Prenups 101: More Couples Sign Agreements Before They Say 'I Do'

Should I Get One? How do I bring up the subject?

Sept. 30, 2010— -- More middle class couples are getting prenuptial agreements, according to a lawyer's association.

The American Academy of Matrimonial Lawyers says about three-quarters of its members have seen an increase in prenups in the past five years. Couples of all income levels are apparently now hedging their bets before they walk down the aisle.

Mellody Hobson, president of Ariel Investments and "Good Morning America" personal finance contributor, appeared on the show today to talk about which couples should get a prenup, how the agreement should be structured, and the potentially sticky subject: how to broach the issue.

CLICK HERE for some Web Exclusive tips for deciding on a prenup.

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Q: Why do you think they're on the rise, and who should consider getting one?

A: Hobson said there were several reasons for the increase. For one, the divorce rate is 50 percent. Many people enter marriage with some debt, and their partners may want to protect themselves from those financial problems if the marriage ends. Also, there are more women and in the workforce now and they may want to protect their assets, she added.

Prenups aren't always about money, Hobson said. They can cover everything from a guaranteed "date night" during the marriage to custody of the pets if there's a divorce. It can also contain provisions about how to handle your affairs upon your death, she noted.

Hobson said she believed having a prenup was a good idea for most people. She cited a recent Harris Interactive poll in which 44 percent of singles and 49 percent of divorced people said they thought having a prenup was a good idea. Fifteen percent of divorced people said they regretted not having one.

Q: How should I broach the topic?

A: It's not easy, because many people view prenups as being anti-romantic, or as a bet against the success of the marriage. But marriage is a contract, she said, and a prenup is simply a way of putting guidelines on that contract.

Because the couple will be merging their lives, it's important to discuss individual interests and aspirations. Try to talk about it early – soon after the engagement – and try to make your approach positive and reaffirming, she said. The venue is important, she added. This is not a discussion for a restaurant or in bed. If you have most of your serious conversations at the kitchen table, this is probably the place to discuss a prenup.

Q: Once we've talked and we both agree on a prenup, what should we do next?

A: Your next step should be creating the agreement. You should first take an inventory of all your assets and debts. Visit a family law attorney, even if you think your situation is uncomplicated. If you draw up an agreement on your own, it may not stand up in court – even if you get it notarized, she said. Lawyers' fees may vary, but expect them to start at about $1,500.

If you truly believe you have a simple agreement and are looking for a cost-effective solution, you may want to consider one of the online services. For example, will have an experienced attorney help you create a prenup for about $695, she said. Before you finalize your prenup, make sure you have your partner review the agreement by his or her own attorney to ensure it's understood. The agreement is valid on your wedding day and it goes into effect when you get divorced, she added.

Q: What should the prenup cover?

A: A prenuptial agreement is most important when it comes to protecting pre-marital financial interests, such as retirement, investment funds, property and other finances. Don't forget about debt, she noted. It's critical that partners disclose and discuss their debts with each other before they tie the knot. If the marriage ends in divorce, one partner may not want to be on the hook for student loans or credit card debt that the other partner accrued before the marriage, she added.

In addition to protecting assets and the division of property, the prenup should spell out how pets and sentimental items should be handled in the event of a divorce, she said. These are strong emotional triggers that can often become the focal point of messy divorces.

Q: What won't a prenup cover?

A: It can't include any provision that would encourage your partner to dissolve the marriage or prevent you from seeking spousal support in the event of a divorce, she said. That means that if a prenup restricts the spouse from seeking alimony, the spouse still has the right to sue for marital support.

A prenup does not cover the child custody arrangements or child support, but it can specify the type of education and religious faith that you prefer for your child, she added.

Q: What is a postnup? And how about marriage insurance?

A: A postnup is an agreement that spells out terms but which is signed after the marriage takes place, and it generally is scrutinized more in court, Hobson said. If you do get a postnuptial agreement, make sure that both parties have their own attorneys review it, she added.

Marriage insurance does exist, and there is a monthly premium for the coverage. Hobson said she does not think it's a good idea and she would not consider buying this insurance.

Web-extra Tips

Here are some more of Mellody's tips:

You may want to consider getting a prenuptial agreement if you think you will quit your job in the future to raise children. It will ensure that the financial burden of child-rearing is split equitably.

To ensure the agreement remains fair, a prenuptial agreement should be reviewed periodically, especially if your lifestyle changes or your salary has significantly increased.

If you live in a community property state such as California, usually everything you purchase during your marriage is split 50/50, no matter who purchased it. If you don't agree with those regulations, make sure you spell out specific guidelines about property division in your prenup, but remember that your partner will need to agree.

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