Valentine’s Day reminds us to celebrate our relationships, and prenuptial and postnuptial agreements can be part of that. Many people assume these agreements are about mistrust or preparing for divorce. In reality, they enable couples to discuss and find solutions to financial issues before they become a problem and ruin a marriage. Going through the process can help couples build trust and learn to work together more effectively to achieve their financial goals.
What Prenups and Postnups Do
Prenups and postnups are contracts entered into before marriage (prenup) or during marriage (postnup) that typically address how the couple wants to handle their finances while married, if they get divorced or separated, and after one of them dies. Common provisions indicate which assets and income are separate and marital, whether a spouse is entitled to support and how much, and how inheritance will be treated.
Importantly, the process of getting to an agreement and its specific terms can also clarify each spouse’s financial expectations. All of us go into a relationship with our own financial values, spending and saving habits, income, assets, debts, lifestyle aspirations, and family obligations. We think that any disagreements with our spouse will be easily resolved because we are in love. Unfortunately, money is one of the biggest sources of conflict in marriage. While it may not be the sole reason for divorce, it can add tremendous stress to the relationship. Prenups and postnups help avoid future conflicts by facilitating open and honest conversations. Spouses must talk through their concerns, so they feel secure in their separate and shared finances.
Items to Discuss
Topics that tend to cause the most problems with prenuptial or postnuptial agreements include:
- Current finances. What income, assets, and debts does each side have?
- Financial values. How does each spouse view spending, saving, and investing? What are their lifestyle expectations?
- Division of labor. Who pays the bills, tracks accounts, keeps records, and handles investments? How will the other party be kept informed?
- Separate and shared finances. Which accounts and assets are joint and which remain individual? What expenses are shared, and which are personal? How will pre-existing and new debt be handled? What is “fair” to share if there is a significant income/asset disparity between spouses?
- Goals. What short, medium, and long-term goals do couples have individually and together? How will they accomplish them?
- Illness, disability, or changes in capacity. Who will manage finances if the primary person cannot handle them? How will caregiving needs be paid for? What planning should be done to protect finances?
- Obligations to children from prior relationships. What money will go to prior children during the second marriage and after the parent’s death? How will the current spouse and any children be protected?
- Divorce. How will property be divided in the event of divorce? Is a spouse entitled to support, and if so, how much?
Getting Help
Many of us are uncomfortable discussing money, but bringing it out into the open can reduce arguments and build a stronger, more trusting relationship.
Valentine’s Day is about caring for the people you love. Thoughtful financial planning is one more way to do exactly that, so don’t be afraid of asking for a prenuptial or postnuptial agreement.
If you’re having trouble raising the issue or coming to an agreement with your fiancé or spouse, consider getting professional assistance. Depending on the nature of the problem, a lawyer, daily money manager, financial planner, accountant, and/or marriage counselor can provide guidance.
As a daily money manager, I can help improve your financial literacy, provide an unbiased view of your finances, teach you how to build a budget and track your finances, and develop strategies to manage your finances as a team. I can also handle any day-to-day financial tasks for you if you want assistance because of a lack of time or other reason.
Contact me for a free consultation.
