Prenuptial agreements, or binding financial agreements as they may be known, are no longer an exclusive financial risk management tool for Hollywood couples.
Having seen what can happen when a high-profile relationship fails, increasing numbers of less famous couples are known to be opting for written agreements to protect the financial assets each partner brings to the relationship.
The popularity of binding financial agreements show men and women are taking more financial and legal precautions against a relationship breakdown or divorce, says Jenny Weaver, financial planner of the Sydney, Australia-based wealth-management and stockbroking firm Prescott Securities.
“Most see it as a form of insurance — a legally binding safety net which they hope to never need. These agreements have become increasingly popular among people entering their second marriage and who previously have been through a difficult settlement. While these couples want to protect themselves against potential claims, in many cases they also want to protect the assets they accumulated during the previous marriage for their children’s sake,” she says.
Couples in a defacto relationship may also consider such agreements because living under the same roof for just three months may give someone a financial claim over property.
People have become more pragmatic about such agreements, Weaver says. “Increasingly people have seen what happens in high-profile cases and realize it is far more publicly acceptable to be up front about what they brought into a relationship. I say to people that if you can draw up a binding financial agreement then you will probably find it is much easier to talk about a lot of other more delicate financial matters,” Weaver says.
The desire for greater financial independence among partners has also fueled the debate on running joint or separate accounts in a relationship. The decision depends on each partner’s preference. It is worth remembering in that in many cases, if a relationship breaks down, what is earned during a marriage will be part of the settlement regardless of whether it has been held in a joint or separate account.
Whether to have a “prenup” is as personal a decision as whether to marry in the first place, says Attorney-Mediator Katherine E. Stoner.
Some of the advantages of such an agreement are: to protect your separate property; support your estate plan; it defines what property is considered marital property or community property; it reduces conflicts and saves money if you divorce; it clarifies special agreements between you, and it establish procedures and ground rules for deciding future matters.
“Creating a prenup may actually strengthen your relationship. While people often focus on the fact that negotiating a prenup is potentially divisive, it is easy to lose sight of the fact that communicating about money matters can actually improve the quality of your marriage,” says Stoner.
But, of course, a prenup is not romantic.
“Being engaged conjures up images of candlelit dinners and walks in the moonlight. Although marriage is a financial partnership as well as a romantic one, if you feel that discussing something as mundane as property and finances, as well as the possibility of divorce, will mar an otherwise beautiful time of your lives, you may not be candidates for a prenup,” Stoner says.
Read the pro’s and con’s of prenups here.