Should You Get a Prenup?

Among the many questions raised following the announcement of foundation co-founders Bill and Melinda Gates’ divorce, one could determine the fate of the couple’s assets totaling nearly $150 billion: Did they have a prenup?

A prenuptial agreement sets in place a legally binding contract for how assets will be divided in the case of a divorce or of one spouse’s death. But prenups aren’t just for the ultrawealthy.

Though prenuptial agreements can be especially important for those holding significant assets or debts before marriage, circumstances such as having had a prior divorce or having children from a prior marriage may justify the cost and effort of getting a prenup.

Prenups can also be an especially important tool for women, who are more likely to spend time outside the workforce caregiving to children or elderly family members. As Lauren P. Raysor, a New York attorney, says, “You don’t think you’re going to get in a car accident, but you sure do buy the insurance anyways.”

“The most important thing is that people should go into a marriage knowing the rules of divorce,” Raysor added. “It’s hard to say that, but if you go into the marriage knowing the rules of divorce, you know how to protect yourself.”

[READ: Little-Known Financial Benefits of Divorce.]

What Is a Prenup?

In addition to dividing up financial assets, a prenup can outline a range of provisions touching on topics like spousal support and inheritance.

The agreement prepares couples for the unthinkable — ultimately aiming to save both parties in emotional and financial ways.

“The most useful aspect of a prenuptial agreement is that it frames and narrows the issues in the event of divorce,” Arthur D. Ettinger, chair of Greenspoon Marder’s New York Matrimonial and Family Law Group, wrote in an email. “We all know that divorce is not cheap and fees will mount quickly if litigation ensues. A good prenuptial agreement can limit the costs attenuated to the divorce by crystalizing how the financial aspects will be resolved if the marriage goes sideways.”

Reasons to Get a Prenup

Prenuptial agreements are common among individuals with significant premarital assets or those who have been divorced and may have vowed to never again go through the challenges of divorce without a prenuptial agreement.

Here are some common reasons couples seek prenuptial agreements:

— Future spouse(s) hold significant assets prior to marriage.

— Future spouse(s) have a significant stake in family assets or a family business.

— Future spouse(s) fully or partially own a business.

— Future spouse(s) had children from a previous marriage.

— Future spouse(s) had one or multiple prior divorces.

— Future spouse(s) hold significant debt or plan to incur significant debt.

[Read: 6 Financial Considerations for Remarriage.]

How to Get a Prenup

There are many reasons a prenup may be necessary, but broaching this uncomfortable topic with a significant other isn’t easy.

Having an honest conversation with your future spouse well in advance of the wedding date is the first step to making the prenup process a smooth one.

“Try to handle it so your legitimate concerns are met but you’re also sensitive to the other side,” says Steve Raynor, Virginia attorney and fellow of the American Academy of Matrimonial Lawyers. “This is an early step in being a good spouse. Treat the other person fairly so that this is a positive thing in your marriage as opposed to a negative thing.”

Once both future spouses are in agreement, it’s time to find an attorney and provide the necessary financial documentation. In this stage, couples should seek an attorney who shares their attitudes toward marriage and the prenup, Raynor says.

From this point, the prenup process can vary widely, and the resulting contract will be unique to each couple.

“If I have 20 prenups, each one is going to play out in a different manner,” Raynor says. But in general, he advises: “Don’t do it at the last moment, don’t be aggressive and screen out other people’s involvement” to ensure family members don’t disrupt the process.

The typical steps to getting a prenup are:

1. Communicate early and openly.

2. Consult and attorney.

3. Gather your financial information, including assets and liabilities.

4. Determine whether a prenuptial agreement is necessary.

5. Outline financial and marital goals of the agreement.

6. Draft and negotiate the agreement.

7. Review the final agreement.

8. Execute the agreement.

How Much Does a Prenup Cost?

The complexity of a couple’s situation will determine the cost of their prenup.

Moshier Law, an Arizona family law practice, estimates couples will pay $2,500 on average, but costs can be much higher under some circumstances.

[Read: Married Couples: Should You File Jointly or Separately?]

Alternatives to a Prenup

There are a few alternatives to prenups that may help couples prepare for their financial future. A postnuptial agreement, for example, is less common than a prenup but has become more popular in recent years, Ettinger says.

“If a couple has a significant change in finances or are having marital issues, a postnuptial agreement can be useful to reflect changed circumstances,” he says. “Postnups can address and establish plans in case of divorce, separation, or death in the same way prenuptial agreements do.”

Other alternatives to prenups include mutual estate planning and simply relying on the laws in place within a couple’s state of residence.

“If you don’t have a prenup and get a divorce, there’s a whole body of laws that governs that,” Raynor says. “In some cases it’s just a matter of educating the client about what happens in the event of a divorce.”

More from U.S. News

Taking the ‘Permanent’ Out of Permanent Alimony

Should Spouses Retire Together?

Financial Steps to Take Before, During and After Your Divorce

Should You Get a Prenup? originally appeared on usnews.com

Update 05/11/21: This story was published at an earlier date and has been updated with new information.

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