Prenuptial arrangements

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
throwaway1535
Posts: 11
Joined: Sat Apr 10, 2021 5:21 pm

Prenuptial arrangements

Post by throwaway1535 »

I'm likely going to be getting married as my partner and I have been discussing possibly getting engaged.

A few details, we should have about $900k of combined investments with 2/3 from myself and 1/3 from my partner. Our only combined debt will be $125k on a house mortgage.

I'm curious to hear how others have planned for an upcoming marriage. We've had a few preliminary discussions and they honestly haven't gone the greatest. Some of our differences:
-One prefers paying off the house while the other values more investments.
-One is more of a 30% of income saver while the other is closer to 15%.
-One is turned off by the idea of early retirement while the other isn't.
These seem relatively minor and it's great to find someone who is also pretty savvy with money and we get along great otherwise, but we'd both like to figure out how to have better financial discussions.

Two questions, I have:
1) How much did you discuss before versus after getting engaged?
2) Did you go through a structured discussion with a 3rd party: premarital counselor, estate planner, or lawyer?
Soon2BXProgrammer
Posts: 2050
Joined: Mon Nov 24, 2014 11:30 pm

Re: Prenuptial arrangements

Post by Soon2BXProgrammer »

Everyone has a prenup. Its called the law/judge.

If you don't want it to be that, then you need to have the hard conversation with your spouse.

I had it easy, we both had nothing when getting married, so there was no assets or liabilities to prenup.
Ependytis
Posts: 146
Joined: Mon Oct 17, 2016 11:10 am

Re: Prenuptial arrangements

Post by Ependytis »

I commend you for considering prenup. As they say, you could either go with the government contract or your own. Neither party should agree something that they can’t live with. If both parties are committing to the terms in writing then there’s less of a chance for there to be a miss understanding or resentment years later.

If you can’t agree to the terms now, imagine what it would look like years from now. There’s only one logical reason while someone making less will not agree to a prenup and that’s the money.

You don’t seem like your values, in terms of money, are that different. For some people, this issue can be a very emotional therefore you have to take it slow but start immediately. If things start to go sideways, reschedule another time to talk about it. But definitely have the conversation.

You need to have his and her lawyers to review the final document. Good luck.
oldfatguy
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Joined: Tue Feb 27, 2018 1:38 pm

Re: Prenuptial arrangements

Post by oldfatguy »

throwaway1535 wrote: Sat Apr 10, 2021 5:34 pm I'm likely going to be getting married as my partner and I have been discussing possibly getting engaged.

A few details, we should have about $900k of combined investments with 2/3 from myself and 1/3 from my partner. Our only combined debt will be $125k on a house mortgage.

I'm curious to hear how others have planned for an upcoming marriage. We've had a few preliminary discussions and they honestly haven't gone the greatest. Some of our differences:
-One prefers paying off the house while the other values more investments.
-One is more of a 30% of income saver while the other is closer to 15%.
-One is turned off by the idea of early retirement while the other isn't.
These seem relatively minor and it's great to find someone who is also pretty savvy with money and we get along great otherwise, but we'd both like to figure out how to have better financial discussions.
You sound like a couple that may want to maintain separate finances. There are many different methods of doing so, and whatever works best for the two of you is the best one.

What would you want a prenup to accomplish? I assume you are most focused on protecting your pre-marriage assets?
VoiceOfReason
Posts: 168
Joined: Sat Jan 02, 2016 6:54 pm

Re: Prenuptial arrangements

Post by VoiceOfReason »

This doesn’t sound like a situation requiring a Pre-nup. It sounds like a situation where you need to get aligned with your partner on life.

Find compromise and align on goals.

I would suggest spending your efforts on 1:1 conversations and alignment on long term $ goals and life than bringing in 3rd parties for contracts. Maybe try Couples therapy to discuss this and any other topics. (Kids, family support, religion, holidays). But not to draw up contracts.

My wife and I had clear alignment on long term goals - FI, kids, savings, LBYM prior to marriage. Day to day we def have different approaches that can cause frustration, but big picture we are completely aligned.
Jacotus
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Re: Prenuptial arrangements

Post by Jacotus »

The title of the thread talks about prenups but the question seems to be less about prenups than about handling general differences in financial preferences between spouses. The latter requires extensive and ongoing open communications with your partner.

You said your conversations didn't go so well, but it sounds like you effectively communicated your preferences to each other. That seems like a good start to me. Having different preferences is normal, and so is finding common ground to compromise.
Anon64
Posts: 51
Joined: Wed Dec 20, 2017 7:38 pm

Re: Prenuptial arrangements

Post by Anon64 »

Just some thoughts-

The mortgage seems low compared to your combined investments so it seems pretty low risk either way you go on that one.

Not enough info on the savings rate without knowing the relative incomes.
Monsterflockster
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Re: Prenuptial arrangements

Post by Monsterflockster »

throwaway1535 wrote: Sat Apr 10, 2021 5:34 pm I'm likely going to be getting married as my partner and I have been discussing possibly getting engaged.

A few details, we should have about $900k of combined investments with 2/3 from myself and 1/3 from my partner. Our only combined debt will be $125k on a house mortgage.

I'm curious to hear how others have planned for an upcoming marriage. We've had a few preliminary discussions and they honestly haven't gone the greatest. Some of our differences:
-One prefers paying off the house while the other values more investments.
-One is more of a 30% of income saver while the other is closer to 15%.
-One is turned off by the idea of early retirement while the other isn't.
These seem relatively minor and it's great to find someone who is also pretty savvy with money and we get along great otherwise, but we'd both like to figure out how to have better financial discussions.

Two questions, I have:
1) How much did you discuss before versus after getting engaged?
2) Did you go through a structured discussion with a 3rd party: premarital counselor, estate planner, or lawyer?
You are so close to 50/50 I wouldn’t waste my time. Not to mention everything you earn while married will be split evenly anyways. But hopefully you aren’t planning on a split up... otherwise I’d just break up now.

Take this as you may but this is a relationship not a business transaction. What happens if you get laid off and she supports you while you are out of work? What about kids? That’s going to change everything.
Topic Author
throwaway1535
Posts: 11
Joined: Sat Apr 10, 2021 5:21 pm

Re: Prenuptial arrangements

Post by throwaway1535 »

To be clear, I'm not sure we need a prenuptial agreement but it seems we should do some financial planning and make some arrangements. If no prenup agreement, do people typically record their assets before marriage? Our networths are pretty close but one thing I've wondered about is how a premarital house that we then live in would be treated compared to retirement accounts and taxable investments. The main thing is I think we want everything to be all in 50-50 or premarital assets clearly identified.

I love my girlfriend very much. But I'm a boglehead and thus a planner for each contingency. It's very hard for me to jump into marriage without better understanding the rules and then making some plans. Are there any books people would recommend or can people share more of their personal experiences?
fourwheelcycle
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Re: Prenuptial arrangements

Post by fourwheelcycle »

I am not a lawyer, but it seems reasonable that if you each put your assets before marriage in accounts titled solely to each of you, those accounts will remain outside the joint assets of your marriage. Ditto for any earned retirement benefits or 401k savings, etc., before the date of your marriage. Everything earned by each of you after the date of your marriage, or earned by your savings and investments along the way, is open for division if you ever get divorced. I don't think you can keep your respective earnings, savings, or investments after the date of your marriage outside of your joint marital assets by holding them in accounts titled solely to each of you. If you ultimately choose to commingle your assets before the marriage in your joint marriage account or investments, those pre-marriage assets will also become part of your joint marital assets (that seems fair, but remember, I am not a lawyer).

How about you each agree to "pay" half of the outstanding $125K mortgage into a joint account. Then you will start your marriage with your respective single owner "outside the marriage" accounts and a joint account with a $125K balance.

Now you will be just like any other couple getting married. You will have a joint mortgage liability of $125K and a joint account with $125K in it - in other words, you'll be "even". My wife and I were "even" when we got married 45 years ago, except we had no mortgage and a joint account with about $2,000 in it. Now we have lived our careers, raised two children, and retired comfortably. We never discussed how much to save. We both had good careers, with enough money for what we needed to live on, plus extra money to save. We did the classic LBYM thing, putting all of our respective earnings in one joint checking account and saving whatever was left each year in a joint Vanguard account, plus our employer-based retirement savings. We never tried to link our respective earnings to our "shares" of our joint savings. We agreed we were in an equal marriage and if we ever parted ways we would split our savings since the date of our marriage equally. However, we have never had to confront that issue, since we have been happily married from our 20s to our 70s.
neverpanic
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Re: Prenuptial arrangements

Post by neverpanic »

VoiceOfReason wrote: Sat Apr 10, 2021 7:25 pm This doesn’t sound like a situation requiring a Pre-nup. It sounds like a situation where you need to get aligned with your partner on life.

Find compromise and align on goals.
This is a relationship question (which is also legal AND financial, as always), but I wanted to comment quickly before the thread gets locked.

Pre-nups depend on the state. On a personal level, there are times when they're called for and many times when they are not. If you want to protect separate assets, list them and manage them separately. Don't talk about it during the marriage, just do it. If there is a family/legacy inheritance, keep them separate, but if significant, feel inclined to share a bit. Be partners on everything else from this point forward. Good luck.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
vtjon02
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Re: Prenuptial arrangements

Post by vtjon02 »

throwaway1535 wrote: Sat Apr 10, 2021 8:56 pm To be clear, I'm not sure we need a prenuptial agreement but it seems we should do some financial planning and make some arrangements. If no prenup agreement, do people typically record their assets before marriage? Our networths are pretty close but one thing I've wondered about is how a premarital house that we then live in would be treated compared to retirement accounts and taxable investments. The main thing is I think we want everything to be all in 50-50 or premarital assets clearly identified.

I love my girlfriend very much. But I'm a boglehead and thus a planner for each contingency. It's very hard for me to jump into marriage without better understanding the rules and then making some plans. Are there any books people would recommend or can people share more of their personal experiences?
Every single marriage needs a prenup. More importantly though, you both need to compromise and come up with a plan on goals, spending and savings. The idea is to try to never have to use the prenup, but I’m case something happens, to have an understanding in place. Divorces are far too common and are catastrophic in many ways. It’s a lot easier to come to an understanding now while you love each other than later when you hate each other.
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mrspock
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Re: Prenuptial arrangements

Post by mrspock »

Honestly... and I’m the biggest prenup guy in the world. For 600k/300k I’m not sure I’d bother. You are in the “mutually assured destruction” financial territory in that range, and alimony (especially if she quits her job to raise kids), child support and other difficult to prenup marriage risks dwarf the 300k difference.

I’d focus more on becoming a team to the common goal of FI, and making sure you understand the game plan when/if you have kids (is anyone quitting their job? Nanny?). If she plans to stay home, the prenup is even more pointless, at that point you are likely (per the law of most states) assuming responsibility for her financial well being for the rest of your life — married or not. The life long costs from that will make the $300k look quaint.
claypigeon
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Re: Prenuptial arrangements

Post by claypigeon »

We’re both savers and both frugal but I’ve always been a broad index ETF investor and she’s always been one to hold things in cash with an eventual plan to invest in real estate when she could pay in full.

What I found helpful was

1) discussing how much of a cash reserve / emergency fund was needed for her to feel comfortable. It turned out to be 12 months expenses

2) a pre nup so there was that extra cash reserve on top

3) a written IPS

This worked beautifully and eventually she used that pre nup reserve as the down payment on our house after seeing what investing in broad index based ETFs is all about. And that 12 month emergency fund became a 5 month one after daycare and the mortgage were added on so I wanted to up it to a 6 months reserve And as I’m paying her back with interest for the down payment she’s investing in ETFs herself
Shalom Aleichem
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Re: Prenuptial arrangements

Post by Shalom Aleichem »

If you have around 600 k and she has about 300 the difference is 300. If you were to split up it would be the difference between you keep 300 and you keep 150. 150 k is not nothing but ... you’re not talking about an enormous amount of money over the course of a lifetime. You could just put your money in a separate account and hers in a separate account and go to legal zoom and get a prenup that says those accounts are off limits. The bigger question will be going forward how to divide it up if one partner makes much more than the other. But money you make as a couple will end up divided anyway so who cares. One question will be - if you both work - who pays for what? Do you each put say 50 pct of your paycheck in the family fund and make personal purchases from the other fund? Or do you put 100 percent in the family fund?
ivgrivchuck
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Re: Prenuptial arrangements

Post by ivgrivchuck »

1. I wouldn't recommend a prenup. The point of marriage is managing things together.

2. Before getting engaged, it might be wise to make sure that you two are sufficiently aligned in your thinking about finances...
37% VTI | 37% VXUS | 13% I-bonds | 13% EE-bonds
Cruise
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Re: Prenuptial arrangements

Post by Cruise »

OP, I don’t envy your situation. When I got married many decades ago, we had no assets to protect. But what we did was assume that every going forward was 50/50, regardless of which spouse was the higher earner. That 50/50 concept is a critical component to marital success. Good luck.
protagonist
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Re: Prenuptial arrangements

Post by protagonist »

throwaway1535 wrote: Sat Apr 10, 2021 5:34 pm

Two questions, I have:
1) How much did you discuss before versus after getting engaged?
2) Did you go through a structured discussion with a 3rd party: premarital counselor, estate planner, or lawyer?
Currently engaged, retired. Previously married without a prenup, went through a horrible costly divorce.
My current fiancee and I have been engaged for a LONG time (we set our wedding date for June, 2022 in 2014). That has given us a long time to discuss finances, and we discussed everything openly (both of us agreed to a prenup from the get-go...I would never marry again otherwise).
"Structured discussion with lawyers" will happen before we sign anything....we are in complete agreement regarding how to proceed so it should not be too much of an issue.
My advice....the longer you can stay engaged, the better. You have a lot to discuss.
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galving
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Re: Prenuptial arrangements

Post by galving »

throwaway1535 wrote: Sat Apr 10, 2021 5:34 pm I'm likely going to be getting married as my partner and I have been discussing possibly getting engaged.

A few details, we should have about $900k of combined investments with 2/3 from myself and 1/3 from my partner. Our only combined debt will be $125k on a house mortgage.

I'm curious to hear how others have planned for an upcoming marriage. We've had a few preliminary discussions and they honestly haven't gone the greatest. Some of our differences:
-One prefers paying off the house while the other values more investments.
-One is more of a 30% of income saver while the other is closer to 15%.
-One is turned off by the idea of early retirement while the other isn't.
These seem relatively minor and it's great to find someone who is also pretty savvy with money and we get along great otherwise, but we'd both like to figure out how to have better financial discussions.

Two questions, I have:
1) How much did you discuss before versus after getting engaged?
2) Did you go through a structured discussion with a 3rd party: premarital counselor, estate planner, or lawyer?
Congrats on your engagement.
Now it's more of a 'team game'.
Looking back we somehow knew that we'd combine finances if only just to minimize the complexity.
We created a 'system' to basically openly discuss finances each week at the coffee shop. It was a time of great change! New house, new expenses, new challenges including integrating two independent people with different standards for 'clean'. That was resolved by contracting professional cleaners.

Recommend reframing and focusing on joint targets that you can agree upon. Discuss and prioritize items as you go. Consider an authorized limit on spending where you wouldn't have to get approval from your spouse. I think we started at $100 . . . two decades ago. Now it's considerably higher.
Some of the items that you mention don't need to be decided today. BTW things change over time so it's super important to keep openly discussing the priorities. For example despite our joint target being a beach house. . . we ended up using some of that fund to pay off the primary residence because it gave us the freedom to consider other options in the near term.

Eventually we did sit down with a financial advisor (fee only), once we had our arms around on respective finances. To be honest that discussion/plan together with the bogleheads still permeates our finances today. Dollars are automatically withdrawn on payday and applied to the various accounts. Beach House/Car/Kid Acct/etc.

I can remember multiple 'conversations' where the monthly cash flow was 'negative' after making all the investments. It was completely irrational on my part but we had to work through it.

Keep the open communication and understand why your partner prefers a particular solution. Often both team members share the same motivations but choose a different solution to get there. In those cases it makes it much easier to reevaluate your preference if in the end you get to the same place as a team.

Good luck!
Marseille07
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Re: Prenuptial arrangements

Post by Marseille07 »

Cruise wrote: Sun Apr 11, 2021 4:02 am OP, I don’t envy your situation. When I got married many decades ago, we had no assets to protect. But what we did was assume that every going forward was 50/50, regardless of which spouse was the higher earner. That 50/50 concept is a critical component to marital success. Good luck.
The problem with this approach is when one spouse earns significantly more than the other and the D-word comes.

Suddenly the higher earner has to provide the same standard of living post D-word. Imo this isn't 50/50 at all. I've seen several well-paid tech engineers suffer through this situation.
H-Town
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Re: Prenuptial arrangements

Post by H-Town »

There’s another option: don’t get married and don’t commingle assets. Track your spending and divide it exactly in half. You pay half and your partner pay the other half. That will solve financial issues related to pre-marital assets.

Set that aside and enjoy life together. Don’t let social norms dictate what you should do if you don’t want to.
Marseille07
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Re: Prenuptial arrangements

Post by Marseille07 »

H-Town wrote: Sun Apr 11, 2021 10:32 am There’s another option: don’t get married and don’t commingle assets. Track your spending and divide it exactly in half. You pay half and your partner pay the other half. That will solve financial issues related to pre-marital assets.

Set that aside and enjoy life together. Don’t let social norms dictate what you should do if you don’t want to.
If you can pull it off, that'd be best. The challenge is, being able to protect your assets might not be such an appealing idea for the other party.
humblecoder
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Re: Prenuptial arrangements

Post by humblecoder »

I think pretty much every reply has completely missed the point of the question. Everyone sees the word "prenuptial" in the title and assumes that the OP is asking whether he/she should get a prenuptial agreement prior to marriage.

However, if you actually take the time to read the post, it is more about how do potential life partners come to some sort of consensus on big picture financial questions. For instance, the OP mentions the question of prioritizing paying off a house early vs not. I am not a lawyer, but I don't think any prenuptial agreement is going to resolve that question (unless I am missing something).

This requires discussion between the two people, potential compromise (ex: split the difference... half towards house, half towards savings), and potentially seeking the advice of a neutral third party. This is no different than any issue between committed couples.

The only other piece of advice I will add is that you need to resolve these questions sooner rather than later. Otherwise, they are going to continue to fester and eventually explode.

Good luck!
intluser
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Re: Prenuptial arrangements

Post by intluser »

throwaway1535 wrote: Sat Apr 10, 2021 5:34 pm I'm likely going to be getting married as my partner and I have been discussing possibly getting engaged.

A few details, we should have about $900k of combined investments with 2/3 from myself and 1/3 from my partner. Our only combined debt will be $125k on a house mortgage.

I'm curious to hear how others have planned for an upcoming marriage. We've had a few preliminary discussions and they honestly haven't gone the greatest. Some of our differences:
-One prefers paying off the house while the other values more investments.
-One is more of a 30% of income saver while the other is closer to 15%.
-One is turned off by the idea of early retirement while the other isn't.
These seem relatively minor and it's great to find someone who is also pretty savvy with money and we get along great otherwise, but we'd both like to figure out how to have better financial discussions.

Two questions, I have:
1) How much did you discuss before versus after getting engaged?
2) Did you go through a structured discussion with a 3rd party: premarital counselor, estate planner, or lawyer?
1) Flip a coin and see what happens; over 50% of marriages end in divorce. The person you marry now is usually not the same as you will divorce.
2) Place your pre-marital assets inside an irrevocable trust.
3) Get a prenup (which get thrown out all the time). At the minimum, you have it recorded on video of you both signing with a former elected judge.
4) Get a religious marriage and skip the legal marriage all together.
illumination
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Re: Prenuptial arrangements

Post by illumination »

You just need to get your own lawyers (it will need to happen anyway for most prenups to be upheld that you both had your own separate legal counsel) and craft the agreement in a way where in the event of a divorce, it would be no different legally than if a boyfriend/girlfriend broke up and moved out. Property that is in both of your names (like a mortgage) will get divided up, otherwise what in your name is yours, and vice versa. Figure out joint expenses, keep things like retirement plans separate. Something like a living trust probably makes sense for each of you.

I wouldn't get in the weeds with a legal arrangement about issues like how quickly a mortgage is paid off or when you want to retire. You can have those discussions later and I would presume those aren't "deal breaker" issues anyway.

But absolutely get a prenup, I have two close contacts that just went through this, one had a prenup and the divorce was very simple with almost no legal fighting because there just wasn't much to fight over financially. The other did not, and their divorce you could make a movie about, the "jump ball" nature of the assets in question was fuel to a nasty fire. The one big lesson the other person got from the whole experience is they were getting a prenup "next time".

In the one case, a person took a large distribution out of their family trust to make a big down payment on a home, that money ended up becoming the property of the spouse after the divorce as the house was split 50/50.

We never question getting fire insurance that has like a 1% probability, but for some reason a prenup is considered "weird" but the divorce rate is close to 50%. It's worth the initial "awkwardness" getting this agreement in place.
PowderDay9
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Re: Prenuptial arrangements

Post by PowderDay9 »

Need more info to give tailored advice.

What are your ages, jobs/incomes, and plans for children?

If you both are young and have similar education and careers, then there's not much benefit of a prenup. I still think you need to get on a similar page and discuss finances, children, life goals, etc. If you don't feel comfortable working through that now then you should wait to get engaged.
Topic Author
throwaway1535
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Re: Prenuptial arrangements

Post by throwaway1535 »

claypigeon wrote: Sat Apr 10, 2021 10:31 pm We’re both savers and both frugal but I’ve always been a broad index ETF investor and she’s always been one to hold things in cash with an eventual plan to invest in real estate when she could pay in full.

What I found helpful was

1) discussing how much of a cash reserve / emergency fund was needed for her to feel comfortable. It turned out to be 12 months expenses

2) a pre nup so there was that extra cash reserve on top

3) a written IPS

This worked beautifully and eventually she used that pre nup reserve as the down payment on our house after seeing what investing in broad index based ETFs is all about. And that 12 month emergency fund became a 5 month one after daycare and the mortgage were added on so I wanted to up it to a 6 months reserve And as I’m paying her back with interest for the down payment she’s investing in ETFs herself
Thanks, that's useful. I'm realizing my girlfriend is going to want a larger emergency fund as well. I'm not sure what you mean by #2? Yeah, I'm realizing we're going to probably need a written IPS and more of a budget. Both of us have been comfortable just kind of knowing what we want without writing it down or explicitly budget. It feels in a way like a step backwards to redeveloping a common plan that will take some work, but I'm coming around to realize that's what we need to do.
Topic Author
throwaway1535
Posts: 11
Joined: Sat Apr 10, 2021 5:21 pm

Re: Prenuptial arrangements

Post by throwaway1535 »

galving wrote: Sun Apr 11, 2021 7:46 am
Congrats on your engagement.
Now it's more of a 'team game'.
Looking back we somehow knew that we'd combine finances if only just to minimize the complexity.
We created a 'system' to basically openly discuss finances each week at the coffee shop. It was a time of great change! New house, new expenses, new challenges including integrating two independent people with different standards for 'clean'. That was resolved by contracting professional cleaners.

Recommend reframing and focusing on joint targets that you can agree upon. Discuss and prioritize items as you go. Consider an authorized limit on spending where you wouldn't have to get approval from your spouse. I think we started at $100 . . . two decades ago. Now it's considerably higher.
Some of the items that you mention don't need to be decided today. BTW things change over time so it's super important to keep openly discussing the priorities. For example despite our joint target being a beach house. . . we ended up using some of that fund to pay off the primary residence because it gave us the freedom to consider other options in the near term.

Eventually we did sit down with a financial advisor (fee only), once we had our arms around on respective finances. To be honest that discussion/plan together with the bogleheads still permeates our finances today. Dollars are automatically withdrawn on payday and applied to the various accounts. Beach House/Car/Kid Acct/etc.

I can remember multiple 'conversations' where the monthly cash flow was 'negative' after making all the investments. It was completely irrational on my part but we had to work through it.

Keep the open communication and understand why your partner prefers a particular solution. Often both team members share the same motivations but choose a different solution to get there. In those cases it makes it much easier to reevaluate your preference if in the end you get to the same place as a team.

Good luck!
How did your experience go with the fee only advisor? And how did you find them. I've always been skeptical, even of fee only advisors being useful to me. But I'm realizing a 3rd party might be useful.
Topic Author
throwaway1535
Posts: 11
Joined: Sat Apr 10, 2021 5:21 pm

Re: Prenuptial arrangements

Post by throwaway1535 »

PowderDay9 wrote: Sun Apr 11, 2021 4:50 pm Need more info to give tailored advice.

What are your ages, jobs/incomes, and plans for children?

If you both are young and have similar education and careers, then there's not much benefit of a prenup. I still think you need to get on a similar page and discuss finances, children, life goals, etc. If you don't feel comfortable working through that now then you should wait to get engaged.
39 and 38. Similar incomes between $75-100k each. We'd like children if biology allows. That's how I feel about working through it before getting engaged, but I think she would like to discuss more detailed after getting engaged but before marriage.
RickyAZ
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Re: Prenuptial arrangements

Post by RickyAZ »

mrspock wrote: Sat Apr 10, 2021 10:08 pm Honestly... and I’m the biggest prenup guy in the world. For 600k/300k I’m not sure I’d bother. You are in the “mutually assured destruction” financial territory in that range, and alimony (especially if she quits her job to raise kids), child support and other difficult to prenup marriage risks dwarf the 300k difference.

I’d focus more on becoming a team to the common goal of FI, and making sure you understand the game plan when/if you have kids (is anyone quitting their job? Nanny?). If she plans to stay home, the prenup is even more pointless, at that point you are likely (per the law of most states) assuming responsibility for her financial well being for the rest of your life — married or not. The life long costs from that will make the $300k look quaint.
This.

Spend the $ for a an hour’s time with a divorce attorney (each gets to pick one). That’ll straighten you up and help you align your values and goals.
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celia
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Re: Prenuptial arrangements

Post by celia »

throwaway1535 wrote: Sat Apr 10, 2021 5:34 pm I'm curious to hear how others have planned for an upcoming marriage. We've had a few preliminary discussions and they honestly haven't gone the greatest. Some of our differences:
-One prefers paying off the house while the other values more investments.
-One is more of a 30% of income saver while the other is closer to 15%.
-One is turned off by the idea of early retirement while the other isn't.
These seem relatively minor and it's great to find someone who is also pretty savvy with money and we get along great otherwise, but we'd both like to figure out how to have better financial discussions.
These are pretty good topics but what about discussing:
-How did each set of your parents handle money? (Debt vs savers, homeowners vs renters, moved a lot vs stable, SAHM or not). This is recomended to see where you each came from.

-What were your parents’ priorities in life?

-What would you each like to do if you alone won $5M in the lottery and weren’t married?

-How would you each like to spend vacations?

-How much would each of you spend on your kids’ education (not a dollar amount, but what would you be willing to sacrifice so they could at least get the education you have)?

-Why do each of you think you should have a pre-nup or not?
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Freetime76
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Re: Prenuptial arrangements

Post by Freetime76 »

throwaway1535 wrote: Sun Apr 11, 2021 6:00 pm
PowderDay9 wrote: Sun Apr 11, 2021 4:50 pm Need more info to give tailored advice.

What are your ages, jobs/incomes, and plans for children?

If you both are young and have similar education and careers, then there's not much benefit of a prenup. I still think you need to get on a similar page and discuss finances, children, life goals, etc. If you don't feel comfortable working through that now then you should wait to get engaged.
39 and 38. Similar incomes between $75-100k each. We'd like children if biology allows. That's how I feel about working through it before getting engaged, but I think she would like to discuss more detailed after getting engaged but before marriage.
The good thing is that you are getting married as real adults. That also is a challenge, because habits are more ingrained.

My spouse and I have gotten further (wealth-wise and happiness-wise) coming up with shared goals. The goals for this year are pretty set. The goals for 10 or 20 years from now are more fluid, but we talk about it now and then. What I am saying is that you don’t have to decide every nitpicks thing Today, but you will benefit if you agree on the big stuff. Compromise. Sometimes you get your wish list, sometimes she does. It’ll all get done eventually.

My advice is to keep the discussion going, without pressure of “we must agree next week, Tuesday”. Aim to understand her position and reasons/feelings about it all. One is not better if everyone is being responsible overall,..you’ll do fine. You can share the Bogle world at breakfast sometimes :wink:

And I wouldn’t do a prenup, especially if pro-prenup person above says not to...
PowderDay9
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Re: Prenuptial arrangements

Post by PowderDay9 »

throwaway1535 wrote: Sun Apr 11, 2021 6:00 pm
PowderDay9 wrote: Sun Apr 11, 2021 4:50 pm Need more info to give tailored advice.

What are your ages, jobs/incomes, and plans for children?

If you both are young and have similar education and careers, then there's not much benefit of a prenup. I still think you need to get on a similar page and discuss finances, children, life goals, etc. If you don't feel comfortable working through that now then you should wait to get engaged.
39 and 38. Similar incomes between $75-100k each. We'd like children if biology allows. That's how I feel about working through it before getting engaged, but I think she would like to discuss more detailed after getting engaged but before marriage.
I still think you should have the conversations before getting engaged but it sounds like she doesn't want to. If you propose and then the conversations don't go well, will you not go forward with getting married? How important are these things to you?

It's good that your ages, jobs and income are similar. I wouldn't bother with the prenup. You know your relationship the best though. You could keep your assets from prior to marriage separate for a few years but I'd probably combine them at some point. Eventually the 300k difference will be a much smaller portion of your combined net worth.
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throwaway1535
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Re: Prenuptial arrangements

Post by throwaway1535 »

celia wrote: Sun Apr 11, 2021 6:57 pm
throwaway1535 wrote: Sat Apr 10, 2021 5:34 pm I'm curious to hear how others have planned for an upcoming marriage. We've had a few preliminary discussions and they honestly haven't gone the greatest. Some of our differences:
-One prefers paying off the house while the other values more investments.
-One is more of a 30% of income saver while the other is closer to 15%.
-One is turned off by the idea of early retirement while the other isn't.
These seem relatively minor and it's great to find someone who is also pretty savvy with money and we get along great otherwise, but we'd both like to figure out how to have better financial discussions.
These are pretty good topics but what about discussing:
-How did each set of your parents handle money? (Debt vs savers, homeowners vs renters, moved a lot vs stable, SAHM or not). This is recomended to see where you each came from.

-What were your parents’ priorities in life?

-What would you each like to do if you alone won $5M in the lottery and weren’t married?

-How would you each like to spend vacations?

-How much would each of you spend on your kids’ education (not a dollar amount, but what would you be willing to sacrifice so they could at least get the education you have)?

-Why do each of you think you should have a pre-nup or not?
Those are great questions, thanks!
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throwaway1535
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Re: Prenuptial arrangements

Post by throwaway1535 »

PowderDay9 wrote: Sun Apr 11, 2021 7:08 pm
throwaway1535 wrote: Sun Apr 11, 2021 6:00 pm
PowderDay9 wrote: Sun Apr 11, 2021 4:50 pm Need more info to give tailored advice.

What are your ages, jobs/incomes, and plans for children?

If you both are young and have similar education and careers, then there's not much benefit of a prenup. I still think you need to get on a similar page and discuss finances, children, life goals, etc. If you don't feel comfortable working through that now then you should wait to get engaged.
39 and 38. Similar incomes between $75-100k each. We'd like children if biology allows. That's how I feel about working through it before getting engaged, but I think she would like to discuss more detailed after getting engaged but before marriage.
I still think you should have the conversations before getting engaged but it sounds like she doesn't want to. If you propose and then the conversations don't go well, will you not go forward with getting married? How important are these things to you?

It's good that your ages, jobs and income are similar. I wouldn't bother with the prenup. You know your relationship the best though. You could keep your assets from prior to marriage separate for a few years but I'd probably combine them at some point. Eventually the 300k difference will be a much smaller portion of your combined net worth.
I don't know if she's necessarily opposed, I think she was a bit taken aback at one point saying we weren't even engaged yet. It just needs to be a gradual process. One of our first money discussions got way too serious, too fast. I think if we come up with some groundrules and do it more regularly in small pieces, that might help.
Cruise
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Re: Prenuptial arrangements

Post by Cruise »

throwaway1535 wrote: Sun Apr 11, 2021 8:30 pm
PowderDay9 wrote: Sun Apr 11, 2021 7:08 pm
throwaway1535 wrote: Sun Apr 11, 2021 6:00 pm
PowderDay9 wrote: Sun Apr 11, 2021 4:50 pm Need more info to give tailored advice.

What are your ages, jobs/incomes, and plans for children?

If you both are young and have similar education and careers, then there's not much benefit of a prenup. I still think you need to get on a similar page and discuss finances, children, life goals, etc. If you don't feel comfortable working through that now then you should wait to get engaged.
39 and 38. Similar incomes between $75-100k each. We'd like children if biology allows. That's how I feel about working through it before getting engaged, but I think she would like to discuss more detailed after getting engaged but before marriage.
I still think you should have the conversations before getting engaged but it sounds like she doesn't want to. If you propose and then the conversations don't go well, will you not go forward with getting married? How important are these things to you?

It's good that your ages, jobs and income are similar. I wouldn't bother with the prenup. You know your relationship the best though. You could keep your assets from prior to marriage separate for a few years but I'd probably combine them at some point. Eventually the 300k difference will be a much smaller portion of your combined net worth.
I don't know if she's necessarily opposed, I think she was a bit taken aback at one point saying we weren't even engaged yet. It just needs to be a gradual process. One of our first money discussions got way too serious, too fast. I think if we come up with some groundrules and do it more regularly in small pieces, that might help.
Red Flag Warning. Hope I am wrong.
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Doom&Gloom
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Re: Prenuptial arrangements

Post by Doom&Gloom »

Cruise wrote: Sun Apr 11, 2021 8:40 pm
throwaway1535 wrote: Sun Apr 11, 2021 8:30 pm
PowderDay9 wrote: Sun Apr 11, 2021 7:08 pm
throwaway1535 wrote: Sun Apr 11, 2021 6:00 pm
PowderDay9 wrote: Sun Apr 11, 2021 4:50 pm Need more info to give tailored advice.

What are your ages, jobs/incomes, and plans for children?

If you both are young and have similar education and careers, then there's not much benefit of a prenup. I still think you need to get on a similar page and discuss finances, children, life goals, etc. If you don't feel comfortable working through that now then you should wait to get engaged.
39 and 38. Similar incomes between $75-100k each. We'd like children if biology allows. That's how I feel about working through it before getting engaged, but I think she would like to discuss more detailed after getting engaged but before marriage.
I still think you should have the conversations before getting engaged but it sounds like she doesn't want to. If you propose and then the conversations don't go well, will you not go forward with getting married? How important are these things to you?

It's good that your ages, jobs and income are similar. I wouldn't bother with the prenup. You know your relationship the best though. You could keep your assets from prior to marriage separate for a few years but I'd probably combine them at some point. Eventually the 300k difference will be a much smaller portion of your combined net worth.
I don't know if she's necessarily opposed, I think she was a bit taken aback at one point saying we weren't even engaged yet. It just needs to be a gradual process. One of our first money discussions got way too serious, too fast. I think if we come up with some groundrules and do it more regularly in small pieces, that might help.
Red Flag Warning. Hope I am wrong.
+1

OP, are you sure that you aren't getting a bit ahead of things here?
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Re: Prenuptial arrangements

Post by Grt2bOutdoors »

After reading through all the responses I can see you and your intended are not on the same page.
First, go for premarital counseling - usually they will give you a list of questions you both answer independently, then you go through them together. That's the time to talk. It will be money well spent, if it costs anything at all.

After you hash out your differences, and you still think a prenup is what you both want, each of you will need to visit their own independent attorney, but be prepared because a prenup can be thrown out in court, if you move out of state do you think the new state will honor it? If you have kids, do you think the prenup will matter? If your intended has to stop working, do you think it will matter? Given your amount of assets - if you do think or want to plan in the event of contested dissolution, consider that attorney fees are not inconsequential and will chew up quite a bit of joint/combined assets the longer the process draws out. Every phone call, letter or visit to the court is your money going to someone other than you or the other party. Or just take your assets now, cut it in half and say that plus any appreciation that goes with it may be what I may have to give up. The other thought if you were optimistic is, that plus all we accumulate together over our marriage is ours and in the odd chance we choose to go our separate ways, it will be equitably split.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Topic Author
throwaway1535
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Re: Prenuptial arrangements

Post by throwaway1535 »

Doom&Gloom wrote: Sun Apr 11, 2021 9:30 pm
Cruise wrote: Sun Apr 11, 2021 8:40 pm

Red Flag Warning. Hope I am wrong.
+1

OP, are you sure that you aren't getting a bit ahead of things here?
No, I'm actually sure I got ahead of things. That's why I came to the board for help. I'm struggling with how to get the financial discussion started to eventually be ready to get engaged. I really liked celia's questions as that seems like a good way to start.
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Re: Prenuptial arrangements

Post by LilyFleur »

illumination wrote: Sun Apr 11, 2021 4:34 pm You just need to get your own lawyers (it will need to happen anyway for most prenups to be upheld that you both had your own separate legal counsel) and craft the agreement in a way where in the event of a divorce, it would be no different legally than if a boyfriend/girlfriend broke up and moved out. Property that is in both of your names (like a mortgage) will get divided up, otherwise what in your name is yours, and vice versa. Figure out joint expenses, keep things like retirement plans separate. Something like a living trust probably makes sense for each of you.

I wouldn't get in the weeds with a legal arrangement about issues like how quickly a mortgage is paid off or when you want to retire. You can have those discussions later and I would presume those aren't "deal breaker" issues anyway.

But absolutely get a prenup, I have two close contacts that just went through this, one had a prenup and the divorce was very simple with almost no legal fighting because there just wasn't much to fight over financially. The other did not, and their divorce you could make a movie about, the "jump ball" nature of the assets in question was fuel to a nasty fire. The one big lesson the other person got from the whole experience is they were getting a prenup "next time".

In the one case, a person took a large distribution out of their family trust to make a big down payment on a home, that money ended up becoming the property of the spouse after the divorce as the house was split 50/50.

We never question getting fire insurance that has like a 1% probability, but for some reason a prenup is considered "weird" but the divorce rate is close to 50%. It's worth the initial "awkwardness" getting this agreement in place.
A friend had put inheritance money into the downpayment on the home purchased during the marriage, and she was able to get it back in the divorce through tracing where the money came from. She did not have a prenup.
Probably best to document everything you have before getting married.

I am planning on giving sizable down payments to each of my children. I will document it carefully just in case of future divorces.
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celia
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Re: Prenuptial arrangements

Post by celia »

If you haven’t met each other’s closest relatives, get going on that. (You know, a picture is worth a thousand words...). Hopefully you will be more understanding of each other after that.
Freetime76
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Re: Prenuptial arrangements

Post by Freetime76 »

Money-wise, well, this is the crux of it - hashing through “how are WE going to handle OUR finances?!?” A lot of that happens after marriage (counseis helpful, yet I n reality...you grow up, life changes, families age and parents need help...or who knows???), since all the decisions can’t be made in advance at whatever age you are. The key is: Can You Work Together? :shock: Compromise? If so, then you will, as a married couple, be able to navigate the finances together over the - hopefully many - decades to come.

Does she want this to change?: You’re legally not a WE yet: if you die, she does not get your social security legal benefits of marriage, she is not an automatic beneficiary in the eyes of the state, if you list her as your IRA beneficiary she can’t roll it to hers like a spouse, you are not each other’s next of kin for hospitals, which may only let family visit and certainly only family is a candidate to make medical decisions if needed and no POA.WE might decide to combine it all, build wealth through goals (hers, yours, ours, all agreed to jointly) or WE might decide to keep finances separate and jointly pay bills. That’s up to the two of you.
ETA: these items were key decision makers for me, because I could do without being married at the time...unforeseen to me how much better it’s been married than if we just stayed as we were :D

Relationship-wise, you’re on your own :D (whether to do counseling before getting engaged, why bother being married does she want to be married? or keep the status quo etc etc). I’ll just say that it’s really hard to see inside someone else’s head without asking them in a very supportive, curious and kind/loving way. If the two of you were of the same mind, then one of you is redundant, I’ve heard.

I’m just wondering about the approach, because, I can imagine it falling a bit flat :wink: if I have a long term commitment in my mind and a co-owned house...and this person hits me with “Bogleheads”, “prenup”, mentioning that my 1/3 is less than other’s 2/3 —> plus I “only” save 15% which is more than all of my friends...investing my precious future rental cash all in a go with by the way I’ve been thinking about engagement :wink:. Later, I Google “Bogleheads” and find that I will henceforth only be allowed to drive a 20+ year old Corolla, live in a small house, and shop at Walmart.
protagonist
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Re: Prenuptial arrangements

Post by protagonist »

illumination wrote: Sun Apr 11, 2021 4:34 pm

I wouldn't get in the weeds with a legal arrangement about issues like how quickly a mortgage is paid off or when you want to retire. You can have those discussions later and I would presume those aren't "deal breaker" issues anyway.

We never question getting fire insurance that has like a 1% probability, but for some reason a prenup is considered "weird" but the divorce rate is close to 50%. It's worth the initial "awkwardness" getting this agreement in place.
Interesting, illum... When I read the OP's description of their issues, the "early retirement" disagreement was the only one that I interpreted as being potentially serious (admittedly, probably way down the line).
Your analogy with fire insurance is a good one.
illumination
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Re: Prenuptial arrangements

Post by illumination »

LilyFleur wrote: Mon Apr 12, 2021 2:36 am
illumination wrote: Sun Apr 11, 2021 4:34 pm You just need to get your own lawyers (it will need to happen anyway for most prenups to be upheld that you both had your own separate legal counsel) and craft the agreement in a way where in the event of a divorce, it would be no different legally than if a boyfriend/girlfriend broke up and moved out. Property that is in both of your names (like a mortgage) will get divided up, otherwise what in your name is yours, and vice versa. Figure out joint expenses, keep things like retirement plans separate. Something like a living trust probably makes sense for each of you.

I wouldn't get in the weeds with a legal arrangement about issues like how quickly a mortgage is paid off or when you want to retire. You can have those discussions later and I would presume those aren't "deal breaker" issues anyway.

But absolutely get a prenup, I have two close contacts that just went through this, one had a prenup and the divorce was very simple with almost no legal fighting because there just wasn't much to fight over financially. The other did not, and their divorce you could make a movie about, the "jump ball" nature of the assets in question was fuel to a nasty fire. The one big lesson the other person got from the whole experience is they were getting a prenup "next time".

In the one case, a person took a large distribution out of their family trust to make a big down payment on a home, that money ended up becoming the property of the spouse after the divorce as the house was split 50/50.

We never question getting fire insurance that has like a 1% probability, but for some reason a prenup is considered "weird" but the divorce rate is close to 50%. It's worth the initial "awkwardness" getting this agreement in place.
A friend had put inheritance money into the downpayment on the home purchased during the marriage, and she was able to get it back in the divorce through tracing where the money came from. She did not have a prenup.
Probably best to document everything you have before getting married.

I am planning on giving sizable down payments to each of my children. I will document it carefully just in case of future divorces.

State laws treat things differently, and also it can just come down to the judge. FWIW, the person's situation I just referenced, it was basically an open and shut "textbook" case that it was community property and had to be split evenly because both their names were on the home and both and put money into the home. The wife though had made like a $700k down payment she had withdrawn out of her trust and the husband had only put in like $50k in mortgage payments. And it was not for lack of trying that this conclusion was reached that the home equity and appreciation had to be split.

Most estate attorneys will tell you once you take money out of a trust and it becomes commingled with a spouse's assets, it's in serious jeopardy . It can also be a problem when you do the reverse and you put community property into something like a trust.

Your friend that was able to "get it back", I don't know the details, it could have been a situation where the other party went along in exchange for something else in the divorce or a unique state law or sympathetic judge. But I wouldn't draw a lesson from it that "tracing" it is a good way to recoup something like that. If you want premarital assets protected and want to put it towards a home, there either needs to be some sort of contract/prenup drawn up or the home needs to be in a trust's name, etc. Definitely get an estate attorney to figure out how to protect it, "documenting" it on your end is not enough.
Marseille07
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Re: Prenuptial arrangements

Post by Marseille07 »

illumination wrote: Mon Apr 12, 2021 9:41 am State laws treat things differently, and also it can just come down to the judge. FWIW, the person's situation I just referenced, it was basically an open and shut "textbook" case that it was community property and had to be split evenly because both their names were on the home and both and put money into the home. The wife though had made like a $700k down payment she had withdrawn out of her trust and the husband had only put in like $50k in mortgage payments. And it was not for lack of trying that this conclusion was reached that the home equity and appreciation had to be split.

Most estate attorneys will tell you once you take money out of a trust and it becomes commingled with a spouse's assets, it's in serious jeopardy . It can also be a problem when you do the reverse and you put community property into something like a trust.

Your friend that was able to "get it back", I don't know the details, it could have been a situation where the other party went along in exchange for something else in the divorce or a unique state law or sympathetic judge. But I wouldn't draw a lesson from it that "tracing" it is a good way to recoup something like that. If you want premarital assets protected and want to put it towards a home, there either needs to be some sort of contract/prenup drawn up or the home needs to be in a trust's name, etc. Definitely get an estate attorney to figure out how to protect it, "documenting" it on your end is not enough.
My naive understanding is that whatever people agree on would go. In the case of 700k vs 50k, if the husband demands 50% of the house, it would get messy (the law would support this, unfortunately). But if he agrees to a 90/10 split, that's also fine.

At the end of the day, the crux of the issue is one party starts making demands on something they know it wasn't theirs.
H-Town
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Re: Prenuptial arrangements

Post by H-Town »

LilyFleur wrote: Mon Apr 12, 2021 2:36 am A friend had put inheritance money into the downpayment on the home purchased during the marriage, and she was able to get it back in the divorce through tracing where the money came from. She did not have a prenup.
Probably best to document everything you have before getting married.

I am planning on giving sizable down payments to each of my children. I will document it carefully just in case of future divorces.
It doesn't seem like that it would go down like what you described in community properties states.

If both parties are young and have zero assets, then prenup is unnecessary. But if both parties are older and have accumulated sizeable assets (and/or debts), prenup is a must-have. Not just for the event of divorce, but it's also a test to see if both parties are compatible financially. If not, there's no reason to get married.
illumination
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Re: Prenuptial arrangements

Post by illumination »

Marseille07 wrote: Mon Apr 12, 2021 10:21 am
illumination wrote: Mon Apr 12, 2021 9:41 am State laws treat things differently, and also it can just come down to the judge. FWIW, the person's situation I just referenced, it was basically an open and shut "textbook" case that it was community property and had to be split evenly because both their names were on the home and both and put money into the home. The wife though had made like a $700k down payment she had withdrawn out of her trust and the husband had only put in like $50k in mortgage payments. And it was not for lack of trying that this conclusion was reached that the home equity and appreciation had to be split.

Most estate attorneys will tell you once you take money out of a trust and it becomes commingled with a spouse's assets, it's in serious jeopardy . It can also be a problem when you do the reverse and you put community property into something like a trust.

Your friend that was able to "get it back", I don't know the details, it could have been a situation where the other party went along in exchange for something else in the divorce or a unique state law or sympathetic judge. But I wouldn't draw a lesson from it that "tracing" it is a good way to recoup something like that. If you want premarital assets protected and want to put it towards a home, there either needs to be some sort of contract/prenup drawn up or the home needs to be in a trust's name, etc. Definitely get an estate attorney to figure out how to protect it, "documenting" it on your end is not enough.
My naive understanding is that whatever people agree on would go. In the case of 700k vs 50k, if the husband demands 50% of the house, it would get messy (the law would support this, unfortunately). But if he agrees to a 90/10 split, that's also fine.

At the end of the day, the crux of the issue is one party starts making demands on something they know it wasn't theirs.

I just have a very different perspective and think that sort of reasoning would almost mean you don't ever need any sort of contracts at all because people will ultimately do what is right. Divorces just don't usually go down that way, each side thinks maximizing their take is what's "fair" and what they are owed.

But yes, in a divorce, one party can absolutely not demand something they are legally entitled to.
Marseille07
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Re: Prenuptial arrangements

Post by Marseille07 »

illumination wrote: Mon Apr 12, 2021 10:56 am I just have a very different perspective and think that sort of reasoning would almost mean you don't ever need any sort of contracts at all because people will ultimately do what is right. Divorces just don't usually go down that way, each side thinks maximizing their take is what's "fair" and what they are owed.

But yes, in a divorce, one party can absolutely not demand something they are legally entitled to.
We're in agreement. Obviously human decency goes out the window (if there was one) during the due process.
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LilyFleur
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Re: Prenuptial arrangements

Post by LilyFleur »

illumination wrote: Mon Apr 12, 2021 9:41 am
LilyFleur wrote: Mon Apr 12, 2021 2:36 am
illumination wrote: Sun Apr 11, 2021 4:34 pm You just need to get your own lawyers (it will need to happen anyway for most prenups to be upheld that you both had your own separate legal counsel) and craft the agreement in a way where in the event of a divorce, it would be no different legally than if a boyfriend/girlfriend broke up and moved out. Property that is in both of your names (like a mortgage) will get divided up, otherwise what in your name is yours, and vice versa. Figure out joint expenses, keep things like retirement plans separate. Something like a living trust probably makes sense for each of you.

I wouldn't get in the weeds with a legal arrangement about issues like how quickly a mortgage is paid off or when you want to retire. You can have those discussions later and I would presume those aren't "deal breaker" issues anyway.

But absolutely get a prenup, I have two close contacts that just went through this, one had a prenup and the divorce was very simple with almost no legal fighting because there just wasn't much to fight over financially. The other did not, and their divorce you could make a movie about, the "jump ball" nature of the assets in question was fuel to a nasty fire. The one big lesson the other person got from the whole experience is they were getting a prenup "next time".

In the one case, a person took a large distribution out of their family trust to make a big down payment on a home, that money ended up becoming the property of the spouse after the divorce as the house was split 50/50.

We never question getting fire insurance that has like a 1% probability, but for some reason a prenup is considered "weird" but the divorce rate is close to 50%. It's worth the initial "awkwardness" getting this agreement in place.
A friend had put inheritance money into the downpayment on the home purchased during the marriage, and she was able to get it back in the divorce through tracing where the money came from. She did not have a prenup.
Probably best to document everything you have before getting married.

I am planning on giving sizable down payments to each of my children. I will document it carefully just in case of future divorces.

State laws treat things differently, and also it can just come down to the judge. FWIW, the person's situation I just referenced, it was basically an open and shut "textbook" case that it was community property and had to be split evenly because both their names were on the home and both and put money into the home. The wife though had made like a $700k down payment she had withdrawn out of her trust and the husband had only put in like $50k in mortgage payments. And it was not for lack of trying that this conclusion was reached that the home equity and appreciation had to be split.

Most estate attorneys will tell you once you take money out of a trust and it becomes commingled with a spouse's assets, it's in serious jeopardy . It can also be a problem when you do the reverse and you put community property into something like a trust.

Your friend that was able to "get it back", I don't know the details, it could have been a situation where the other party went along in exchange for something else in the divorce or a unique state law or sympathetic judge. But I wouldn't draw a lesson from it that "tracing" it is a good way to recoup something like that. If you want premarital assets protected and want to put it towards a home, there either needs to be some sort of contract/prenup drawn up or the home needs to be in a trust's name, etc. Definitely get an estate attorney to figure out how to protect it, "documenting" it on your end is not enough.
Yes, my friend is in a community property state, as am I. A trust was not involved, but there was an inheritance in her name that she kept in her own account and dipped into it for the downpayment for the house. Both cases were difficult and went to court. I also traced an asset back three decades (my parents had documentation but not completely thorough documentation, and I was awarded the asset.) My attorney, a very experienced attorney married to a family law judge, actually used the word "traced."

After the really horrible divorce was over, I asked my divorce attorney about a prenup. The attorney was willing to write one for me, but said, "they don't always hold up in court."

I am not an attorney, but I am reporting actual statements from attorneys in the state of California.
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LilyFleur
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Re: Prenuptial arrangements

Post by LilyFleur »

illumination wrote: Mon Apr 12, 2021 10:56 am
Marseille07 wrote: Mon Apr 12, 2021 10:21 am
illumination wrote: Mon Apr 12, 2021 9:41 am State laws treat things differently, and also it can just come down to the judge. FWIW, the person's situation I just referenced, it was basically an open and shut "textbook" case that it was community property and had to be split evenly because both their names were on the home and both and put money into the home. The wife though had made like a $700k down payment she had withdrawn out of her trust and the husband had only put in like $50k in mortgage payments. And it was not for lack of trying that this conclusion was reached that the home equity and appreciation had to be split.

Most estate attorneys will tell you once you take money out of a trust and it becomes commingled with a spouse's assets, it's in serious jeopardy . It can also be a problem when you do the reverse and you put community property into something like a trust.

Your friend that was able to "get it back", I don't know the details, it could have been a situation where the other party went along in exchange for something else in the divorce or a unique state law or sympathetic judge. But I wouldn't draw a lesson from it that "tracing" it is a good way to recoup something like that. If you want premarital assets protected and want to put it towards a home, there either needs to be some sort of contract/prenup drawn up or the home needs to be in a trust's name, etc. Definitely get an estate attorney to figure out how to protect it, "documenting" it on your end is not enough.
My naive understanding is that whatever people agree on would go. In the case of 700k vs 50k, if the husband demands 50% of the house, it would get messy (the law would support this, unfortunately). But if he agrees to a 90/10 split, that's also fine.

At the end of the day, the crux of the issue is one party starts making demands on something they know it wasn't theirs.

I just have a very different perspective and think that sort of reasoning would almost mean you don't ever need any sort of contracts at all because people will ultimately do what is right. Divorces just don't usually go down that way, each side thinks maximizing their take is what's "fair" and what they are owed.

But yes, in a divorce, one party can absolutely not demand something they are legally entitled to.
They can and do ask for things they are not legally entitled to. Intractable parties drive divorce attorney fees sky high and ensure multiple trips to court. Unethical attorneys fan up their clients' anger and spend time on letters and claims that are futile, in order to drive up their bills. And in my state, the attorney charges hourly for prepping for court, the drive to court, waiting in court, and driving back to the office after court. It is horribly expensive. Many divorcees receive only what is legally theirs because a judge gave it to them.
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