What Is a Prenup: How Much a Prenup Costs & When You Might Need One
Marriage is about more than love. It’s a legal contract that financially binds you to another person — for better or worse.
Prenups are a legal agreement between a soon-to-be-married couple that details how assets will be divided in case of a divorce.
No one likes to think about splitting up before they even tie the knot. But consider this: You already have an unofficial prenup in place when you let the courts decide what to do with your assets in the event of a divorce.
A prenuptial agreement can be an opportunity for you and your partner to make your own decisions instead of the legal system deciding for you.
“(Prenups) can also allow for open and honest discussions concerning finances before marriage,” said family law attorney Sabrina Shaheen Cronin, founder and managing partner of The Cronin Law Firm. “And they set forth reasonable expectations between both parties.”
Prenups aren’t just for the super wealthy. A prenuptial agreement can help keep individual assets separate, protect a small business and shield a significant other from your debt.
Getting a prenup might not be on your wedding checklist — but maybe it should be.
So what is a prenup, exactly? Here’s everything you need to know.
What Is a Prenup?
A prenup, or prenuptial agreement, is a legal contract between two people that lists each person’s assets and debts. It also details what each party’s property rights will be in case of divorce.
You enter a prenuptial agreement before you and your partner get married. (A postnup is a similar agreement, but it’s signed after you get married instead of before.)
Prenups are written to fit the specific needs of each couple. They can vary in length and complexity. You can choose how to divide — or not divide — money and assets in any way you want.
This legal document has a lot of flexibility, but most premarital agreements outline a few key things:
- A list of each partner’s individual assets, and which assets should remain separate during a divorce.
- How debts acquired before and during marriage will be handled.
- How property acquired during the marriage will be divided.
- Guidelines about spousal support, aka alimony payments.
Not everything can be written into prenuptial agreements. They can’t include a plan for child custody or child support, for example.
How Much Does a Prenup Cost?
Generally, a very simple prenup can cost $600 while a more complex prenup can cost $3,000 or more. Online services like HelloPrenup charge a flat $599 fee to create a legal prenup.
An attorney will charge you by the hour to draft a premarital agreement. If you and your partner both have significant assets and debts, the longer it takes to create the document — and the more you’ll pay.
Factors that influence the cost of a prenuptial agreement:
- The number of assets of each person.
- The complexity of the terms of the prenup.
- Whether international property is involved.
- Whether trust documents need to be created.
The cost also varies depending on where you live. A family law attorney in New York City, for example, will have a higher hourly rate than a lawyer in rural Indiana.
Who Needs a Prenup?
Prenups aren’t cheap. Forking over that much money while planning a wedding may make you wonder if getting a prenuptial agreement is even worth it.
But when you consider the cost of getting divorced (and putting your assets/debts at the mercy of state law), spending $600 to $2,000 now may be a smarter move.
A full scope divorce lawyer can charge an average of $11,300 in legal fees, according to a 2019 national survey conducted by Nolo, a legal services website.
Still, a prenup can benefit certain couples more than others. Here are a few instances when getting a prenuptial agreement can be especially advantageous.
You Live in a Community Property State
Divorce looks different depending on where you live.
If you live in a community property state, anything acquired during the marriage — including debts — belongs to both spouses. The same goes for personal property: Courts in community property states generally split marital assets 50/50.
Community property states include: Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
All other states are considered equitable distribution states. Here, judges can divide marital assets in a way they deem fair.
A prenup can override community property or equitable distribution laws so that you and your partner can decide what works best for your situation.
It’s a Blended Marriage
Prenuptial agreements make a lot of sense for couples who want to earmark assets for children from a previous marriage.
A prenup won’t detail what specific property your children will inherit. (That’s what a will does.) Instead, a prenup can be written so that a house or other assets remain your personal property. This way, you can pass that property or investment account on to your kids later.
“You can make sure you keep those assets that you’re saving for your children so that they remain yours,” said Erin Morse, a family law attorney in Orlando.
One of You Has a Lot of Debt
An increasing number of couples are drafting prenups because one or both parties doesn’t want to get saddled with their partner’s debt if the marriage ends.
A prenuptial agreement can be written so that you and/or your spouse won’t be responsible for any debts incurred by the other person before or during the marriage. This can be particularly helpful if one partner has significant student loans or business debt.
“Each party can decide that anything titled in their own name is theirs and non-marital,” Morse told The Penny Hoarder.
This can spare you from being on the hook for debt your partner accumulates after you get married, too.
One of You Owns a Business
If you own a business before you get married, it’s not considered marital property. But in some cases, a spouse may still be entitled to half of what your business is worth during a divorce.
“If you restructure your business after you get married, perhaps changing it to an LLC, that business is now considered marital property,” Morse said. “The same goes for any new businesses you create after you get married.”
If your spouse works for you or has any involvement in your business, they can argue that they helped increase the value of the business and are therefore entitled to part of its value.
“It’s more of a creative argument, but a prenup can reduce and eliminate arguments like that,” Morse said.
A prenup can be written to protect any current or future businesses from claims during a divorce. For most small business owners, their work is their livelihood. Getting a prenup is one way to protect this major asset.
You’re Going into the Marriage with Big Assets
Sometimes people enter marriage with substantial assets, everything from a family home to a trust worth millions of dollars.
Prenuptial agreements can help protect assets you both already own in the event of a divorce. You may decide to split a home equally if you buy one together, but the inheritance you received from your grandmother two years ago is off limits.
Older couples often enter a marriage with more personal property and wealth than younger couples. You might already own your own home and have substantial savings in your retirement account. A prenup can shield you from losing part of what you’ve worked hard for and avoid an ugly legal battle.
3 Things to Consider When Getting a Prenup
Prenups may be beneficial but they have two big drawbacks: They’re pricey and they take a while to create.
If you decide to get a prenuptial agreement, it’s important to start the process well ahead of time and discuss elements of the contract with your partner. Finding a good lawyer is also key.
1. Start the Process Early
Don’t rush to write a prenup right before your big day. Experts suggest discussing a prenup with your partner at least six months before you get married.
“Many people sign a document too hastily without thinking through the terms,” Cronin said. “This could have devastating and lasting consequences.”
Waiting until the last minute could also make the prenup less valid down the road. Evidence of technical errors, coercion and unfair terms can invalidate a prenup in the event of a divorce.
2. Be Kind
Entering a prenuptial agreement can be emotional. One person’s family might be pushing for the contract, or it might feel like getting married is off the table unless you sign the document.
Be respectful of each other’s feelings, reactions and thoughts. It’s essential that both parties feel heard and valued.
3. Meet with a Lawyer
You’ll need to find a family law attorney to help draft your prenup agreement and make it valid.
Each person should seek separate legal counsel from their own attorney to ensure prenup terms are fair for both parties. Never sign a prenup without first understanding your rights.
While you can technically draft your own prenuptial agreement, you’ll eventually need to meet with a lawyer to make the document valid and ensure it complies with state law.
In some states, you might also need to sign the written contract in front of a notary public who will ensure each person is signing under their own free will.
What Should a Woman Ask for in a Prenup?
Prenups have a negative reputation as something older wealthy men make younger trophy wives sign.
The truth is prenuptial agreements can protect women from a financially devastating divorce just as much as men. And that’s important, because women historically shoulder more negative financial outcomes after divorce than their male counterparts.
Women are strongly disadvantaged in terms of losing household income and the associated increase in the risk of poverty, according to a 2018 study about gender differences after divorce. Those effects are short for men but chronic for women.
Meeting with your own lawyer to review the premarital agreement is essential if you want to negotiate fair terms. All of the suggestions below can apply to both men and women.
Here are a few things to consider when getting a prenuptial agreement.
Alimony
Women generally shoulder the financial cost of having children more than men. They often provide child care for free at the expense of their own careers. Alimony payments can help compensate a parent for these costs by establishing an agreed-upon structure for spousal support payments.
“It shows that your future spouse values you and values that domestic work,” Morse said.
Setting up the terms of these payments now also spares nasty court battles later.
Premarital Property
If you’re entering the marriage with substantial savings, investments or other assets, protect them in your prenup. You can stipulate that your retirement account is off limits, for example.
Gift Clause
Divorces can get really messy. Your significant other may try to take back expensive gifts, like jewelry. A gifts clause can ensure each spouse gets to keep what their partner gifted them during the marriage.
Joint Bank Accounts
If you’re combining finances for the first time, you might want to outline how and when a joint bank account will be used during the marriage.
Any money in a joint account will be treated as marital property during divorce. Setting up guidelines — like how much money you each should deposit into the account each month and what expenses will be paid from it — can get you and your partner on the same page before tying the knot.
Life Insurance Policies
If you have separate life insurance policies or intend to buy them after you get married, a prenup can stipulate who owns the policy after divorce. You can also decide how to divide any life insurance policies for current or future children.
Consider Keeping Things Separate
If your fiance wants to structure the prenup so that anything in his name remains his personal property, make sure this clause applies to both of you.
A bilateral provision like this means that everything in his name remains his separate property and the same goes for you.
“We live in a world where stay-at-home moms are becoming social media moguls and influencers — and sometimes earning more than their husbands,” Morse said. “If you ever become the person with the money, you want to make sure you also get to keep your business and what you’ve earned.”
Pet Clause
You probably love your pet like family, regardless of your gender.
Including a pet clause in your prenup is one way to ensure you and your partner don’t end up fighting over who gets to keep Fido after a divorce.
Some states also let you include a pet visitation schedule where you and your significant other can work out details similar to a child custody agreement for your pet.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder. She focuses on retirement, investing, estate planning and taxes.
