Pre-nuptial Agreement to Protect FIRE Nestegg

[eridanus]

I live in TX and that is a community property state. We were planning to do a prenup.

Isn't that the point of a community property state? What you bring in, you take out? Assuming it's not too commingled, of course.

http://en.wikipedia.org/wiki/Community_property

 

[preben]

I would never get married without a prenup. They do seem to hold up better in Europe than in the USA after what I have read. Cheers!

 

[deserat]

Great thread on the pre-nup. My background - divorcee for over ten years with assets of my own and desire to retire early; spouse - recently divorced with two kids and support payments with much fewer assets. We recently married - discussed pre-nup, decided to clearly identify the financial staus of each of us on the day of the wedding and then everything after that was shared. The day of the wedding we downloaded all account values and identified them as such . We then agreed that if anything happened, that would be the baseline for any split.

Now, the most important part - before we ever got married or even thought about any kind of marriage, we had many long, long discussions regarding goals, values and financial temperament. At the same time we spent a lot of time together to assess each other's behaviors' (to determine if behavior follows what one is saying). We trusted each enough that the actions above were OK. We also do things that look at the long term with respect to taxes and possible future actions towards saving money or reaching our goals.

What's very interesting is that we still had many heated discussions this last tax time due to both of us having different preferences regarding how they should be done. After much heated dicussion, we compromised but then realized that perhaps it was time to hand some of these things over to professionals, with us carefully reviewing them.

So long story, short - we did a sort of pre-nup, but were careful to trust first. I personally look at it as I was alone beforehand and may end up alone again, I still need to care for myself in a certain sense and expecting that in full from my spouse is a good way to become disillusioned. One can be inter-dependent not totally dependent or independent.

Good luck with your decision - Bridget

 

[Nords]

The day of the wedding we downloaded all account values and identified them as such.

OK, I think if I'd tried to do that on my wedding day that I would have needed wedding insurance. And maybe disability insurance too... I'm not even going to start in with the honeymoon jokes.

Now, the most important part - before we ever got married or even thought about any kind of marriage, we had many long, long discussions regarding goals, values and financial temperament. At the same time we spent a lot of time together to assess each other's behaviors' (to determine if behavior follows what one is saying). We trusted each enough that the actions above were OK. We also do things that look at the long term with respect to taxes and possible future actions towards saving money or reaching our goals.

What's very interesting is that we still had many heated discussions this last tax time due to both of us having different preferences regarding how they should be done. After much heated dicussion, we compromised but then realized that perhaps it was time to hand some of these things over to professionals, with us carefully reviewing them.

Great post, Bridget. A recurring theme in this thread has been "What, me trust? We'll have a prenup!" Yeah, people change, but after years of fighting negotiating financial compromises they're much more likely to remain committed to each other. And that renders the prenup unnecessary. OTOH insisting on a prenup could destroy the foundation of trust and render the wedding unnecessary...

Speaking of heated tax discussions, in our house whoever has the most heated (and least compromising) position gets to do the taxes. This has worked out great for me-- not only do I win all the tax discussions, but I also get to do all the taxes!! Spouse seems to be taking it pretty well...

 

[cute fuzzy bunny]

I'm not even going to start in with the honeymoon jokes.

But I will!

Whats a honeymoon salad?

Lettuce alone.

 

[free4now]

I'm going to revive this thread since the subject has been on my mind. I am unmarried with a nest egg big enough to support no-frills FIRE for myself right now, but probably not big enough to support FIRE for two. Ideally I'd find a fiance who is in the same FI position and we would live happily ever after, but I suspect my soulmate will not be FI, so I need to cover my behind so that worry over what would happen in divorce court doesn't stop me from marrying my soulmate.

There seems to be a perception here that prenups always are tools for the more financially powerful party to force the other into submission. It seems to me that this does not have to be the case. The prenup I'm envisioning would say something to the effect of "If the marriage ends within a year, my assets from before the marriage are mine only. For each year after that, X% of my original assets become property of my spouse, until 50% is reached".

That accumulation of X% per year is a right that I'm giving to the spouse that wouldn't have existed otherwise, and in exchange I'm getting the security of knowing that I'm not on the hook for any more than that.

I know that many of the anti-prenup crowd feel it spoils the sublime abandon of romance and I'm sure those people will not be interested in this kind of thing. But for the people who opposed prenups on other grounds, how does this kind of compromise strike you?

And, perhaps the most titillating question... what value of X would you use if you were to use this type of prenup?

 

[Nords]

The prenup I'm envisioning would say something to the effect of "If the marriage ends within a year, my assets from before the marriage are mine only.  For each year after that, X% of my original assets become property of my spouse, until 50% is reached".

I know that many of the anti-prenup crowd feel it spoils the sublime abandon of romance and I'm sure those people will not be interested in this kind of thing.  But for the people who opposed prenups on other grounds, how does this kind of compromise strike you?

That sounds more like a term contract than a life of marriage.

If two companies want to do business together, they draw up a contract to protect their own interests. Maybe the CEOs get along with each other pretty well, but neither one would be so foolish as to presume that either would put the other company's priorities ahead of their own company's priorities. Each company's CEO wants to protect their own company from being exploited by the other, and that generates a lot of fine print & legal fees.

But more than romance & hormones, I feel that marriage is about trust and about putting someone else's priorities on par with or even ahead of yours. Both parties benefit by pulling together in harness instead of guarding their asse(t)s. One example of subsuming personal priorities to a higher calling would be raising kids.

If you're trying to quantify "x" in a situation that calls for compromise & perhaps even a little sacrifice, then you're in the wrong situation. Go for a contract, not a marriage.

 

[mathjak107]

prenups are a tricky lot.first of all they arent worth the expense of doing them more ofton than not in fact many lawyers wont get involved drawing them up for fear of being dragged into silly court battles later on....they are not airtite as you might think and end up in court more ofton than not.
the problem is when pre-nups are agreed to certain issues are assumed about each person...its assumed that if you divorce then the poorer partner can work and earn a living...but what if they are ill or incapacitated....what if the husband just runs off leaving you with the kids and no assets ...issues like these in courts tend to destroy pre-nups......
the point is a prenup can be a safety net but dont for 1 minute think your leaving a marriage with what you came into the marriage with because you wrote it on paper....yes my 2nd wife and i did a post nup...kind of a safety net in case of divorce although we are leaving each other everything at death..but we know and understand its basically a gentlemans agreement since we both have our own assets although she may be ahead of me...

 

[Howard]

My father, 86, moved in with his girlfriend, about 10 years younger, both have sizeable assets.

Family Trusts were set up by both, each had their assets placed in this Trust , on their demise the trust Asssets will go where they directed.

 

[TomSimpsonAZ]

Lets put it this way, if you can get away with it, nice job!


I think the pre-nup pro/cons are a lot like the menage a twa request.....only for the brave.

 

[Eagle43]

Never had a prenup. Why? Neither DW nor I had any money. I trust her completely with our bank account and she never (seldom) looks at the investments.

Now, if for some reason I had to or wanted to get married again, and had my current net worth, well, at my age, pre-nup might save some heartaches later on.

 

[Jay_Gatsby]

Fireme,

Perhaps you should review some of the following books at your local library or bookstore:

http://www.amazon.com/gp/richpub/listmania/fullview/ZY17D650OPE6/104-6770473-9577508?_encoding=UTF8

 

[LRS]

I see my perspective is colored by my 25 year marriage. Hub and I started out together in college, sharing a married student flat, eating beans and rice, picking up cans for a nickle apiece, etc. There's no question of "my money" vs. "his money"; our accounts are as comingled as can be.

I was never a dependent party, though. I worked for over 20 years and I have a pension that would support me in case we split. In part I managed my life in reaction to my mother's life. She was completely financially dependent on my dad. She often said she wanted to leave him but couldn't, because she had no money and her health prevented her from getting a job.

I also think of my sister, whose husband up and left her one day, took all the furniture, the fridge and both the cars--because he paid for them--took all the money--because that was his too--and left her with the house and a mortgage with monthly payments that were more than her takehome salary from her miserable minimum wage job. My sister--who raised his kids from a previous marriage, managed the house, did all of the housewifely chores and worked full time to supplement their income--had no concept that perhaps there was something wrong with that picture. "Well, it was his money ... " They ended up back together. She did it part because she can't make enough money to live on her own. Sorry, but stories like this make me want to puke.

I guess I have a low opinion both of women who accept a role of dependency/inferiority in a relationship and men who hoard/protect their stash from their own wives. Perhaps, if both parties are healthy-minded and independent, living separate lives side by side makes sense, but why marry in that case? Avoid legal entanglements. Share an apartment, keep separate tabs for the food, avoid joint check accounts. Should work out fine, and saves tons of dough spent on lawyers.

 

[SteveR]

I guess I have a low opinion both of women who accept a role of dependency/inferiority in a relationship and men who hoard/protect their stash from their own wives. Perhaps, if both parties are healthy-minded and independent, living separate lives side by side makes sense, but why marry in that case? Avoid legal entanglements. Share an apartment, keep separate tabs for the food, avoid joint check accounts. Should work out fine, and saves tons of dough spent on lawyers.

Why marry indeed!

If the "relationship" is as distrusting as the on you describe then I would highly recommend just living together. That way you can keep you stuff separate from each other and when you do split, you take what is yours and leave with no financial ties to deal with. But this assumes both parties make about the same income and save about the same and buy things independently. There is no "our stuff"; only yours and mine. I cannot see living this way but that is just the way I am wired.

As I stated previously in this thread, I have been on both sides of this thorny issue and lost every thing to a greedy former spouse while facing marriage to a person with 1/100th my assets. Second or third marriages later in life are complicated by blended families and require different thinking than marriage when you are 20. Each couple needs to do what works for them. If you feel you need a prenup then by all means do one. It may not be my cup of tea but it may help you sleep at night.

 

[free4now]

Why marry indeed!

For healthcare insurance of course

After my mother divorced my father she dated one guy for 19 years, and when they finally married it was so he could be covered under her healthcare policy.  They loved each other too, but that was not the impetus for the marriage

I suppose my own family history colors my perspective on prenups; my own parents divorced after 6 or so years of marriage despite having loved each other quite a bit in the start.  My sister, who is the most skilled person at relationships I know, divorced her husband after just one year because she just decided she didn't like him so much after all.

As I think about the prenup I would write, it occurs to me that all I'm really looking for is a confirmation of the basic  community property law:  We both take out what we came in with, and half of what we made during the marriage.

The reason I don't trust this is that I constantly hear anecdotes about people losing half their pre-marriage assets in divorces.  I wonder if this really happens often in real life, or whether it's just something like school shootings that does happen but not enough to require defensive action.

One thing that may not be obvious is that prenups don't and can't say anything about how child support will be handled (especially if you don't have the kids when you enter the marriage).  I wonder if most of the people who lost their premarital assets in divorces lose them because of children in the mix.  If that is the case then a prenup obviously wouldn't help, and I am not looking for protection against that.

Another question is how on a practical level to avoid comingling accounts if you are ER.   ER means you are taking withdrawls, so by definition some money from the pre existing accounts is entering the "marriage domain".   Perhaps the accounts aren't considered comingled if you are only withdrawing, not adding money.  Even if you're not ER it seems likely that you would want to take money out for things like home down payments or smoothing cash flow issues.   Using your accounts to smooth cash flow issues would involve round tripping money out and in to the account, which seems very likely to cause comingling.

I suppose the ultimate way to avoid comingling accounts would be to divide your assets up into lots of small accounts and withdraw from one at a time until it gets sucked dry and then on to the next one.  Yech, what a hassle.  And how unromantic :-!

 

[ladelfina]

For healthcare insurance of course

The Repub's should start using this line ("defense of marriage") to bolster their arguments in favor of the private health-care system!

I know a couple that went so far as to get a friend made one of those "justice-of-the-peace-for-a-day" thingies and had a completely ridiculous 'ceremony', just to get one of them on the other's health plan. Despite the absurd nature of this "marriage", one of the partners was quite upset about going through the whole thing--she had a rough time growing up and saw marriage as evil, really evil, and was in tears over it, but she couldn't leave her beloved w/o HC coverage.

people losing half their pre-marriage assets in divorces

I think that happens in certain states like California IF your pre-marriage assets are not kept 100% separate. I'm sure if you Google 'community property' you'll get a lot of info. People worried about this would be wise to check the regs of the state they live in or plan to live in.

I'll just put in my .02 and repeat the earlier advice that if you are not 100% comfortable with sharing everything then maybe you shouldn't be getting married in the first place. Not to be moralistic or anything.. I had way more than DH, but put his name on all my accounts. If I couldn't trust him with the $, why would I trust him with the rest of my life? I think it was a matter of getting married later in life and of having had some experience in reading people. [I am 100% certain if I tell him today that I want to take his name off, he'll sign on the dotted line without question.]

If I'd been 20, I may have thought twice about it (but then at 20, I was furnishing my apt. with chairs rescued from other people's trash).

I had to laugh about the "vesting" (you get x% after 5 years; 2x% after 10, etc.). I don't care how rich the guy is, I would run, not walk, away from that. Must mean he thinks he'd be so bad to stay married to that someone would need an extra bribe to stick it out.. Depressing. A kind of indentured servitude.

 

[Outtahere]

Funny you should talk about getting married for healthcare coverage cuz that's exactly what dh and I did. He didn't have any and to buy it was outrageous. So we married in Aug of 97, that year, 3 months later the owner of the company changed the healthcare plan to include significant others. I can tell you I was a little upset by that and told him as much. Do I regret it, no. Would we have married if we'd had the coverage? Who knows, maybe one day we would have.

 

[unclemick]

Soooo - when I go on the cruise in Feb:

1. Eat a lot of Sara Lee - 100% whole wheat white bread.

2. Casually in conversation ascertain her health insurance status before her 'other' er ah assets

??

 

[brewer12345]

Soooo - when I go on the cruise in Feb:

1. Eat a lot of Sara Lee - 100% whole wheat white bread.

2. Casually in conversation ascertain her health insurance status before her 'other' er ah assets

??

Hey, UM< where did you decide to go? Get a good deal, or is the widow loosening up the purse strings finally?

 

[SteveR]

My health insurance at work allows domestic partners (DP)on the policy; some for life, vision, dental and pet insurance. Marriage is not a requirement. And this is in one of the most conservative states in the US. My wife's employer also supports DPs without marriage. All it takes is a form and a couple of signatures. Same sex partners are OK too.

Now if they can fix SS to allow remarriage to not cancel out receiving benefits from a deceased spouse....

 

[cute fuzzy bunny]

went so far as to get a friend made one of those "justice-of-the-peace-for-a-day" thingies

Gonna make y'all laugh now.

I'm a fully ordained minister. I'll be glad to perform any marriage ceremonies for the cost of the local licensing fee and a $20 tip...

 

[REWahoo]

I'm a fully ordained minister.  I'll be glad to perform any marriage ceremonies for the cost of the local licensing fee and a $20 tip...

I'm just thankful you aren't an "ordained" mohel...

 

[unclemick]

Nope - just picked one - Mexican Riveria out of LA, Princess Lines. Booked via AOL travel.

My subconsious version of out West. Haven't been out West since 1993.

Bahamas, Cancun, Cozemel, Key West in the old days of New Orleans.

That and B.S. with the guy in looking at estimating pulling up the 1970's carpet and refinishing the Oak floors in the house.

He had just got back from a West Coast cruise out of Los Angeles.

?? - good first try at non frugal -

 

[greg]

?? - good first try at non frugal -

Not bad! And don't spend any money on beer either. Just buy expensive mixed drinks and say "I don't need no stinkin' little umbrella in that thingy" to the waiter--curmudgeon-like--to ease the transition.

 

[Martha]

My health insurance at work allows domestic partners (DP)on the policy; some for life, vision, dental and pet insurance. Marriage is not a requirement. And this is in one of the most conservative states in the US. My wife's employer also supports DPs without marriage. All it takes is a form and a couple of signatures. Same sex partners are OK too.

Now if they can fix SS to allow remarriage to not cancel out receiving benefits from a deceased spouse....

Unless the DP fall within the definition of dependent in the IRC, the employee will have to pay federal income tax on those benefits. State taxes, maybe yes, maybe no, depending on the state.