Importance of Prenup

By Laura Petrecca, USA TODAY
Let's face it: The afterglow of that Valentine's Day proposal often begins to dim as discussions of wedding details get started.
The happy couples face potential buzz killers that are financial (how to keep reception costs down), logistical (where to seat relatives not on speaking terms) and, in recent years, even more controversial (So, honey, I love you, but how about that prenuptial agreement ...).


TELL US: Have you ever signed or been asked to sign a prenuptial agreement?

The prenup seems so utterly unromantic — or just plain wrong — but it's also become so right for so many these days: those keenly aware that a marriage may end up in a legal separation, divorce or death. Most prenups tackle financial issues such as real estate, division of bank accounts and potential spousal support in the case of divorce or separation.


GETTING IT RIGHT: Tips on how to make sure your prenup holds up

"More and more of these agreements are being drafted," says American Academy of Matrimonial Lawyers President Marlene Eskind Moses. "It's not just something for the rich and famous any longer. It's for people that have assets and/or income that they want to protect."

Nearly one-third of single adults say they would ask a significant other to sign a prenup, according to a February survey of 2,323 adults by Harris Interactive.

Only 3% of folks with a spouse or fiancée have a prenuptial agreement, but that's up significantly from the 1% reported when Harris conducted a similar study in April 2002.

LeAnna Kruckeberg, 24, of Iowa City, says that she has already told her boyfriend of about one year that she would like him to sign a prenup if they get married.

"Family money stays in the family and should be passed down from generation to generation," she says. "Why should those businesses that my grandparents and my parents built on good old-fashioned hard work be given to someone who marries into a family?

"Any inheritance or trust funds should go to my kids and completely bypass my husband."

Her boyfriend knows the stories of her relatives' struggles as they built businesses, so "he understands and respects" her prenup thinking, she says.

For better or worse

Specific data about the often-complex contracts don't exist, mainly because prenups fall into the area between family law and estate planning, so there is no single trade group continually tracking trends, says Steve Hartnett, associate director of education for the American Academy of Estate Planning Attorneys.

But a number of factors are fueling the prenup bump. At a broad level, they have gained more acceptance as a financial-planning tool.

Personal-finance expert Suze Orman encourages every engaged couple to get one to protect their current and future assets as well as to shield themselves in case a mate secretly runs up massive credit card debt (which could damage both partners' credit scores).

Elizabeth Gilbert, author of the blockbuster tome Eat Pray Love, recently made the case in her new best seller, Committed, for why she and her husband got a prenup.

"Marriage is not just a private love story but also a social and economical contract of the strictest order," she says. "If it weren't, there wouldn't be thousands of municipal, state and federal laws pertaining to our matrimonial union."

More than one-third of adults — 36% — said prenups make smart financial sense, according to the Harris survey. When Harris asked that same question in 2002, 28% said so.

In a recession, people want to hang onto the assets they have, so they increasingly look to these pacts as an option, says Robert Nachshin, co-author of the prenup guide I Do, You Do ... But Just Sign Here.

Also, as marital trends change, so do attitudes. Many couples are tying the knot at an older age, so those folks — as well as those entering a second or third marriage — are bringing more assets into the relationship than, say, a 23-year-old would have.

And of course, prenups are an extremely popular topic on the Internet (particularly on wedding, news and celebrity sites). The gritty details of actor Dennis Hopper's and golf aces Tiger Woods' and Greg Norman's prenups have all been hot topics.

When love doesn't conquer all

The all-encompassing bliss that usually comes with a loving relationship often drowns out any thoughts that the marriage won't work.

"People are hopeful," Orman says. "They want their relationship to last. ... It's just natural that they don't think they'll need a prenup. Never in a million years do they think (divorce) will happen."

In 2008, the divorce rate was about 50%. Among married Americans, the median duration of their wedded life in 2008 was 18 years, according to Pew Research Center's analysis of government data.

Given those odds, "Hope is not a financial plan," says Orman, who urges that every couple get a prenup. "The time to plan for a divorce is not when you're in a state of hate," she says.

Among the divorced, 15% say they regret not having a prenup in their most recent marriage, according to the Harris poll. Men are more likely than women to have this regret, at 19% vs. 12%. Nearly 40% of divorced Americans also say they would ask their significant other to sign a prenuptial agreement if they remarried.

Divorce mediator Marietta Shipley offers more prenup wiggle room than Orman. She says they may not be for everyone but are "absolutely essential if people are getting married for the second time or have children or have wealthy parents."

Financial, legal and marriage experts do agree on one front: Before getting hitched, couples should sort through issues such as credit card debt, discrepancies in each person's wealth and the possibility of future inheritances. Shipley advises the marriage-bound to not only share lifelong dreams but to also review each other's credit reports.

Engaging in those talks also shows that a couple is capable of "financial intimacy," Orman says.

"If they're not open to doing that, we have a serious problem coming down the pike."

Sweetheart deals and bitter feelings

Gilbert says in Committed that drafting her and her husband's "exit strategy" was tense, uncomfortable and dreary work.

Madison, Wis.-based entrepreneur Penelope Trunk, engaged to a farmer, says she understands that each person in a relationship has assets to protect. In her case, it's the shares in her career management business. For her fiancé, it's valuable farmland.

But even with that understanding, they have had many fights and have broken up and reconciled, as they try to "muddle" through making their agreement.

They're still sorting it through, but she is hopeful that they'll get to a resolution. "In the end, I just want to marry him," she says.

Some prenups touch upon more sentimental topics, such as who keeps the heirloom silverware received as a wedding present.

Prenups can even outline what is expected of a spouse's behavior.

"I had a client who was willing to pay his wife a special amount each year provided she didn't do cocaine," says prenup guide author Nachshin. "The agreement was to pay her $25,000 a year. He had the right to drug test her, and if she was clean, she was able to get $25,000."

The wife stayed off the drugs, and over the last 10 years she received $250,000.

Some prenups address issues such as adultery, frequency of intimacy, limitations of weight gain, the scheduling of housekeeping and provisions for pets, says attorney Eskind Moses.

Those clauses may seem unnecessary to some folks, but nailing down what is important to each individual — be it the ownership of a ski house, retaining the rights to an antique tea set or determining who keeps Fido — is vital to do before the marriage laws kick in, say pro-prenup lawyers and financial advisers.

Trunk agrees that it's important to outline expectations when it comes to asset division, but she says these agreements are about emotional security as much as monetary security: You can't fully insulate yourself against marital heartbreak, but at least you can protect your assets.

"It's about everyone feeling secure in a relationship," she says. "You can't have a contract for your heart, but you can have a contract for the rest of this stuff."