Getting married? Let’s talk about money
If there is one statistic that does not lose its ability to scare, it’s how many marriages end in divorce. “About half ” is thrown about often, if a bit loosely.
Research has added nuance to that figure. Factors like age, education, and socioeconomic status contribute to reducing the likelihood of divorce. So, too, does the number of marriages: First marriages are less likely to end in divorce than third marriages. Still, the numbers do not fill a young (or old) heart with joy.
The response for many wealthy people is the prenuptial agreement, which details what each spouse is entitled to financially if the marriage were to end in divorce.
Whether a person’s betrothed or their own family raises this issue, the ensuing conversation is likely to be about as romantic as deciding who takes out the trash. Any discussion, after all, will focus on the parameters for who gets what at the end of a marriage that has not even started.
This is where Nathan Dungan, a wealth educator and founder of Share Save Spend, a financial consulting firm in Minneapolis, is trying to take a smarter approach to any conversation around prenuptial agreements. He wants to require both partners to attend what could be called Prenup 101.
It is far from something couples can take casually. Dungan has developed worksheets and quizzes to complement extensive counseling that lasts at least six months, though ideally closer to a year. He calls the whole process “onboarding” — a far more welcoming description than “divorce planning.”
“You want to say, ‘We’re in this together,’ but then there’s this big wrench that gets put in place,” he said. “What if we looked at it as an opportunity and not this huge problem?”
To this end, the worksheets ask open-ended questions about how people feel about money: “What is money to me?” “What things matter most to me in life?” “Why is it important to understand how each person is wired with respect to money?”
“They have homework assignments they need to do,” Dungan said. “Some are together, some are separate.”
But emphasis is put on the discussion, he said.
“Part of this is to recognize that this is not a romantic conversation,” Dungan said. “We get that, but it’s an opportunity for them to step into this and talk about their own family of origin and their own money story.”
Dungan said his goal is to take the prenuptial agreement out of the conversation and present the couple with an opportunity to have an honest conversation about money. He wants them to learn if they are spenders, savers or sharers when it comes to money in their lives.
Andrew, who comes from a prominent Midwestern family and asked that his last name not be used, said his family had been a client of Dungan’s since he was a teenager. He’s in his late 20s now and has been married for four years.
His wife became part of the family’s financial discussions while they were dating. Still, when they got engaged and the process ramped up, the conversations were not easy.
“There were things that got brought up that my wife and I never knew were bothering us,” Andrew said. Dungan helped them ask about their attitudes toward money. “It allowed my wife and me to learn why this is important and to understand this isn’t a ‘me vs. you’ thing,” he said.
The process took about six months until a prenuptial agreement was signed.
“It can feel like you’re against each other from the start,” said Andrew. But in the end, he was glad they were both on the same page. “It lets you start your marriage on the right foot,” he said.
Dungan’s method appeals to people who are confident and open enough to at least discuss money within their own families. That’s usually how they know about him in the first place: as clients of his getting advice on wealth and inheritance.
But many prenuptial financial conversations are not well planned. More often, couples wait until weeks or even days before their wedding before talking about a prenuptial agreement — a hasty decision signed in what the industry calls “the shadow of the altar.”
Casting that kind of uncertainty on a wedding can dim the sunny days most couples expect. But such an approach can also have unintended ramifications.
The person who is being presented with the prenuptial agreement can feel unprepared or, worse, ambushed. As for the agreement itself, that kind of rush also increases the likelihood that whatever gets signed will not hold up in court.
Part of what makes a prenuptial agreement enforceable is a full disclosure of existing assets. To do this, there needs to be time for both parties to understand what is involved.
“It’s difficult to challenge a prenup in New York,” said Jacqueline Newman, managing partner at the New York law firm Berkman Bottger Newman & Rodd. “But if it’s literally thrown to the person in the shadow of the altar, courts consider all of that. It’s not smart on the part of the person who wants a prenup to give it to someone last minute.”
Inherited assets and family gifts are generally protected in divorce proceedings. But if, say, income from a trust was used to pay for the family’s lifestyle, it could be subject to division in a divorce, said Silvana D. Raso, managing partner at Schepisi & McLaughlin, a law firm based in New Jersey.
The same, she said, holds true for a family business, even if a new spouse is only partly involved in managing it and receiving income from it. Both concerns can be handled in a properly drafted agreement, but doing so takes time and discussions.
Newman, however, noted that for the so-called nonmonied spouse, a prenuptial agreement can offer access to funds supporting the couple’s married lifestyle that would not be available in a divorce, such as otherwise untouchable inheritance funds.
There is consensus on what makes a good prenuptial agreement: time to discuss all the issues and draft a document that is fair to both sides and perhaps even has provisions to change over time.
But getting to that document can cause lasting problems in a family if it is not handled with care. Dungan’s classes attempt to fend off emotional distress, much of which can revolve around how families talk — or don’t talk — about money.
Alison Comstock Moss, chairman and chief executive of Paul Comstock Partners, which advises clients on a total of $2.2 billion in assets, recalled a client who told his future son-in-law that he would not get a dime from the family if the marriage ended. The son-in-law, who was himself financially successful, had not planned to ask for anything from his wife’s family in the prenuptial agreement.
Years later, the marriage is happy, but the two men still do not get along. “Knowing all the parties involved, I don’t think the intent was to be nasty,” Moss said. “I think they got bad advice, and the way they communicated with each other was really hurtful.”
A better way to have handled the situation, she said, would have been to ask a simple question about expectations, which would have allowed the son-in-law to speak his mind.
But an approach like that requires planning, education and openness about financial expectations, which may not be possible if the focus is on the agreement itself.
Dungan said his process still leads to the same end — a prenuptial agreement — but it gets there in a way that requires more thought.
“We’re not robotically moving through this process,” he said. “We’re creating a dynamic that allows them to have the best outcome.”