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Prenup Basics if You Get Married - Guest Post
Level 1 - NGMI
Welcome Avatar! BowTiedBrain checking in. For one reason or another I’m tasked with various obscure topics and today we’re covering getting married and a prenuptial agreement. For the record, I am not an “expert” on this topic and am only here to provide the basics as the one I signed was pretty straight forward. Lawyers who follow this (there are a lot apparently!) can chime in with additional details. The post is free since it’s likely an important decision for many of you who think they want to have families one day.
Making a Decision: Since many people in the strange Twitter sphere will jump up and down and call me an “idiot” for getting married in the first place here is my reasoning: 1) my wife is not an American Citizen - Western Europe which is defined as: Belgium, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom and 2) I’ve made a decision to have kids as I don’t see anything else to “prove” from a financial standpoint.
For the record, if you’re dating an American I don’t see any real reason to get married legally (see i’m pretty open minded!). My case is not the same as it would be difficult if not impossible to try and raise a small family with an inability to live in the same house. My understanding is there are “civil” marriage laws in specific states (live with someone for X years and you’re legally married) and i’m not aware of those so please see a lawyer!
Part 1: Before the Basic Contract Set Up…
As you can imagine, no woman is going to find signing a prenuptial agreement as romantic. That said, I’d say that you’re an absolute fool to go in with nothing since I’ve heard of hundreds of ugly divorces over the course of my life. For the record, I am not saying my marriage has a 100% success rate. Only time will tell and having rose colored glasses on is a surefire way to get hosed down the road.
Be Reasonable: Before you bring this up, you should not be fighting over the details of a basic contract. At least this was my view. The agreement (which you see below) should be extremely reasonable and if she’s negative on the idea on second one you should run!
This is actually something interesting, if the girl is actually in love with you and the contract is reasonable then the conversation takes less than 5 minutes. Here is all you have to say “When we get married i’ll consider that day the official start of our new life and we can split everything down the middle”. This is pretty much what was said and it’s hard to argue against it (more on this below). I had no issues here and she agreed immediately after reading it and a two minute conversation.
Part 2: Basic Contract
The main thing you should do? Get your financial assets as early as possible. This is because it is extremely difficult to argue against prior assets. Your future spouse will have a hard time arguing against this as well and if she is fighting you… look out. You should bail in general.
1) Prior Assets Are Separate: Assume that you’ve decided to get married and have $1M in Stocks, $500K in rental properties and Ownership of one E-commerce business (100% ownership). This means that all of this is protected (some nuance but see below).
Stocks: If you have $1M in the S&P 500 and it goes up in value to $2M and the dividends were $25K, it means all of this is untouchable. If you simply leave it there in a brokerage account it is a separate asset
Yes you can trade. If you sell half of the S&P 500 assets and buy say Amazon Stock and it doubles. The Amazon stock and the S&P assets are still yours. The key reason: you funded the purchase with pre-marital assets
Real Estate Rental: I’m using the word rental properties here because you can get into a dicey situation if it’s not a rental. If you own a place and you end up living there its pretty easy to make the argument that this is a shared asset. In the case that you own two rental properties of $250K each generating X thousand dollars per year, all of this is also untouched
Similar to stocks, if you decide to sell your rental and buy another one with the proceeds you have no issues. Example: you rent out the two places and you gather $100K in rental income, you decide to sell both and take the rental income to purchase a $600K place. That $600K place is still yours because once again: you funded the purchase with pre-marital assets
Business Assets: This one is much much much harder. If you are a business owner it will be harder to separate since you are likely earning all of your income from this business. On a personal note (what I did), is I had two businesses. I sold one (put all of it into stocks) and then went through the contract process. While the one that I currently run is considered separate I am going to assume that it will be deemed a 50/50 item if SHTF.
One key thing to remember, if you end up running a business do not hire your spouse otherwise that effectively guarantees it is a marital asset. As mentioned above if you only own one business I would go ahead and assume that the shares/ownership will be split. That’s just my own paranoia though
Inherited Assets: This is also something you can easily protect (once again goes back to “prior assets”). Going to be pretty rough to argue that this was a marital asset if you inherit say $100K from your parents upon their death.
For the record, I expect to inherit practically nothing. That said, left the clause in there as I’ll be supporting the parents in old age.
Part 3: Basic Future Earnings
Mine was straight forward. Any assets we earn are split upon a divorce (if that occurs). If we decide to split in say 10 years and we’ve created a $4M stock account, it means that she would get $2M and I would get $2M. End of the road!
The other thing you can add is “no alimony” which typically kills most people (be sure to add it). This means she cannot claim your earnings after divorce. It’s an asset split and you two part ways.
Important Note: This is quite simplified due to my current financial situation. If you end up having no savings post marriage your contract is likely going to be thrown out. Say you are married for five years, you make $500K and she makes Zero. You spend every penny and have no assets. Well how is your spouse going to live on zero dollars when she didn’t work for five years?
I won’t disclose my finances but the quick math is this. I make $X US tokens, she doesn’t work and will be a stay at home mom. The financial planning I’ve set up is to spend 1/3, save 2/3. I realize those numbers seem unsustainable to most but that’s the calculation at this time! This way if things go wrong and say we split in 10 years, she’ll be set for life from a lifestyle perspective (or close to it). If you do the quick math it means that 1/6 of the income would represent lifestyle cost per person. After 10 years she’ll have 20 years of living expenses or more (pretty tough to fight against that).
Do not mix any of your pre-marital assets with marital assets. If you do assume that the mixed assets will be deemed marital assets
Example 1: you two decide to buy a home. You sell some of your stocks to fund the purchase (from a pre-marital account). Once those funds leave the account to a joint account they are “co-mingled” and you’re done. This means the home you purchase is split 50/50 even if you funded the entire downpayment with your pre-martial assets. Don’t Co-mingle
Example 2: Where the money goes. If you have rental properties and stocks make sure they go to *one* bank account. This bank account should never take a penny from your future earnings. If you work in a career and make $20K per month, that $20K should hit a *different* bank account which would be marital assets
Example 3: Do not transfer from marital assets to pre-marital assets. Not even $100. I repeat, don’t co-mingle. Be strict. Even if you can move from pre-marital to marital assets to fund a large purchase, i’d avoid it. Do everything you can to keep the paper trail as clean as possible. Document everything.
Addition! When signing of course disclose *all* assets or else the contract can be invalidated. Seems obvious but just in case, don’t try to pretend you have less assets than you do.
Part 4: Still Not Risk Free!
So you did all of the above can you still get burned? Yes. Yes you can.
As you can see, if the prenuptial agreement is deemed unfair it can be thrown out and if she claims that there was physical abuse you could have it thrown out as well. That last part is not something you can do much about since a nasty divorce would result in lies/fighting to the bitter end.
Kids: This one is also not something you can do for a prenuptial agreement. Hopefully you don’t plan on being a deadbeat dad so it wasn’t a huge consideration. I’ll set up a basic fund for them and make sure neither myself or my spouse can touch it. This also helps you as you’ll be seen as a responsible adult (hopefully you do the same)
Time With Kids: There is a high chance I end up homeschooling my kids. This is for two reasons: 1) the current education system seems to be designed for mediocre people and I didn’t have a great experience in both K-12 and even college and 2) the more you can prove you were involved in their lives - the better.
As a note on number two, I’d hope that if you plan on having kids you won’t view it as a burden. Nothing more pathetic than a deadbeat dad. Not only do you get to spend more time with your kids but you also have a lot more sway in court when they recognize how much you are actually doing for them. Many men lose their kids as they can’t prove they were actively involved in their lives.
Part 5: Post-Nuptials and Other Considerations
So far, i’ve got no issues. I haven’t even thought about getting a post-nuptial but my understanding is you can re-confirm certain aspects of the assets. Since I haven’t gotten one I am not going to claim that I know how they work.
One Thing I do Know On Them: According to basic research you can actually include child related obligations in a post nuptial agreement. After you have a couple of kids (or how ever many you plan) you can have something like this signed to avoid some of the headaches listed above in part 4.
Other Considerations: If I were to say anything to a person getting a contract it would be this: 1) get enough money before you get married and 2) don’t be a greedy imbecile. Of the two, the most pain appears to come from the second part. If your entire contract is thrown out, that is a level of pain you do not want to feel. You’re better off leaning on the conservative side versus the aggressive side in this case.
Much like other parts of life, the richer you are the better off you are in terms of managing what it fair. If you spend $200K and save $400K, its pretty easy for someone to live on the savings for a long time especially if your marriage lasts a decade or more. If you decide to “get close to the line” and spend $500K while saving only $100K, you can easily get into a dicey situation if the marriage only last say five years. These are all just simple examples but you get the idea.
Part 6: Conclusion
Well this was not an exciting thing to write but it’s important particularly if you’re thinking about getting married in the future. Once again I’m not a lawyer and you should 100% talk to a professional. Summarizing my basic advice is pretty simple: 1) don’t mix funds; 2) get a large sum before you sign the dotted line; 3) don’t be aggressive on the future earnings split as a thrown out contract will absolutely hammer you and 4) if the girl you’re hoping to marry throws a fit I’d personally run. My agreement primarily focused on protecting prior assets and 50/50 is as fair as it can get in terms of an asset split.
Questions! I’m happy to answer any basic questions you have in the comments. Please remember this is NOT legal or financial advice. I could only describe my basic understanding and you’d have to talk to a professional.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by an anonymous group of Ex-Wall Street Tech Bankers who moved into affiliate marketing and e-commerce.
Daily Reminder: You ARE EARLY. Too much negativity/cope. Everyone reading this is extremely early. If you stay on top of technology, there is always a new opportunity.