THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE SEE MY DISCLOSURES. FOR MORE INFORMATION.
When you’re getting ready to tie the knot, one of the things you may have to decide is whether or not to sign a prenuptial agreement.
This can be a tough decision, but it’s important to weigh all of the pros and cons before you make a decision.
In this post, I discuss the major pros and cons of prenuptial agreements.
By understanding both sides of this issue, you can make an informed decision about whether or not to sign one.
Table of Contents
12 Major Pros And Cons Of Prenuptial Agreements
What Is A Prenuptial Agreement?
A prenuptial agreement, or prenup as it is commonly called is a legal written contract, drafted by a lawyer, between two people, created before they are married.
It lists all the property each person owns as well as their debts and specifics each person’s property rights after the marriage if it ends in divorce.
Now that you have a little background information on what a prenup is, let’s look at the advantages and drawbacks.
6 Pros Of Prenuptial Agreements
There are many good reasons to sign a prenuptial agreement.
Here are the biggest prenuptial agreement pros you need to be aware of.
#1. Protects Personal Assets
Most people are familiar with the fact that a prenup agreement protects the financial interests of each spouse.
So if one party brings substantial wealth into the marriage, they would get a prenuptial agreement stating that if the marriage were to end in divorce, the assets they had before the marriage would not be subject to the divorce.
Understand that the marital assets earned during the marriage are not impacted by the prenup and would be split based on the terms of the divorce.
- Read now: Learn how to hide money before a divorce
#2. Safeguards Business Assets
Prenuptial agreements aren’t just for personal assets.
They can also help protect family business assets as well.
In fact, some small businesses require a prenup agreement so that there is no risk to the business.
For example, let’s say Allison and Heather own a business together.
If Allison gets divorced, her ex-spouse could be entitled to 50% of her share of the business.
In this case, Heather owns 50%, Allison owns 25%, and Allison’s ex-husband owns the other 25%.
To get Allison’s share back, she would have to buy it from him, or give up some of share of her personal assets to satisfy this amount.
#3. Compensates You For Giving Up Career
This advantage is not something you hear talked much about when it comes to prenuptial agreements.
Let’s say one spouse gives up their high paying career to raise the children and the other spouse continues to work.
If the marriage does not last, you can be compensated for the income you missed out during these years.
- Read now: Learn how much six figures is
The catch to this is you have to give up your career after you get married and you need to include this in the prenuptial agreement.
This is why it is critical you find a highly qualified family law attorney so your prenup includes things you might not be thinking about.
#4. Safeguard Inheritance Rights Of Children
Another overlooked benefit of a prenuptial agreement is child support in the event the children are from a previous marriage or relationship.
Depending on state laws, regardless of what your will says, your spouse could be entitled to all of your assets.
If your will states that your children from a previous marriage get certain assets, it could be ignored in most states.
- Read now: Here is why you need a will
Many couples are not aware of this.
And the good news is that in most relationships, if you communicate to your partner your wishes, they will honor them.
However, this isn’t always the case.
But if you have a prenup, you can rest knowing that your wishes will not be ignored.
#5. Agreement Of Spousal Support
In the event of a divorce, there is a good chance one spouse could owe spousal support to their partner.
A premarital agreement can state what this amount is ahead of time, saving both parties a lot of time and effort.
- Read now: Here is how to value your time vs. money
The biggest downside to this however, is if there is a tremendous amount of wealth earned during the marriage.
Both parties might be used to living on a lot more income and then after the divorce, the spousal support is a lot less money.
#6. Can Protect You From Debt Obligations
Most people think of a prenuptial agreement as protecting only assets in the event of a divorce.
As a result, many couples think they are only for the wealthy.
But a prenup agreement can protect you from the debts of your partner.
Depending on your state’s laws, you can include a clause that states you cannot be held liable for any additional debt your partner during the marriage.
Since some states have community property laws, a creditor can come after a spouse for unpaid debt.
This debt clause can protect from owing money borrowed by your partner during marriage.
- Read now: Learn the hidden costs of debt
6 Cons Of Prenuptial Agreements
As great as the above benefits are, there are some serious cons of a prenuptial agreement.
Here are the ones you need to know about.
#1. Creates A Sense Of Distrust
The biggest issue with a premarital agreement is that for some people, even having the prenup conversation can spark distrust.
If either party feels they aren’t being fairly represented in the prenuptial agreement, a sense of distrust can form.
And this feeling can sit and fester below the surface for many years, never allowing the relationship to blossom into its full potential.
#2. Can Ruin The Romance
A prenup forces partners to think about real life issues when they are deep in love.
This can ruin the romance and send the relationship to an end before it really begins.
This is another reason why it is important to look at this agreement as a way of dividing future marital property fairly between both parties now while you are in love.
You are more likely to be fair with property division now, than you would be during the heat of a divorce.
#3. Assumes Marriage Will Not Last
Talking about a prenuptial agreement to some people is a red flag.
Instead of looking at a prenup as a way to safeguard marital property now when both parties are happy, some people see a prenuptial agreement as a guarantee the relationship will not last.
Because of this, you have to be careful if you are thinking of drafting a prenuptial agreement and bringing it up to your partner.
#4. Not Foolproof
As much as a premarital agreement can safeguard your finances and marital assets, it is not perfect.
For example, if either partner was not upfront with all of their financial situation, this could cause a legal issue during the divorce process.
Likewise, if you try to save money by writing your own prenup, if might not hold up based on state laws.
While legal fees can be high, it is more important to pay legal fees and have your prenuptial agreement drafted by an experienced family law attorney.
This way, you know the likelihood of a legal issue during the divorce process is small.
- Read now: Here is how much happiness costs
#5. Difficult To Predict The Future
No one is good at predicting the future.
You might sit down with your partner and draft out a prenup that you both think covers everything.
But they you get married and other factors come into plan.
On spouse wants to stay at home.
Or your finances increase substantially due to the selling of a business you didn’t even know you wanted to create.
The good news is that you can change your prenup.
But both spouses have to agree and be on the same page.
- Read now: Here is how to pay for a divorce with no money
#6. May Agree To Poor Terms
Finally, one of the biggest overlooked drawbacks of prenuptial agreements is that either partner might agree to poor terms.
When you are deep in love, you might not think through a situation completely.
Or you might not be thinking clearly at all.
For example, you might agree that if you divorce, financial support for you might be $30,000 a year.
In the moment, this sounds great.
But fast forward 10 years and you have child custody and are raising 3 family members on $30,000.
That money isn’t going to last long.
Or you might agree that if you have a second marriage, you give up all your rights to financial support.
This is yet another reason why it is important to have your own family law attorney look over the prenuptial agreement before you sign it.
There are the biggest pros and cons of prenuptial agreements.
When you are wedding planning, thinking about a future divorce is not on your mind.
But the fact is close to 40% of all marriage ends in divorce.
While it is not exciting think about, it could be in your best interests to have legal counsel write up a premarital agreement.
Because even though you think your partner and you will be civil, a contentious divorce is not a fun experience.
It’s better to go through the process now while you are happy and in love, and not sad and bitter towards your partner.
- Read now: Here are the life lessons from the wealthy
- Read now: Find out how to move with no money
- Read now: See the best Ted Talks about money
I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.