Per­fectly suited for mod­ern love: prenups

The Washington Post Sunday - - BUSINESS - BY JONNELLE MARTE

Amanda Far­ris works in ac­count­ing and likes to “play things safe” when it comes to her sav­ings and in­vest­ments. Her boyfriend, Andy Sal­mons, owns a cof­fee shop and is a se­rial en­tre­pre­neur not afraid to take risks.

The two have been to­gether for nearly four years and are talk­ing about mar­riage. But be­fore they vow to stay to­gether for bet­ter or worse, they’ve agreed to come up with a plan for how they would pro­tect their fi­nances on the — slim, they hope — chance that their re­la­tion­ship should head south.

“I wanted to find some mid­dle ground,” said Far­ris, 31, adding that a prenup­tial agree­ment would sep­a­rate her re­tire­ment sav­ings from Sal­mons’s busi­ness and the debt he took on to launch that and other ven­tures. “It’s im­por­tant for us to keep things sep­a­rate,” Sal­mons, 32, said. “I

don’t ever want my de­ci­sions to put her in jeop­ardy.”

As more mil­len­ni­als put off mar­riage un­til later in life than pre­vi­ous gen­er­a­tions, they are more likely to have ca­reers, busi­nesses and prop­erty. And that, fi­nan­cial ad­vis­ers say, has made them more pro­tec­tive of what they have built. As a re­sult, the prenup­tial agree­ment is start­ing to lose its taboo.

For gen­er­a­tions, the agree­ments have proven a stick­ing point for cou­ples who deemed them un­ro­man­tic. In some re­la­tion­ships, the con­tracts can sig­nal a lack of trust or sug­gest that one per­son is fore­see­ing an end to the union.

But over time, the equa­tion for when and why two peo­ple should marry has changed. In the 1970s, about 8 in 10 peo­ple had mar­ried by age 30, ac­cord­ing to a U.S. cen­sus re­port. In 2016, that same per­cent­age wasn’t reached un­til age 45.

Mil­len­ni­als are also less in­clined to get mar­ried while they’re young and broke. More than half of peo­ple in their 20s and 30s say it is im­por­tant for them to be fi­nan­cially se­cure be­fore they get mar­ried, ac­cord­ing to a 2015 sur­vey by All­state and the National Jour­nal.

That in­creases the chance that when two peo­ple tie the knot, each will have a ca­reer or busi­ness that they want to pro­tect, fi­nan­cial ad­vis­ers say. In 1975, about 43 per­cent of women were stay-at-home moms or homemak­ers, ac­cord­ing to the cen­sus re­port. In 2016, only 14 per­cent of women were home full time.

Now, some cou­ples are us­ing prenups as a way for each per­son to pro­tect any as­sets they ac­cu­mu­lated — be it a mod­est condo or a promis­ing start-up. The agree­ments can also help peo­ple pro­tect fu­ture in­come at a time when it’s not un­heard of for a pop­u­lar smart­phone app to bring sud­den wealth or for a suc­cess­ful side gig to turn into a full-blown busi­ness.

And in the era of ris­ing stu­dent loan debt, prenups have emerged as a way for cou­ples to say up­front how they would like to sep­a­rate their debt loads in the event of a di­vorce.

“Kids to­day are say­ing, ‘How do I pro­tect my ideas?’ ” said John Volt­ag­gio, a wealth man­ager at fi­nan­cial firm North­ern Trust who has no­ticed an in­crease in the num­ber of young cou­ples in­ter­ested in prenups. “They’re not shy about talk­ing to their fi­ances about it.”

A 2016 sur­vey from the Amer­i­can Academy of Mat­ri­mo­nial Lawyers, a trade as­so­ci­a­tion for di­vorce lawyers, found that 62 per­cent of mem­bers saw an in­crease in the num­ber of cou­ples seek­ing prenups over the past three years. And 51 per­cent said they no­ticed more mil­len­ni­als ask­ing for the agree­ments.

Prenup­tial agree­ments are a rel­a­tively mod­ern con­cept. It was only within the past 25 years or so that the con­tracts be­came widely ac­cepted in most states, coin­cid­ing with the rise of di­vorce, said John Slowiaczek, pres­i­dent of the Amer­i­can Academy of Mat­ri­mo­nial Lawyers.

Prenups also have evolved as re­la­tion­ships have changed. In the ’70s, when cou­ples gen­er­ally mar­ried younger, prenup­tial agree­ments were mainly used for es­tate-plan­ning pur­poses, Slowiaczek said. And more com­monly, those were sit­u­a­tions where one part­ner had sig­nif­i­cantly more wealth or stood to in­herit money.

But prenups aren’t only for the rich. As young peo­ple have be­come more likely to de­lay mar­riage un­til they are more fi­nan­cially se­cure, prenups also have be­come a way for part­ners to pro­tect their as­sets and fu­ture in­come, Slowiaczek said.

They’re also emerg­ing as a tool for di­vid­ing debt loads. About 41 per­cent of cou­ples had stu­dent loan debt in 2013, com­pared with 17 per­cent in 1989, ac­cord­ing to the cen­sus re­port. The size of that debt bur­den is grow­ing as col­lege be­comes more ex­pen­sive.

New col­lege grad­u­ates left school with an av­er­age $30,100 in stu­dent loans in 2015, more than triple the av­er­age debt load of $9,400 in 1993, ac­cord­ing to the In­sti­tute for Col­lege Ac­cess and Suc­cess, which tracks stu­dent loan debts. In sit­u­a­tions where one part­ner has sig­nif­i­cantly more debt than the other, a prenup can de­tail who would be re­spon­si­ble for pay­ing that debt should the two di­vorce, Slowiaczek said.

Some cou­ples are still us­ing prenups for more tra­di­tional rea­sons. Christo­pher Lee, 29, talked to his par­ents and then his fi­ancee about a prenup within days of his pro­posal. Lee said he knew the agree­ment would be im­por­tant for his par­ents, who have a phar­ma­ceu­ti­cal con­sult­ing busi­ness and want to make sure any as­sets they pass along to their chil­dren would stay in the fam­ily in the event of a di­vorce.

Lee said that he views the agree­ment as a form of “in­sur­ance” to keep his par­ents at ease and that his fi­ancee is “to­tally on board.”

They’ll fin­ish the pa­per­work be­fore they say their vows near Den­ver in August — and they hope to never have to use it, he said.

To be sure, prenups are still off lim­its for plenty of cou­ples. Some peo­ple view the agree­ments as the first step to a di­vorce.

The con­tracts may also not al­ways make sense for two peo­ple with sim­i­lar fi­nan­cial sit­u­a­tions.

Tyler Dolan, a 29-year-old fi­nan­cial plan­ner who works mostly with mil­len­ni­als, said the clients he works with are more pre­oc­cu­pied with pay­ing down loans and open­ing 401(k)s than sign­ing prenups. But the is­sue comes up with peo­ple who have been mar­ried pre­vi­ously or who have chil­dren from a prior re­la­tion­ship.

Some cou­ples are turn­ing to le­gal agree­ments af­ter get­ting mar­ried to lay out how they would di­vide any prop­erty, sav­ings and debt ac­cu­mu­lated af­ter ty­ing the knot.

Phoebe Gavin, 30, didn’t sign a prenup when she mar­ried her hus­band six years ago. But now that the two are plan­ning to in­vest in sev­eral rental prop­er­ties, they have agreed to draw up a post­nup­tial agree­ment.

The doc­u­ment, which they hope to for­mal­ize be­fore they buy their first in­vest­ment prop­erty at the end of next year, will lay out a plan for how they would di­vide their prop­er­ties if they ever de­cided to sep­a­rate. Gavin broached the topic be­fore the two bought their first home in March, when she re­al­ized there could po­ten­tially be hun­dreds of thou­sands of dol­lars on the line, if not more.

“It’s just on my mind that we should be re­ally smart about all of our real es­tate in­vest­ments,” Gavin said. “Mar­riage is a fi­nan­cial de­ci­sion, and di­vorce is a fi­nan­cial de­ci­sion, and we should be smart about that.”

“Kids to­day are say­ing, ‘How do I pro­tect my ideas?’ They’re not shy about talk­ing to their fi­ances about it.” John Volt­ag­gio, a wealth man­ager at fi­nan­cial firm North­ern Trust

SHAWN POYNTER FOR THE WASH­ING­TON POST

Amanda Far­ris and Andy Sal­mons of Corbin, Ky., are talk­ing about mar­riage and the idea of sign­ing a prenup­tial agree­ment to sep­a­rate her sav­ings from his busi­ness.

SHAWN POYNTER FOR THE WASH­ING­TON POST

Andy Sal­mons, 32, is a se­rial en­tre­pre­neur and not afraid to take risks. Amanda Far­ris, 31, works in ac­count­ing and likes to “play things safe.”

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