VOL. 127 | NO. 56 | Wednesday, March 21, 2012
Rays of Wisdom
Dana and Ray Brandon
Prenups: Not Just for Rich
By Ray and Dana Brandon
Ray’s Take There are many reasons to have a prenuptial accord: Firstly, while people expect their marriages to last forever, more than one-third of first marriages fail, and that percentage rises with subsequent marriages; secondly, people are waiting longer to marry and enter their union with more assets; and thirdly, prenups can offer protection if one spouse secretly runs up massive debt.
People often think of only financial assets when drawing up prenups, but there are other factors a prenup can address. You may want to ensure that children are raised in your religious faith or that you maintain custody of a beloved pet. The ultimate disposition of prized family heirlooms could also be included.
In this day of divorces, remarriages and blended families, prenups can be crucial to seeing children inherit assets from a previous marriage, particularly things like qualified retirement plans, that otherwise might automatically go to the current spouse.
Prenups might be of particular importance when one spouse owns a business, there is a disparity of wealth, or one spouse supports the other through college. It’s also something to be considered if a large inheritance is in the future or if assets such as a home or investments are involved.
Drawing up a prenup contract requires calm, careful consideration and complete honesty. It’s largely a financial planning tool that provides guidelines for disposal of assets in case of divorce or the death of a spouse.
Drawing up a prenup may not sound like a particularly romantic notion when planning a lifetime of marriage. However, think of it as insurance – or, better yet, assurance – that your financial assets and position will be protected just in case the unthinkable actually comes to pass.
Dana’s Take Simply saying the word “prenup” can suck the romance out of a relationship, but it doesn’t have to be that way.
I can honestly say I would have broken down in tears if Ray had brought up a prenuptial agreement after he proposed to me. It implies a certain amount of mistrust.
But if the couple or the couple’s parents hired a financial adviser prior to the marriage, it might not be a deal breaker. The advice would be independent and not so tinged with emotion.
Couples considering marriage should already be talking about how to handle existing debts, their household finances and what would be done with any inheritances.
Prenups are about the financial security of both parties. In fact, courts are known to throw out prenups that would result in unfair property division or when one spouse is not represented by a lawyer when the agreement was drawn up.
Starting the couple off with a good financial plan could be an ideal engagement gift. Having those difficult but important discussions – and perhaps a prenup – could actually improve the chances of a marriage’s success.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at email@example.com.