Reposted from Attitude Financial Advisors – by Bryan Trugman, CFPⓇ
Before you commit to spending the rest of your life with someone, both of you need to get financially naked and lay the cards on the table. You may already see where I’m going; I am an advocate for prenuptial agreements (or “prenups”). Planning for the possibility of divorce may seem unromantic, but attitudes have changed in recent years. A 2016 study from the American Association of Matrimonial Lawyers found that 62% of responding firms found an increase in the overall number of requests for prenuptial agreements. (1)
I asked a colleague and attorney, Elan Wurtzel, with the Law Offices of Elan Wurtzel to share his thoughts on the question of prenuptial agreements. “Divorce, separation, and death are life-changing, chaotic events for anyone,” Elan commented. “Prenuptial agreements are indispensable tools to help manage the chaos by pre-planning for death or divorce. While newlywed couples may think they will be together forever and happily ever after, it’s not always the case. Properly drafted prenuptial agreements can ease the termination of the relationship and pave the way for a new future.”
I have worked with clients who are planning to get married, recently divorced, and remarried, some with children and some without. While every situation is different, one factor remains constant: the couples who have difficult conversations about money early and often are the ones who fare better. So in this article, I’m going to briefly discuss some decisions a couple needs to make during the prenuptial agreement process.
Who Keeps the Financial Assets?
In the event of a divorce, it’s not just cash that will need to be divided. For instance, a couple might jointly own a home. What happens if one spouse wants to sell the home and divide the proceeds but the other spouse wants to continue living in the home? What if market conditions are unfavorable and it’s not a good time to sell? Anything else you own will also need to be sorted out, including cars, boats, furniture, art, jewelry, and both your retirement and investment accounts. If you and your spouse have not established the habit of talking about money, you will be forced to have those conversations while filing for divorce—the worst possible time.
Family law attorney Nicole Aratoon-Lane shares her perspective: “Financial planning prior to being married can be key in whether or not the marriage ends in divorce. When tensions are high, accepting that what you believe is ‘yours’ is really ‘ours’ can be extremely difficult. Working with many couples in divorce mediation, I’ve found that more often than not, they are stunned by what is not ‘all mine’ anymore. New York is an equitable distribution state, which means that assets acquired during the marriage belong to both spouses. This is where the prenup is key. A prenup is not only pivotal in the event of a divorce, but also lays all the cards on the table and helps you understand your spouse-to-be on a different level. This understanding is vital for a happy and successful marriage.”
How Divorce Affects Both Extended Families
Money affects the family dynamic on many different levels, and marriage adds a layer of complexity to the picture. For instance, if one spouse received a large gift or inheritance from a relative before or during the marriage, what happens with the money in the event of a divorce? What happens when one partner comes into the marriage with a heavy amount of credit card or student loan debt and the other partner helps to pay down the debt, possibly utilizing funds received from family members? What if the parents of one or both spouses contribute a substantial sum toward a down payment on the couple’s family home?
A prenuptial agreement protects the interests of more than the couple. As Attorney Michael Langer explains, “By having a prenuptial agreement, each party can often spare their families and children the nightmare of the divorce process, allowing for an easier resolution of an emotionally difficult circumstance. However, prenuptial agreements will only be honored if they are properly executed, and there are strictly legal and technical requirements. It is therefore extremely important that an experienced attorney be utilized for this process.”
The Key Is to Start Early
I was fortunate to grow up with parents who taught me to manage money from a young age, and they talked openly in our home about the family’s finances and discussed major purchases in advance. I’m a firm believer that it’s never too soon to start discussing money with your spouse (or significant other). The process of creating a prenup forces both spouses to dig into “the good, the bad, and the ugly” of their pre-marital finances. Ask yourself: If I am going to discover a surprise about my new spouse’s finances, would I rather find out sooner or later? Our culture teaches that love is blind, but I believe everyone should make decisions with eyes wide open, especially when marrying a life partner. The time to get financially naked, in my opinion, is six months to a year before your wedding date.
I’m Here to Help
Planning your wedding and imagining the rest of your life is an exciting process. I think of divorce just like any other contingency that we all need to plan for, like serious illness or the death of a primary income earner. We don’t go into marriage intending to divorce, but we need to be ready for the unexpected. If you are engaged or considering marriage, let’s get a time on the calendar to talk. Reach out to me via email at [email protected] or give me a call at (516) 762-7603 to set up a consultation.
Bryan Trugman is a managing partner, co-founder, and a CERTIFIED FINANCIAL PLANNER™ practitioner at Attitude Financial Advisors. With more than 13 years of experience, Bryan specializes in addressing the financial needs of new parents as they seek to realign their finances, assisting divorced individuals as they navigate an unforeseen fork in the road, and strategizing with those seeking to accrue a dependable retirement nest egg. Bryan is known for being a good listener and building strong relationships with his clients so he can help them develop a customized financial plan based on what’s important to them. He is passionate about helping his clients experience financial confidence so they can worry less and play more. Bryan has a bachelor’s degree in industrial and systems engineering with a minor in mathematics from the State University of New York at Binghamton. He has served on the board of the Financial Planning Association and continues to be actively involved in the national organization. He is also a member of the Plainview-Old Bethpage Chamber of Commerce and has served as its vice president and as a board member. When he’s not working, you can find Bryan on the ballroom dance floor or engaged in a fast-paced game of doubles on the tennis court. To learn more about Bryan, connect with him on LinkedIn. Or, watch his latest webinar on: How Much Is Enough? A Surprisingly Simple Way to Calculate Your Retirement Savings Needs.
About Elan Wurtzel
Elan Wurtzel and his firm are committed to representing the best interests of their clients in the areas of personal injury law, family law, and estate law. Since 1984, they have been the premier NY personal injury law firm serving Long Island and the City of New York, including Suffolk and Nassau Counties, Queens, Brooklyn, Manhattan, and the Bronx.
About Nicole Aratoon-Lane
Nicole Aratoon-Lane is a Family Law attorney who focuses her practice on divorce mediation and prenuptial agreements, among other related issues like custody, parenting agreements, family conflicts, and postnuptial agreement. Her firm focuses on helping couples and families transition from one season of life to the next in a way that helps all parties involved feel a sense of peace.
About Michael J. Langer
Michael J. Langer has represented numerous individual and business clients in all phases of litigation, focusing on matrimonial and family law, commercial litigation, criminal defense, and estate litigation, in his 21 years of practice. His representation, in addition to attempting to resolve disputes, involves every aspect of litigation, including pleadings, motions, discovery, depositions, subpoenas, hearings, trials, and appeals.