ASK THE MONEY LADY USA
Dear Money Lady,
How do I get a prenup without paying high legal fees? This is a second marriage for me and I‘m very close to retirement, plus we both have pensions. My partner has 3 adult kids, and I have 2 and we’re agreed that we probably should have something. Thanks, Helen M. FL
Hello Helen, this is a question I get often – thank you for asking it! Seems many Americans know it’s a good idea to have a pre-nuptial or co-habitation agreement, but they don’t want to spend the money to get one. My answer to this is – Why not?
If you have assets: a car, house, cottage, investments, and all your other things you hold valuable, why would you risk it? If you are not in your 20’s with only love and school debt, you should want a written understanding. Even if it costs you a couple of thousand dollars to get one, isn’t that money well spent, for both of you?
Let’s start with the easiest domestic contract, and the least expensive: a cohabitation agreement. Cohabitating partners have very few rights to property, when compared to married couples. Typically, the property you bring into the relationship, plus any increase in its value, usually continues to belong to you alone. This would include investment assets, real estate, or chattels. The main reason for drawing up a cohabitation agreement is to provide for a division of property if the relationship breaks down. The most straightforward way is to state that all property remains the separate property of each individual and to provide in the contract for a “separation of property regime.” This means that all property, including the assets that are owned before cohabitation, plus any increases in value, and all property acquired during the relationship is owned strictly according to title. This type of domestic agreement is very different to a marriage contract and usually not something that is ideal for partners long term. But that being said, cohabitation agreements are not as rigid as marriage prenups, they’re a lot less costly, and contracts can be crafted with a lot more freedom for creativity, based on the particular conditions and circumstances that each party is in when they begin their union and plan a life together. If you don’t have a lot of assets and you’re planning on just living together and not getting married, a co-habitation agreement is a good, less expensive option.
Now let’s talk about prenups. This is a marriage contract that you typically enter into prior to the marriage, hence the term ‘pre’-nuptial. However, they can also be signed or amended at any time during the marriage. I personally have always recommend getting a marriage contract with older couples who bring any assets to the marriage.
Prenups are extremely beneficial for comprehensive estate planning which always must include death succession, not just the possibility of a divorce. To protect each other, you want your lawyer to be interested in what will happen in the event of one of you dying and you must have the new marriage contract and your new Will “in sync.” The reason I say this, is because marriage contracts can, and often do, override existing Wills. Marriage contracts can be limited in their scope and to be valid and enforceable, the spouses must have made full and complete disclosure of all their assets and the current values, including debts and liabilities. You also want ILA, or independent legal advice, so that the marriage contract is less vulnerable and can’t be challenged by family members after a death and set aside by the courts. Remember, this is not a lack of love, but rather a mutual understanding that you both agree to, drafted with your lawyer and signed well in advance of your wedding date.
Good Luck and Best Wishes,
Money Lady
Written by Christine Ibbotson, Author, Finance Writer and Syndicated Money Coach on BNN Bloomberg. Christine is also part of the everyday lineup on Good Morning America and CBS This Morning. No AI. If you have a money question you want answered FREE – send it to: info@askthemoneyladyusa.com.
