Prenups and Real Estate

Love is not only butterflies in the stomach once you reach a certain net-worth. At least this is what we see among Hollywood actors, singers and business people. Even President Donald Trump chose to sign prenup agreements with all his three wives: Ivana, Marla and Melania. According to the New York Times, his first wife, Ivana, got $14 million, a 48-room mansion in Greenwich, Connecticut, an apartment in the Trump Plaza and one month a year at Mar-a-Lago in Palm Beach, Florida. Their public divorce made it to the front pages in 1991. When Donald Trump and Marla broke up in 1999, the press said she walked away with only $2 million. Donald Trump's net-worth then was $5 billion. Today, President Donald Trump and First Lady Melania Trump seem to have a healthy marriage, despite all the negative energy the Trump administration has been attracting since January 20, 2017. But there is a prenuptial agreement in place if the spell is broken.

Prenups have always existed in one form or another. The oldest document of this kind was 2000 years ago and was found in Egypt. Then, in the Jewish culture, there was ketubah - a marriage contract. Back then, the parents of the groom had to decide how much they'll pay the bride's family. Ketubahs continue to be signed before marriage even today, by both the groom and the bride, but in the presence of two witnesses. Some couples even compose their own text for a ketubah, although originally it was a standard text written in Aramaic. In the Jewish tradition, the ketubah is binding under both the civil law and the religious law, and when a couple decides to split up, the women must receive another document from her husband, called a get.

Women have been sitting in the shadow of a man-dominated world until 1848 when women were allowed to inherit their husband's fortune through the Married Women's Property Act. Before that, a woman’s possessions were transferred to her husband.  

Today, about 4% of married couples do have a prenup in a file, somewhere. Prenups are prepared by lawyers or estate-planning attorneys, who charge by the hour. The more you haggle with your partner, the more hours you will pay. Costs can vary depending on the location but usually range between $1,000 and $2,500. If the wedding is less than two weeks away, then there could be a surcharge.

engagement ring on a dollar bill

Prenups pros and cons

Globally, the divorce rate is growing. The United States is among the countries with the highest divorce rate (46%), falling behind Luxemburg, Spain, France, and Russia. According to the CDC, there have been 2,245,404 weddings in 2016, and almost half of them will end in divorce. The main reason? Infidelity. In this context, it really makes a lot of sense for a well-off bride to protect her assets and incomes. Wealthy men will also want to preserve their wealth or to write down how his/her children from another marriage so they can inherit part of the estate. 

Some contracts can even make the husband pay a penalty if he has an affair. For example, Catherine Zeta-Jones and Michael Douglas have had a clause in their prenup that imposed a $5 million fee had Douglas cheated on her. Other celebrities even receive money for every year of marriage. But Mark Zuckerberg and Priscilla Chan must be having one of the weirdest prenup - it is not about money, but about time. Priscilla wanted to make sure she will get to spend alone time with her husband. Now, how sad is that? But - with Facebook stocks reaching new heights every month, stealing more and more of our time -  to sign a contract in order to get to spend time with your partner could soon become the norm. 

At first sight, having to sign a prenuptial agreement is a sign of distrust. It's like feelings don't count at all. Not too long ago marriage meant sharing everything - the good and the bad, wealth or poverty, money and debt, sickness and health. Now, we are moving towards a more individualistic society. This transition can be seen even in the fact that only nine states are community property states. The rest follow equitable-distribution laws that split the wealth fairly, not equally between the two. 

What does community property imply? It means that properties purchased during marriage belong to both spouses equally. Debts are split equally between the two also. But if marriage is a proof of love and a vow to love someone until death do you part, why do you need a premarital contract? If you know you love someone and you're loved back, why don't you take it seriously then? Prenuptial agreements don't add more security, trust, and love to a relationship that is expected to last a lifetime. 

Unfortunately, marriages of convenience are more and more common these days. Rich people get married to gain publicity. It's a way to make sure they get their five minutes of fame. It's all a show for the cameras and paparazzi. It is this kind of marriage that destroys the true meaning of a loving relationship between a husband and his wife. Off the screens, our relationships are still based on feelings and people rarely marry someone out of their league. So, prenuptial agreements should be signed only in extreme circumstances, when there is a huge disparity between one's wealth and the others'. 

prenuptial agreement template

Should you feel offended by a prenup?

Before marriage, everything’s peachy, all kisses and smiles. No sign of trouble, until one brings up the prenup idea. Isn’t it somewhat selfish to sign a prenuptial agreement? Well, in some cases it is - when it is made one-sided from the beginning. In other cases, a prenup shouldn’t be perceived as offensive, as long as there is a balance and both know exactly what they are getting themselves into. 

For example, one of you might have student loans contracted before marriage and don’t want to force the other one to pay for them so they may decide to handle incomes separately or find a way to split the income in order to make ends meet. Also, if one of you defaults on their loans, the creditors could come after the marital property and sell it. With a prenup, you limit your debt liability. You shouldn’t feel offended by your fiance’s need to keep his assets safe from your creditors. Or, when the first baby comes into this world, who is going to be the breadwinner? You may want to have this written black on white. 

If you don’t feel comfortable about signing a prenup agreement before the wedding, you can discuss the possibility to sign a postnuptial agreement as soon as you fight over a financial problem. And sooner or later, that time will come because we are all endowed with a different financial IQ and the education system fails to equip us for adulthood - one of you might be more inclined to save money and tighten the belt, while the other one might be a “prodigal son”, indulging in excessive spendings. 

So, a prenup is a way to show respect. Thinking of trouble before it comes is not pessimism or negativism. We are humans so it’s in our nature to be skeptical and ask a lot of “what ifs”. Not to mention that prenups are even more powerful than the local laws - for example, in a community property state, the liabilities and assets will not be split equally but will follow the specifications found in the prenup. So, if you specify from the beginning how much money you should receive as alimony, you may end up with a higher amount than the one decided in court. When Ivana Trump broke up with Donald Trump she was entitled to an alimony of $650,000 annually. No wonder that today she has “a perfect life”. 

prenuptial agreement

How long do prenups last? 

Prenups can be permanent or end after a certain period of time, for example, 5 or 10 years of marriage - this verbiage must be found in the document. The sooner the couple decides to part ways, the shorter the prenup’s life.

Ideally, prenups should never have to be brought back to daylight. Realistically, though, it goes without saying that we are never going to be in our best health forever. Our bodies lose their mobility, muscles become atrophic, bones get weaker and we can even lose our memory. There are 5.8 million Americans living with Alzheimer’s Disease according to the Alzheimer's Association®,  but memory loss is among the symptoms of other diseases such as amnesia, autism, dementia, Huntington’s disease, Parkinson’s disease, or Schizophrenia. When your partner no longer remembers who you are, what your name is and why you’re there, you need the protection of a prenup or postnuptial agreement. So, if you plan for the worst that could happen, you should make the prenup effective for the duration of the marriage. 

A prenup agreement could also be paired with life insurance. For example, a couple may opt for a joint life insurance policy to pay lower premiums or life insurance with return of premiums. Both are a way to protect one another and guarantee a decent amount of savings to be used either to further invest in bonds, stocks, and mutual funds in order to build a retirement fund, to start a business, or - why not? - to invest in real estate.  

Does a prenup override a will? 

last will and testament

This might surprise you, but a prenup is more powerful than a will. Or, if one of the spouses dies intestate, but has signed a prenuptial agreement during his/her lifetime, it will take effect and his/her estate will be distributed accordingly. 

Whether you marry for love or for convenience, there is nothing wrong in signing a prenuptial agreement. Your life and happiness don’t depend on a piece of paper. The success of any marriage resides in a wife’s constant respect for her husband and his unconditional love for his wife. Fill your hearts with contentment and be thankful for everything that you have! With or without a prenup agreement, you won’t take anything with you from this world.