Do I Need a Pre-Nuptial Agreement?

You may have heard different words for this. There’s no difference between a pre-nuptial agreement, a premarital agreement, and an antenuptial agreement. They’re just different terms for the same thing, an agreement in which a man and a woman agree before their marriage on the rules that will govern their property, their debts, their income, and their expenses. Pre-nuptial agreements are sort of like the weather: everybody talks about them, and almost nobody does them.

Lawyers love to talk about pre-nuptial agreements. They keep talking themselves into believing that eventually, nearly all couples who marry will sign a pre-nuptial agreement (and pay them a big fee), or at least nearly all couples who remarry after a divorce. Maybe. I don’t see it.

Pre-Nuptial Agreements Make Sense

A pre-nuptial agreement allows both of you to protect your separate property. For example, if you own an asset now and you sell it after your marriage, the cash may become marital property, depending on what you say in a pre-nuptial agreement and how you handle the cash.

A pre-nuptial agreement allows both of you to protect yourself from the other’s debts, both those incurred before your marriage and those incurred after your marriage. It also may allow you to determine what level of support one of you will provide to the other if you divorce or if one of you dies.

Another thing that I’m seeing more and more these days, is that one of the spouses may leave a secure and fulfilling job to live with a distant spouse. If the marriage doesn’t work out, is it fair to just send the relocating spouse back home with nothing? Most of us would say there should be some assurances. A pre-nuptial agreement is a good way to provide for that.

On the other hand, a pre-nuptial agreement also allows both of you to agree (if this is your intent) that everything you own and everything you owe will automatically become marital on your wedding day, or slowly as you stay married over a period of years. The flexibility of the pre-nuptial agreement is its main selling point.

Most People Don’t Do Them

Lawyers can talk all they want about how pre-nuptial agreements are prudent for all couples. It just doesn’t feel prudent. It feels like you’re giving up before you even get started.

You’re asking two people who are thoroughly in love and convinced that this is a marriage made to last forever, and you’re asking them to, in effect, negotiate their divorce settlement before they say “I do.” Any way you dress it up, that’s a real downer for romance.

In addition, pre-nuptial agreements are expensive. Most of us can finish a will without a lawyer. Many of us can complete a divorce without a lawyer, or at least using a lawyer only as a coach.

Don’t try that with a pre-nuptial agreement. In most states, you can only enforce it if it’s fair at the time you’re enforcing it (tough standard), or if the party you’re trying to enforce it against has representation at the time. As a practical matter, then, most people who negotiate and execute pre-nuptial agreements are both represented by lawyers. It’s rare for a couple to complete their negotiations and sign the agreement for less than $3,000 in legal fees, and the cost could run much higher.

For both these reasons, pre-nuptial agreements are rare. They may be getting a little more common, but they’re still rare.

What You Can Do Instead

So let’s say you and your new spouse-to-be really aren’t going to do the pre-nuptial thing. Here are some practical steps both of you can take to control the way your property, debts, income, and expenses get merged with each other.

First, prepare a thorough inventory of everything you own and everything you owe as of your wedding day. You can use my Do-it-yourself Inventory sheet as a guide. You can do this without even sharing it with your spouse, but if the two of you can cooperate, you could each prepare an inventory and then sign a document indicating that you’ve each shared this information with your spouse.

Second, to the extent that you want property you acquired before your marriage to remain separate, treat it that way. Don’t use it for the benefit of the marriage. If you sell or liquidate any of it, make sure you deposit the proceeds in a separate account in your name only and that you don’t use the proceeds for the benefit of the marriage.

If you already know that you’re going to use some of your separate property for the benefit of the marriage (and that’s certainly an appropriate choice), go ahead and pull out that much cash and deposit it into a separate account, leaving the remainder of the separate property in the original account and preserving its separateness.

As your marriage continues, you may be tempted to tap into your separate property account for expenses of the marriage, like a down payment on a house, or an investment in a business. I won’t tell you not to do it. I will tell you that every time you tap your separate property for a marital purpose, you make it look more and more like marital property.