Prenups still contend with a frustratingly negative reputation when in fact they’re simply marriage insurance. An insurance policy for something you hope doesn’t happen and for which you pay the premium upfront instead of in monthly installments. Then, if divorce does happen, you have already drastically reduced the financial fallout. A prenup doesn’t mean you assume you’ll get divorced, just like auto insurance doesn’t mean you assume you’ll get into a wreck. It’s a practical step to take, especially when, as my attorney said to me, “Everyone has a prenup. It’s just the default laws of your state.”
In the U.S., each state has its own laws about how to handle assets and debts during the dissolution of a marriage. Without a prenup, you’re simply agreeing to abide by your state’s laws, or ultimately by a judge’s ruling.
A prenup agreement shouldn’t heavily favor one party either. Instead, it should create a fair and balanced distribution of your assets and debts based on what makes sense in the ecosystem of your relationship. Prenups can also account for what ultimately is a vesting schedule on debt repayments. The jilted husband could have paid off his wife’s debts and then prorated how much she would have owed him back each year if the marriage ended quickly.
Romantic? No, it’s not. Practical? Yup. Because much of Western culture is now based on marrying for love, no one really likes to discuss the fact that it’s still a contract and likely the largest financial decision most people will make. You shouldn’t sign any business contract without feeling the terms are fair and equitable, and the same goes for your marriage. And if you’re already married and didn’t do it, don’t despair. There’s always a postnup.
Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part Broke Millennial series.