Sunday, August 15, 2010

Prenuptial planning

(via Mississippi Family law Blog)

Many people fear writing a prenuptial agreement. Some believe that it's just asking for trouble, as if the couple writing one is wishing for divorce. Others think that it's a way for one person to screw the other person in the marriage out of what's rightfully theirs.

Balderdash. Poppycock. Horsefeathers.

As Little Spoon noted, this is your chance to control your future, rather than leaving it up to a lawyer battle or the courts to decide it for you.

Yes, preparing a prenup may feel like tempting the fates, but it's actually an insurance policy against nasty things happening later on if something bad happens and your emotions are spiraling out of control. No, it's not pleasant to contemplate the end of a relationship, but it's better to spell out how you want things to go down before anything happens, while you're both still cool, calm, rational...and fully in the spirit of working together.

What's more, writing a prenup together can actually be an exercise that brings you closer together. When you do it in a structured way, there are very few secrets left between you about your assets and your plans for the future. By the time you've written out the schedules or exhibits of your finances, you should at least know each others' major assets, debts, and expenses. If nothing else spurs you to talk money, this might be it. And if you can't talk about money together, you need to learn how before exchanging rings, because money impacts not only your present, but also your future.

It also forces you to confront eventualities that you might not have thought of. For instance, if one of you is going to stay home at least part time with the kids, how might that impact your earning potential? Are you willing to take that hit for the family? Or will you want to stay in the workforce somehow to keep your skills up? What if you start a business - do you want that to be considered your own work and responsibility, or would you prefer to think of it as community property? Questions like that help you think about what's "mine," "yours," and "ours" before you have to confront them head-on during a marriage and make some tricky decisions.

And here's a dirty little secret: even if your partner has many more assets right now, you may be able to cover your butt for the future. Is there an inheritance that might come your way that you want to be sure stays with you instead of divided among both of you if a divorce happens? Put it in. How 'bout that business you started that's taken off - are you willing to have to sell it or split the proceeds of it with your spouse, even if he or she has done nothing for it but provide capital and support? Is there something that you've bought that you want to ensure you can take with you - car, furniture, computers, art, collectibles, or something else? With a prenup, you can keep that stuff with you without worry. What if your partner wants to change careers and needs to go back to school - are you willing to be responsible for half the debt, or should the debt stay the responsibility of the person who incurred it? You can put a clause clarifying that in the prenup.

Just make sure that you draft one together. Though I shouldered the load of writing ours up, I consulted Little Spoon on the details to make sure her interests were represented. It even led to a conversation that clarified how we wanted to conceptualize purchases we'd make using credit cards that remain in our own names. It was a bit murky at first, but the language of the prenup helped us figure out that if we wanted a major purchase to belong only to one of us, that person would need to use his or her credit card to get it, rather than the one we'll use to pay household expenses. That's not to say money for the purchase must come from a separate account in that person's name; we're open to funneling joint money to big-ticket items. We just want to make sure there's a mechanism for tracking those expenses - and for ensuring we talk about purchases that are big enough to affect both of us.

I found Stoner and Irving's Prenuptial Agreements: How to Write a Fair & Lasting Contract an exceedingly helpful resource in drafting our prenup. This book comes with a CD-ROM that has templates for a variety of issues that would come up, some of which I never considered until reading the book. Copying and pasting the relevant alternatives, then changing the wording to fit your situation and names, is a nice way to create a draft you should be happy with that's also easy to read. Here's hoping the lawyer approves!

Note. We received no compensation for promoting this book; we just checked it out at our local library.

1 comment:

  1. Good stuff, Big Spoon! As a 40 y.o. first time bride, I have amassed considerable assets that I don't want to lose should love go awry.