Suze Orman Money Matters

In a nation that seems to be split down the middle on so many issues, it amazes me how united we all are when it comes to prenuptial agreements. By some estimates, anywhere from 90 to 99 percent of married couples in the United States do not have a prenup.

I think that's a huge mistake.

Let's do a bit of math, my friends. The national divorce rate is roughly 50 percent. Think about that: literally every other marriage in America doesn't make it. Now, however much you adore and respect your honey right now, don't you think most of the folks in the failed 50 percent must have felt pretty much the same way you do, back when they tied the knot? Statistics don't control us, but they do show where risk lies. Assuming total immunity in the face of 50/50 odds is acting way too moonstruck, if you ask me.

And that being true, here's what else you need to realize: Divorce, simply as an emotional blow, is awful enough already. If you split without a prenup, in the midst of this wrenching experience you'll be forced to spend a whole lot of extra time, effort, and money to have the divorce lawyers and divorce courts in your state settle the financial aspects of your split in the adversarial style for which they are famous. Having a prenup that spells out the wishes of both of you is going to make the whole ordeal go much, much easier and faster for everybody.

Isn't It Unromantic?

I know, I know, there's the icky factor. So many of you refuse to even consider a prenup because you see it as a sign of distrust that will sabotage the relationship. I disagree. I think working together to acknowledge each other's wishes -- and financial position prior to the marriage -- is a sign of incredible love and respect. And hey, let's be practical. Not too many of us are getting married when we're 20 anymore. We're getting married later in life, when we have already accumulated a whole bunch of assets, from homes to retirement accounts. Or we are remarrying, and bringing our assets and children from prior relationships into the new mix. Those assets, and especially those children, need protecting.

When you get down to it, that's all a prenup is: protection for one of the biggest and most involved "what ifs" in life. It does not say you love each other less, or that your marriage will be somehow tainted. It has zero impact on your marriage. All the prenup does is protect both of you if -- see, there's the big "if" -- the marriage ultimately doesn't last. It kicks in if, and only if, you decide to split. So I don't see how it sucks the romance out of the relationship.

The Truest Sign of Financial Intimacy
In addition to the emotional and physical bond we form with our partners, I absolutely believe you also need to have financial intimacy -- that is to say, a unified approach to dealing with money matters. And it all starts with a prenuptial agreement. Let's run through a few scenarios where a prenup really helps:

• You or your partner has a load of credit card debt. Typically, only debt that is incurred during a marriage is considered "joint" debt that you are both on the hook for. But a prenup can make it abundantly clear that the person "marrying" the debt will have no obligation to pay any debt the partner incurred prior to the marriage. In some states, you can also stipulate in the prenup that debts incurred during the marriage in the name of only one person will not be the responsibility of the other partner. If you love someone, but are a little nervous about their credit card habits, this can be a way to allay your fears, especially during the early years of the marriage.
• You have children from a previous marriage and want to make sure they inherit the assets you accrued prior to your second marriage. For example, you own a home, solely in your name, that you purchased with assets from your first marriage. You might assume your kids would automatically get that house outright, but in fact state law could stipulate that your new spouse inherit a portion of the home if you die first. In your prenup, however -- along with the all-important Living Revocable Trust -- you can lay out precisely how you want your assets distributed so that your children will be protected after you're gone.
• You possess valuable and/or sentimentally important personal assets obtained before the marriage. Say your grandparents left you and your sister equal shares of the family summer home on the lake. When you marry, your spouse will have a claim to that asset. Unless, of course, you spell out in a prenup that the asset is to remain in your name only.
• You own a business, or are part of a family business. The same concept applies here as with the other personal assets above. The business has been in the family for 40 years and a prenup can remove or limit your spouse's claim to any portion of the value of the business if you split.
  
  Lawyer Up

Prenups are one area where you absolutely need a lawyer to draw up the document. Actually, you need two lawyers. One for you, and one for your honey. For the prenup to hold up in court, some states actually require proof that you both had independent counsel when putting it together. Even if it's not a rule in your state, I still think each of you each should get your own attorney. You want to make sure someone is truly looking out for your -- and only your -- best interests. Besides, if you have any questions or concerns about the agreement, it's easier to have your own lawyer who can represent those concerns for you. Also, make sure you take time to list in writing every asset that you currently have. Don't leave anything to chance.

Depending on your situation, it could cost each of you a few thousand dollars in fees to draft and execute your prenup. I know spending $2,000 or so doesn't make anybody feel too great, but please think about the value -- financial and sentimental -- of every asset you are protecting in the document.

Before you head off to your respective lawyers, you'll want to sit down as a couple and create an outline of the issues and assets you want addressed in your agreement. I recommend having this conversation before you are even engaged. But if that's not gonna happen, I want you to get to work as soon after the engagement as possible. The ideal scenario is to have the prenup finished months before the actual wedding. You want the lead-up to the wedding to be all romance and fun, right? Then get the work out of the way. It's even important to do so from a legal standpoint. Any prenup that is signed on the way to the chapel could run into trouble in the courtroom. One party can easily claim they were pressured to sign it under duress, or under the influence of wedding stress! It can make a big difference down the line if the court sees that you and your partner both made changes to the prenup as it was being drawn up; it's a sign that you both were actively involved in the process and knew exactly what was going on.

You both better come clean, too; if either party does not fully disclose all their assets and debts, the entire document can be thrown out by a judge as unenforceable. Basically you need to be able to prove that both you and your partner fully understood the extent of each other's assets and debts at the time you created the prenup.

Once you hash out the agreement, you, your partner, and both lawyers need to sign the document. In some states you'll need to have your signatures notarized.

It's important to understand that the rules and regulations for what can and cannot be included in a prenup depend on state law. What flies in one state might not work in another. So if you end up moving, please have a lawyer in your new home state review the document and make any necessary changes. And for those of you who live in a community property state -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin -- you can still use a prenup. Whatever is in the prenup will supersede the typical 50/50 split of community property.

Renewing your Prenup Vows
Just like any form of insurance, you should review your prenup from time to time. I'd recommend every five years or so. The point, obviously, is to make sure it continues to express the wishes of both of you as your financial situation changes. Ideally, your original document will factor in many of the likely changes as your marriage and your finances evolve, but if you need to, by all means, seek out lawyers to amend your agreement. Again, it is not an indication of distrust in the marriage. It is a powerful sign that you both want to protect each other in the event things ever do take a wrong turn. Until the divorce rate falls to, say, under five percent, I think prenups are the smartest engagement gift you can give yourself.

And by the way, for those of you who are not the marrying types, cohabitation agreements also exist and are something you should have. The legal situations arising from cohabitation are addressed in some state legal codes as "common-law marriage" -- which should tell you that things can get much stickier than you might think. These documents work just like prenups, allowing you and your partner to lay out clearly what is shared and what is separate in terms of your assets and liabilities.