Years ago, getting a prenuptial agreement was seen as a sign that you were either extremely wealthy or that you were pessimistic about your marriage. Now? Prenups are becoming common practice, especially as people are getting married older.
A 2023 poll from the Harris Group found that half of Americans somewhat support getting a prenup, up from 42% in 2022. And about 20% of married couples have a prenup in place. The numbers increase with younger generations, with about 47% of millennials and 41% of Gen Z having prenups.
Getting hitched and interested in a prenup? Read below to see how they work, how much they cost, and how much they might save you.
What is a prenup?
A prenuptial agreement is a contract between two people getting married that decides how they will split assets in case they break up. Contrary to popular opinion, there does not seem to be a correlation between getting a prenup and getting divorced.
Prenups can decide what will happen to any shared property purchased together, such as cars, houses, or even pets. If one person decides to stay home and raise the children, a prenup can include compensation for them giving up some of their earning years. It can also protect assets that come from an inheritance, even if that inheritance occurs while the couple is married.
Some prenups will stipulate how much an individual might receive in alimony. However, prenups cannot dictate child support payments. Those will be decided by a court.
If you got married without a prenup, it’s not too late to create a postnuptial agreement or a post-nup. You can also change a prenuptial agreement after you’re married as long as both parties agree.
It’s best for each party to have their own lawyer create the prenup, even if it’s more expensive. If you use the same lawyer, then there will be a conflict of interest because one person cannot advocate on both people’s behalf. Before hiring a lawyer, you can each think of some issues you want to go over.
Creating a prenup isn’t cheap. The average cost ranges from $2,500 to $10,000. If one or both parties already have significant assets, then you may end up spending on the higher end.
Think of a prenup as insurance in case of a divorce. if you stay together, then you don’t need it. But if you split up, having that prenup will ensure that everything is divided fairly. Because you create a prenup when you’re happy and optimistic, you’re more likely to be kind and fair to yourself and your partner.
Remember, every state has laws surrounding what people are entitled to during a divorce. In essence, your state already creates a prenup for you, and it may not be what you had in mind. By drafting your own prenup, you can customize it to your own needs and wants. Prenups can even override state laws if you set them up that way.
Can a prenup save you money?
The main point of a prenup is to expedite the divorce process if it happens and save both parties money in the long run. If you have a prenup in place, then you may have to spend less money on lawyer fees, debating over who gets what.
The average cost of a divorce with a lawyer was $7,000 if you didn’t have to go to court, but jumped to $11,600 if you do have a trial. If you have a prenup, then your fees may be much lower because there will be fewer things to disagree about.
If you get married without a prenup, then your divorce may cause undue financial stress. For example, let’s say you’re getting divorced and can’t afford to pay for the divorce lawyer on top of your normal living expenses. You may resort to liquidating your retirement accounts. And if you have a traditional IRA or 401(k), then you may owe income taxes as well as a 10% early withdrawal penalty.
By having a prenup set up, you may be able to save on divorce costs and avoid liquidating your retirement accounts. Many divorced couples also rely on credit cards to cover living expenses during the filing process.
What to know before getting a prenup
Choose a divorce attorney
When drafting a prenup, it may be tempting to ask a lawyer, friend, or family member to represent your side. But it’s better to go with a divorce attorney with plenty of experience. They’ll know more about what you should include in your prenup and will be able to ask the right questions.
Don’t know a divorce attorney off the top of your head? Your state bar association should have a section of family law attorneys that you can browse. If you know a different kind of attorney, you can ask them if they have a recommendation for a divorce lawyer.
May be a substitute for marital counseling
If a couple is not doing premarital counseling, establishing a prenup can help them discuss financial issues before they become a problem.
It can provide an easy way to discuss future scenarios, like if one person will become a stay-at-home parent or what happens if an individual goes back to school and doesn’t provide an income. Going over these scenarios can lead to important conversations.
A prenup can include stipulations about what happens to assets in case one person is at fault. For example, if there is proof of cheating or addiction issues, then certain aspects of the prenup may go out the window.
