Yes, I’m getting married. But I’m not rich so, no, I don’t need a prenup. This has long been the view of many a dreamy eyed newly engaged couple. The rich have always understood why they needed them. People who are marrying for the second or third time tend to get a prenup (if there are children from the first marriage, the children often insist on it). Those who are not rich and are marrying for the first time have historically not regarded prenups as a priority. But things are changing. There has been a shift in recent years towards an increasing number of ordinary income couples signing prenups. Why?
One significant factor is that there is heightened awareness around how traumatic a divorce can be. However unromantic it is to contemplate the end of a marriage that has not yet been entered into, more and more people want to hope for the best but plan for the worst. Without a prenup, the state of California will decide how your financial entanglements should be unwound. People are realizing that there are substantial benefits in taking control of that process and knowing upfront how the couple’s finances will be divided upon divorce.
Let’s start with the millennials. They tend to get married later in life than their parents did. That means that by the time they get married, they are more likely to have accumulated assets that they would want to retain in the event of divorce. They are also, on average, more established in their careers (and therefore earning higher levels of income) than their parents were at the time they got married. With a higher level of income comes a greater level of concern and focus on what would happen to that income upon divorce.
It’s not just about income, though. Debt is also a driving force behind the decision to enter into a prenup. It is well known that millennials acquire staggering amounts of debt, especially student debt. Those debts often will not be paid off for many years after the point at which they get married. If one of the parties to the marriage does not have student debt but her fiancé had a penchant for Ivy League universities that saddled him with $200,000 of student loans, she will often want to enter into a prenup to make it clear that she will not be liable for his student debts if they divorce.
Having decided to enter into a prenup, you should then consult a lawyer to make sure that the prenup will be deemed to be valid and enforceable by a California court. There are formalities that need to be complied with. The main ones are: (i) consent to enter into the agreement must be freely given. That means that each party must have an opportunity to seek independent legal advice before signing the prenup; and (ii) the agreement must not be “unconscionable.” That means that it cannot be the result of seriously unequal bargaining power and it cannot unreasonably favor one party. Full and honest financial disclosure would also be required by each party.
There is no question that 100% of couples believe when they get married that they will not get divorced. Yet the divorce rate in California is not much better than 50%. Even for those whose assets and income would not lead anyone to label them as “wealthy”, entering into a prenup is a wise choice. Once you make a decision that you want a prenup, talk to your fiancé about it sooner rather than later. And don’t try to sign a contract without the involvement of a lawyer. There are lots of traps for the unwary that can make a prenup unenforceable in California. If that were to happen, the agreement that you signed would be worthless and the state of California will decide who gets what in the divorce.