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What Is a Prenup? A Soon-to-Be-Married Person’s Guide

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Like many things about planning for a marriage, prenups stir up more fuss than they probably deserve. In a perfect world, they’re just a legal formality of what should already exist: a healthy relationship between two people who have defined their financial boundaries and expectations before they officially merge their lives. But in reality, they can be ungraceful, expensive, stressful affairs, and force a couple to confront differences they’d prefer to gloss over. And that’s partly why, unlike marriage, they’re rare. About 5 percent (or as few as one percent, according to some sources) of couples get them, despite one survey’s report that 44 percent of unmarried people think they’re a good idea, in the abstract.

From a practical standpoint, a prenup requires you to accept the statistical probability that your marriage may not last, and you’d be wise to “protect” the assets that you’ve brought into it (a house, a business, the cat). While considering this gloomy prospect, you should also think about any money that you or your spouse owes. If you help your spouse pay down their loans and then get divorced, is that fair? You could let a court decide, or pay your lawyers to haggle over a settlement. Or you could hash out worst-case scenarios before they happen, and put them on paper. A common metaphor for prenups is insurance: You can either pay now and worry less about an unknown future, or hope things work out and risk a nightmare if they don’t.

If you’re on the fence, there’s plenty more to read before making up your mind — including your own state’s marital statutes, which may very well render your concerns moot (all but ten states follow equitable distribution laws, which say that whatever was yours before the marriage will remain yours after it). However, if you do want to proceed with a legal agreement, your next steps are critical. If there’s one thing about prenups that everyone can agree on, it’s that a bad one becomes a self-fulfilling prophecy.

Which also brings us to a brighter way of looking at them: “A thoughtful prenup can help a marriage last, as long as it makes both parties feel good,” says Laurie Israel, a lawyer, mediator, and author of The Generous Prenup. The key is prioritizing the health of the relationship over your individual bank accounts: “Many lawyers don’t take the more holistic view, and that can be disastrous, because marriage is a joint financial venture,” she explains. “It’s almost like a socialist institution. Spouses should act as though they have a fiduciary duty to each other, which means they are transparent and do what’s in the financial best interest of them both. But the problem with some prenups is that they’re antithetical to that duty.”

Indeed, most prenups tend to favor the financial interests of the wealthier spouse. “It’s very common for the less-monied spouse to say, ‘I don’t want any of this money,’ and I encourage them to take a more long-term view,” says Israel. While no one wants to look like they’re marrying for financial gain, they shouldn’t ignore the numbers either. “When a prenup leaves one person much less secure than the other, it’s harmful,” she adds.

Conversely, it can be empowering for the less wealthy spouse to spearhead the process. “We think about prenups as something that the wealthy person sticks to the less-wealthy person and says, ‘Sign it. My lawyer said we have to.’ But I think it can be profoundly helpful for the less-wealthy person to take initiative,” says Manisha Thakor, the VP of financial education at Brighton Jones and author of Get Financially Naked: How to Talk Money With Your Honey. “It gives them confidence, clarity, and understanding about what they’re stepping into, and there’s less bitterness over tradeoffs.”

So how, exactly, do you determine a “fair” prenup? The traditional route is for one person’s lawyer to draw up a first draft and send it to the other person’s lawyer to negotiate, but Israel strongly discourages this back-and-forth approach, which often spawns passive-aggression and sour grapes. Instead, she recommends mediation.

A mediator is an impartial third party, ideally an attorney or someone with extensive legal experience in marital cases, who sits down with you both and generates discussions about your concerns. In the initial meeting, both parties must disclose all of their financial assets and debts, if they haven’t already, and make sure that the other party understands their structure. (A personal example: I inherited property from my grandparents, but I share it with my eight cousins, so I can’t just sell it whenever I want to.) The mediator then helps create a term sheet or initial prenup draft to give to your respective lawyers (each of you needs independent legal representation). This way, you are approaching the process from the middle, rather than the extreme ends of your opposite sides. Yes, a mediator does cost more up front, but Israel sees it as an investment. “That’s money you’re spending to strengthen your marriage,” she says.

As for the conversation itself: It will be awkward, but hopefully in a good way. Thakor recommends being up front about your fears, no matter how far-fetched: “You can say, ‘I don’t want you to think I’m a gold digger. But I’m also worried about my financial independence.’” Did your brother lose all his money in a divorce? Do you want to make sure your business remains yours alone? Let it all hang out. Then the mediator can help guide you toward solutions that make both parties feel equally covered. “Money is power, and being honest about the division you would want if things don’t work out is just another way to discuss that balance of power,” says Thakor. “If that balance feels off, you’re not going to have a good marriage.”

Meanwhile, don’t shy away from the nitty-gritty. Prenups can be extremely intricate (or downright weird), but there’s lots of room for creative compromise. For instance, if one person has an asset that generates income (say, a stock portfolio), perhaps that income can become marital property (shared by you both), while the asset remains separate. If you have a house, maybe it stays in your name until you’ve been married for ten years. You could even include provisions for the dog. The point is, you get to make it as strange and specific as you want — together. And you can always go back and trash the whole thing if you both want to, or tinker with it; postnups are a very similar process.

Ultimately, the goal is to induce more relief than heartache —especially if heartache happens later. Thakor experienced this firsthand: “When I was getting married, I certainly didn’t expect to ever be divorced, but having a prenup did make our divorce much more palatable,” says Thakor. “My ex and I have been able to maintain a really amicable relationship because of it.” Your primary objective is to never see that prenup again. But if you do, you should be glad it’s there.

What Is a Prenup? A Soon-to-Be-Married Person’s Guide