The Pros and Cons of a Prenuptial Agreement

Should you create a prenup prior to getting married?

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For many people, it's still assumed that a prenuptial marriage agreement, called a prenup for short, is a death knell for romance. A prenup seems to signify in many minds that one partner doesn't trust the other or that there's not much hope for the marriage to survive long-term. But it doesn't need to be a bad sign. A prenup can also be a practical solution to discussing the topic of complicated finances in a marriage. A prenup is one way to keep a marriage on track.

You don't need to have extraordinary wealth to use a prenup, either. Slowly but surely, the stigma of having a prenup may be lessening. Many couples going into their first and second marriages witnessed the pain of their parents' divorces and they simply want to put their financial cards out on the table and protect their interests—and avoid taking on debt—before they walk down the aisle.

What Is a Prenuptial Marriage Agreement?

A prenuptial marriage agreement is a signed and notarized contract that spells out how a couple will handle the financial aspects of their marriage. Having this honest financial discussion prior to a wedding ceremony can be a very positive experience.

Granted, a prenup is not all that romantic, but it does establish some financial, asset, inheritance, and property rights in the event of a divorce. While no one is thinking about a divorce when they get married, about half of all marriages in America end up in divorce proceedings. It may be a wise decision to at least consider a prenup.

Pros
  • A prenup may alleviate your responsibility for your spouse's outstanding debt after a divorce.

  • Prenups can include and protect your children and grandchildren from a previous marriage to ensure they receive assets if you die.

  • A prenuptial marriage agreement spells out which assets you and your spouse may want to give to children or other family members in the event of your death or your spouse's death.

  • A prenup can protect your business assets and potentially your future business assets if you anticipate exponential growth, and it can limit the control your former spouse can have in your business.

  • A prenup can solidify the division of assets and entitlements to you if your spouse dies or vice versa.

  • In the event of divorce, a well-drafted prenup might allow you both to quickly address the most common and emotionally draining legal challenges and avoid a long and costly court battle.

Cons
  • A prenup can be challenged and deemed invalid by a judge if you or your spouse failed to disclose all assets, there was evidence of fraud, duress, unfairness, or lack of representation at the time of signing the agreement.

  • Even if you have contributed to your spouse's professional success, you may not be entitled to claim a share of the increase in value if you have agreed otherwise in the prenup.

  • You (or your spouse) may have agreed to financial terms that are not in your best interest because you were in the "honeymoon" stage of your relationship and did not anticipate future issues.


  • Regardless of how much either one of you earns, you both will need to pay legal fees to hire separate lawyers to protect your interests while drafting a prenup.

  • The terms of a prenup may substantially favor the partner who has the majority of wealth in the relationship.

Important Steps Before Entering into a Prenuptial Agreement

  • Discuss the agreement early in your relationship or engagement. Do not wait until you are ready to walk down the aisle.
  • Be honest. Do not try to hide your thoughts, feelings, or assets.
  • Hire separate attorneys so you both have good and fair representation.
  • Consider asking both lawyers to supply an affidavit of independent legal counsel. Keep the affidavits with the original prenuptial document.

Warning

Prenups aren't just about assets, they involve debt, too. Student debt and other types of loans can be complicated topics for divorcing couples depending on where you live and other factors. A prenup may be able to specify that student loans borrowed for a spouse’s education will remain that spouse’s separate debt, regardless of whether the debt is borrowed before or during the marriage.

What If You Both Disagree on Getting a Prenuptial Agreement?

What should you do if you feel pressured or completely against getting a prenup, or your partner feels this way and you don't? Some couples may call off their engagement or look for a compromise, such as using a professional mediator to work with you during discussions. Here are other alternative moves you can consider instead of a prenup:

  • Keep separate checking accounts.
  • Keep properties and property taxes in separate names.
  • Consider a revocable trust to protect your premarital assets.
  • Draft a postnuptial agreement.
  • Keep diligent records of all of your premarital accounts and assets.