. Since both are older, have been married before, and are successful in their careers, they have assets they need to protect.

Prenup is no longer a dirty word for many about-to-be married couples. In fact, an attorney recently told Matt Lauer on the Today Show that prenups have gone up 80 percent.

Despite, or perhaps because of, the difficult economy, the number of prenuptial agreements being drawn up is on the rise as more people get married for a second, third, or even fourth and fifth time.

The reasons for prenups are obvious. According to the U.S. Census Bureau, there will be 1.25 million divorces this year. The failure rate for first marriages is 50 percent.

As the saying goes, “If at first you don’t succeed, try, try again.” And so we do. The divorce rate for second marriages is between 60 and 67 percent, while the failure rate for third marriages is even higher at nearly 75 percent.

Whew!

But, ever the optimists, we Americans just keep on trying to get it right.

And not until we get older, gain experience, and see our friends go through bad divorces that leave them broke do we take the steps necessary to protect ourselves financially in case of a divorce.

“Actually, it’s more than just protecting yourself from financial ruin,” says Greenville attorney Charles Groves, “It’s a way to protect what you have spent years earning or building.”

A prenup is a business contract, not a romantic agreement. That, says Groves, is usually the hardest fact for brides-to-be to get over. “Romance sometimes goes out the window when the word prenup comes up,” he says.

Here’s what Legal-Explanations.com defines as a prenup: A written agreement between two people who are about to get married. It states the list of their assets, liabilities, authority over each other’s property, how their earnings and savings will be used, and if the marriage does not last, how the property would be divided and alimony be paid.

There are many models of prenups. They can and should be customized to meet your needs for financial protection.

In the past, only the very wealthy opted to protect their assets with prenuptial agreements. That’s changed, and now prenups may be a valuable method of safeguarding assets for anyone who has spent years working, accumulating, or inheriting property.

Here are questions to help you decide if you need or want a prenuptial agreement:

• Do you own real estate?
  
  
• Do you own all or part of a business?
  
  
• Do you have more than $50,000 in assets?
  
  
• Do earn more than $100,000?
  
  
• Do you own insurance, benefits, IRAs, profit sharing, stocks?
  
  
• Is one of you much wealthier than the other?
  
  
• Will one of you be supporting the other through college or graduate school?
  
  
• Does one of you own a business that could earn millions?
  
  
• Does one of you have loved ones, elderly or disabled siblings, or parents who need to be cared for?
  
  
• Does your intended have a large debt load? If you are marrying somebody who’s carrying a lot of debt then you don’t want to be responsible for that debt should the marriage fail.
  
  
• Are you much poorer than your partner? A prenup can also be used to ensure that you do get something and are protected financially.

If you answered yes to any of those, you might need a prenup.

A couple of suggested additions to consider: If, say, you have a child or grandchildren and you have family jewelry that’s been handed down from your great grandmother, you might want to include in the prenuptial agreement that that jewelry stays in your family and your possession. Assure that, in case of a divorce, those heirlooms do not go into the “marital pot” to be divided up or, worse, leave your family entirely.