Editor’s note: This is part six of an ongoing series throughout this year focused on helping older adults navigate the financial difficulties of gray divorce. See below for links to the other articles in the series.
The notion of romantic love is a relatively modern concept. Centuries ago, and even in some cultures today, marriage is, above all, an economic contract. Yet modern marriage remains the merging of financial lives; the financial implications cannot be overlooked.
This is where prenuptial and postnuptial agreements come into play. These legal documents can serve as essential tools in financial planning, providing a clear framework for asset management and protection.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For those of us on the grayer side of 50, with less time to recover from the financial shock of divorce, they can be a financial lifesaver.
Understanding prenuptial and postnuptial agreements
“In its simplest form, a prenuptial agreement (or prenup) is a contract,” says Molly Rosenblum, family law attorney with Rosenblum Allen Law Firm. “Within that contract, you can make arrangements for various aspects of your marriage. Some examples of that might be whether a spouse would get alimony in the event of divorce. You can also specify how assets may be classified once you get married. You can also accommodate for premarital assets or debts, like a house, that one person may already own.”
A postnuptial agreement, or postnup, is similar but is created after the couple is already married. Both agreements aim to provide clarity and protection for both parties involved.
Protecting individual assets
Allowing individuals to designate certain assets as separate property can be especially important for those entering a marriage with significant personal wealth or business interests. By clearly defining what is considered separate property, individuals can protect their assets from being divided in the event of a divorce.
Prenuptial and postnuptial agreements can also protect against debt, a key component of financial planning. They can outline how existing debts will be handled and prevent one partner from being held responsible for the other’s debts. This protection can be particularly valuable if one partner has significant student loans, credit card debt or other liabilities.
By addressing debt in a prenup or postnup, couples can avoid potential financial strain and ensure that one partner's debt does not negatively impact the other.
“(Prenups and postnups) also make a possible divorce in the future a less time-consuming and less expensive experience for the couple,” says attorney Rebeca Miller of Cooper Coons, Ltd. “It also lessens some of the stress involved with the divorce, as each spouse already knows what they are entitled to receive, and they won't ‘lose’ their pre-marriage/separate property assets.”
This can be particularly relevant to older people going through “gray divorce” with less time to overcome the financial losses of divorce. More than 36% of divorces in the United States happen to people over the age of 50, up from 10% in 1990.
I know from personal experience. I went through divorce, and a subsequent reduction of my net worth by 50%, at age 52. While “never saying never” to the prospect of remarriage, I vowed that should I remarry, which I did, a prenuptial agreement would be in place to insure against another financial bombshell.
I have also worked as a Certified Divorce Financial Analyst (CDFA) with couples decades into their marriage who have crafted postnups to protect themselves in retirement in case of a possible marital split in the future.
Clarity in financial expectations
Despite the financial sense inherent in prenups and postnups, they still bother people who deem them unromantic or perhaps the wrong foot on which to enter marriage. Given the divorce rate, I would argue their usage is a far more realistic approach.
Indeed, the process of creating a prenuptial or postnuptial agreement requires open and honest communication about financial matters. This can enhance financial transparency and trust between partners, fostering a stronger and more resilient relationship. By discussing financial goals, expectations and concerns, couples can develop a shared financial vision and work together toward achieving it.
For her part, Miller notes, “I have never experienced that these agreements ‘influence’ clients' thought processes about divorce as they get married. They usually find that these documents bring them peace of mind.”
Prenups on the rise
According to a survey by the American Academy of Matrimonial Lawyers (AAML), 63% of attorneys reported an increase in the number of clients seeking prenuptial agreements in recent years. This trend suggests that more couples are recognizing the importance of clear financial planning and protection in marriage.
Rosenblum suggests that prenups are increasingly seen as a practical approach, encouraged in a world of reality TV divorce and celebrity divorce coverage focusing on the lack of or existence of a prenup.
Providing for children from previous relationships
For individuals with children from previous relationships, prenuptial and postnuptial agreements can be an important estate planning tool. They can ensure that certain assets are designated for the benefit of children from previous relationships, safeguarding their inheritance. This protection can be especially important in blended families of any age, where financial dynamics can be complex.
Conclusion
Prenuptial and postnuptial agreements are powerful tools in financial planning, offering numerous benefits for individuals entering or already in a marriage. By protecting individual assets, providing clarity in financial expectations, addressing debt and safeguarding provisions for children from previous relationships, these agreements can enhance financial security and peace of mind. Additionally, they can simplify divorce proceedings, enhance financial communication and offer flexibility and customization.
As more couples recognize the importance of financial planning in marriage, particularly older people approaching retirement, the use of prenuptial and postnuptial agreements is likely to continue to rise. By incorporating these agreements into their financial planning strategies, couples can build a stronger financial foundation for the future, ensuring that they are both protected, and their financial goals are aligned.
Other Articles in This Series
- Introduction: Happy New Year: Let’s Get a Divorce
- Part one: How Does a Gray Divorce Affect Social Security Benefits?
- Part two: In Gray Divorce, Two Financial Planning Yardsticks Are Key
- Part three: Don’t Forget to Update Beneficiaries After a Gray Divorce
- Part four: What Is a Lifestyle Analysis in Divorce?
- Part five: How Much Will Getting Divorced Cost You?
Related Content
- Beware of These Three Hidden Costs of Divorce
- 'Gray Divorces' Can Upend Your Retirement Plans
- Four Steps to Prepare Your Finances for Divorce
- You’re Divorcing or Lost Your Spouse: What Do You Do Financially?
- What Older Adults Should Know about Getting Divorced and (Maybe) Remarried
-
Quiz: How Much Do You Know About Taxes on Social Security Benefits?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
Are You Ready for 65? The Medicare Initial Enrollment Period QuizQuiz Turning 65 soon? Test your basic knowledge of Medicare's Initial Enrollment Period (IEP) rules in our quick quiz.
-
3 Ways to Stretch the 2026 Social Security COLA For Your BudgetThree steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
Giving Tuesday Is Just the Start: An Expert Guide to Keeping Your Charitable Giving Momentum Going All YearInstead of treating charity like a year-end rush for tax breaks, consider using smart tools like DAFs and recurring grants for maximum impact all the year.
-
Uber Takes Aim at the Bottom Lines of Billboard Personal Injury LawyersUber has filed lawsuits and proposed a ballot initiative, in California, to curb settlements it claims are falsely inflated by some personal injury lawyers.
-
A Financial Adviser's Health Journey Shows How the 'Pink Tax' Costs WomenFact: Women pay significantly more for health care over their lifetimes. But there are some things we can do to protect our health and our financial security.
-
I'm a Cross-Border Financial Adviser: 5 Things I Wish Americans Knew About Taxes Before Moving to PortugalMoving to Portugal might not be the clean financial break you expect due to U.S. tax obligations, foreign investment risks, lower investment yields and more.
-
Show of Hands: Who Hates Taxes? The Best Time to Plan for Them Is Right NowBy creating a tax plan, you can keep more of what you've earned and give less to Uncle Sam. Here's how you can follow the rules and pay only your fair share.
-
'Smart' Estate Planning Can Cause Huge Problems: An Expert Unravels Popular MythsSometimes no plan at all could be better than making these unfortunate mistakes. Don't let your best intentions mess things up for your heirs.
-
I'm a Financial Literacy Expert: Bubble-Wrapping Our Kids Robbed Them of Resilience. Now What?By raising them to think they're amazing no matter what and lifting them over obstacles, we left them unprepared to work in the real world.
-
I'm a Financial Planner: If You're a High Earner, You Need an 18-Month Safety NetNo job seems to be safe in this age of AI. If you make a larger-than-usual salary, then you need to have a larger-than-usual emergency fund. Here's why.
