Let’s Talk About Prenups as a Financial Planning Tool

Welcome to Let’s Talk About Prenups, our blog series that will familiarize you with terminology that doesn’t need to be taboo. We will answer questions both simple and complex, debunk the myths, and illustrate situations and options. Feel free to contact us with a particular issue or to schedule a consultation.

When planning a wedding, topics like flowers, catering, venue selection, and honeymoon destinations often take center stage. One conversation that many couples avoid—but shouldn’t—is talking about a prenuptial agreement, often called a “prenup.” Though sometimes deemed unromantic or unnecessary, a prenup can actually strengthen a marriage by creating transparency and reducing uncertainty in the future. While prenups tend to be associated with ultra-wealthy individuals and as a symbol of distrust, the prenup conversation can apply to any couple and can be a positive and open conversation if handled properly. Think of it as a financial planning tool for a couple’s future together and as way to have difficult and honest conversations before problems arise.

What Is a Prenuptial Agreement?

A prenuptial agreement is a legal contract created between two people before they get married. It outlines how assets, debts, and other financial matters will be handled during the marriage and in the event of a divorce or death.

Who Needs a Prenuptial Agreement?

Couples do not need to be wealthy to benefit from a prenuptial agreement. The following are common scenarios/situations where a prenuptial agreement is especially important:

• High Net-Worth Individuals: If you or your partner have significant assets (property, investments, a business), a prenup can help protect what you’ve built.
• Blended Families: If either spouse has children from a previous relationship, a prenup can ensure that your children’s inheritance rights are preserved.
• Business Owners: A prenup can protect a business from becoming entangled in divorce proceedings.
• Couples with Debt Concerns: If one partner is entering the marriage with significant student loans, credit card debt, or other liabilities, a prenup can shield the other from responsibility and liability.
• Artists, Creators, or Professionals: If your work produces intellectual property or future earnings potential, a prenup can help clarify ownership rights.

 Common Provisions in a Prenup

A well-drafted prenup can be tailored to address both spouses’ concerns, as indicated in this list of common provisions:

• Division of Assets: Details which property will be distributed in a divorce and how it will be divided. It also identifies exempt assets that remain separate property.
• Debt Responsibility: Specifies who is responsible for debts incurred prior to and/or during the marriage and how those debts are handled.
• Spousal Support (Alimony): Outlines if one spouse will receive support, terms of support, or agreement to waive alimony.
• Inheritance Rights: Can ensure that property inherited by either of the parties prior to or during the marriage is protected and considered separate property and an exempt asset, and can protect children or family members
• Business Interests: Protects business ownership, future value, and income derived from the business during the marriage, including deferred compensation, restricted stock, and stock options.
• Real Estate: Determines how real estate acquired before or during marriage is handled, including how premarital contributions as well as financial obligations during the marriage are managed in the event of death or divorce.
• Retirement Accounts: Can specify how pensions or 401(k) accounts are handled, including whether contributions made during the marriage will be considered exempt or as a joint asset.

Myths About Prenuptial Agreements – Debunked

Let’s clear up some common misconceptions.

1. “Prenups are only for the rich.”

This is false. Anyone with assets, a career, or financial responsibilities can benefit from a prenup. Prenups are about fostering protection, security and clarity, and can apply to any couple, not just the wealthy.

2. “Wanting a Prenuptial Agreement means you are planning for divorce.”

This is false. Just like buying automobile insurance does not mean you expect to crash your car, a prenuptial agreement does not mean you expect the marriage to fail. Planning for unintended outcomes (even if the potential outcome – such as a divorce – might be remote) is extremely common. It is better to have a plan in place just in case the unintended outcome occurs, rather than attempting to resolve the issues after the crisis (divorce) commences.

3. “Prenups are unromantic and show a lack of trust.”

This is false. While discussing the possible ways your marriage could end before you even exchange vows is not an easy conversation to have, open and honest communication about finances actually builds trust between engaged couples. A prenup reflects mutual respect and shared understanding between engaged parties.  Wanting to ensure your spouse is taken care of in the event of premature death or that you and your future spouse treat each other fairly in the event the marriage breaks down is, in and of itself, a romantic gesture.

4. “Courts don’t enforce prenups.”

This is false. When done correctly and in accordance with the appropriate case and statutory law — fair terms, full disclosure, legal counsel — courts often uphold prenuptial agreements.

A prenuptial agreement isn’t a red flag of doubt—rather, it’s a sign of maturity and preparedness. Whether you’re entering a marriage with considerable assets or just want to define your financial future together, a prenup can be an essential tool for long-term harmony. Prenuptial agreements should be thought of as a way to invest in your relationship — by removing financial ambiguity and laying a foundation of honesty.

If you are considering a prenuptial agreement, we can assist. Please contact James M. DeStefano at 973-586-4941 or jdestefano@einhornlawyers.com.