Pattie Lovett-Reid

Chief Financial Commentator, CTV

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Prenuptial agreements or co-habitation agreements can be conceived as being distasteful.

I get it. You are on the cusp on new beginnings in your life, your relationship is strong and the belief is that a relationship breakdown couldn’t possibly happen to you.

Until it does.

Before we get into the pros and cons of the prenuptial agreement I wanted to share some thoughts I got from Renee Bauer, founder of Bauer Law Group, via email. I asked if prenuptial agreements actually work and when they do and don't apply.

“For the young couple starting out with not much more than some school loans and hand-me-down furniture, a prenup really isn’t necessary,” she wrote. “But, the more you accumulate in wealth, in children, and first and second marriages, the more important having a prenup becomes.”

“With the statistics for second and third marriages not being optimistic, the prenup will preserve your estate. Nothing will breakdown the new blended family relationship faster than kids thinking their parent’s new spouse is coming in to deprive them of their inheritance.”

Bauer's statement nicely sums up who might need a prenup and who likely doesn't.

In the interest of disclosure, my husband and I are both on our second marriage. We have been happily married for 26 years and started our new life together with virtually the same asset base. What was very different was our perceived longer-term earning potential. His potential then, and to this day, continues to be vastly more than mine.

I warned him early on, joking that I knew my way around a balance sheet if this didn't work out, so he might want to consider a prenup. He declined my offer. I remember smiling and saying: "Okay, let's do this. We better get it right or it is going to be very expensive".

My point is, it is so important to at least have the conversation even if you don't put the plan in place.

So, let’s look at the pros and cons of a prenup:

Pros:

• The prenup is typically put into place to protect your assets accumulated or to protect assets you don't want to lose in the event of a marital breakdown.
• Children from a previous marriage can be protected financially if something were to happen to their biological parent.
• Current and future business assets can be protected if outlined and documented accordingly.

Cons:

• In some cases you might feel slighted or even think less of your partner. The focus of the relationship can shift from love to money and requesting a prenup can be perceived a lack of faith in the relationship. This is not a romantic document. It isn't fun, nor is it sexy. However, for some it can prove to be invaluable.
• A prenup can be challenged in court especially if either spouse wasn't open and honest about all of their assets. I would consider using a professional and ensure conversations are documented if there is a lot financially at stake.

It’s important to note prenuptial agreements are not only put into place in the event of a divorce. In the case of a second marriage, assets intended for children from a first marriage, should something happen to the remaining parent, can be protected. This offers peace of mind, should assets be co-mingled once remarried.

Like most things in life, timing is everything. This isn't the sort of conversation you have the night before you walk down the aisle.

But it is a conversation worthy of consideration well in advance of walking down the aisle.