The Prenup Taboo Why It's Time to Change Our Mindset About Marital Insurance
00:00:00.000 | (upbeat music)
00:00:02.580 | - Let's talk about the conversation
00:00:07.640 | around money and your partner.
00:00:10.060 | We've already covered the emotional side of it
00:00:12.320 | in my conversation with Ramit,
00:00:14.080 | but I haven't had any conversation on this show ever
00:00:16.960 | about pre-nups and post-nups and that whole can of worms.
00:00:21.240 | And I know you have and have lots of opinions.
00:00:23.120 | So for anyone who's either in that situation,
00:00:26.160 | will be in it, regrets not having been in it,
00:00:30.120 | what advice do you have for people to think about?
00:00:32.560 | - Man, we need to stop making the pre-nup a big deal.
00:00:35.960 | That is my first and foremost soapbox on this topic
00:00:39.400 | is that pre-nups are one of the biggest remaining taboos,
00:00:43.880 | I feel, when it comes to money conversations.
00:00:46.900 | Because to just say the word, like people are like,
00:00:49.560 | cursed, how dare you get a pre-nup?
00:00:52.040 | Your marriage is gonna fail.
00:00:54.100 | You do not trust and love your spouse
00:00:56.320 | if you want a pre-nup.
00:00:58.120 | - All right, here's my multi-prong attack
00:01:00.680 | on people who are currently listening to this
00:01:02.560 | and feeling that way.
00:01:04.360 | First and foremost, as my pre-nup attorney said to me,
00:01:06.920 | because yes, I do indeed have a pre-nup,
00:01:09.720 | is that everyone has a pre-nup,
00:01:11.960 | it's just the default laws of your state.
00:01:14.000 | What a great reframe.
00:01:16.240 | So technically, there is a pre-nup in place for you
00:01:19.120 | if you didn't get one yourself,
00:01:20.320 | and it's just based on how your state
00:01:22.240 | would divide assets in the case of a divorce.
00:01:24.760 | All right, fair enough.
00:01:27.100 | You should look at those state laws
00:01:29.700 | prior to getting married to see if that feels fair to you
00:01:33.340 | and the ecosystem of your relationship.
00:01:35.160 | And if it doesn't, you should get a pre-nup,
00:01:37.780 | because that'll account for what actually feels fair to you
00:01:40.900 | within reason.
00:01:42.340 | You can't just do like anything you want in a pre-nup.
00:01:45.180 | There are rules and stipulations.
00:01:48.200 | But within reason, you can take back some level of control.
00:01:52.240 | The other thing is,
00:01:53.220 | I really just think of it as marital insurance.
00:01:56.340 | And I think of it that way because again,
00:01:58.740 | a lot of times people will say like,
00:02:00.040 | oh, if you get a pre-nup,
00:02:01.040 | it means that you don't love or trust your partner.
00:02:03.840 | Well, I don't have renter's insurance
00:02:05.240 | because I think that I'm gonna get burglarized.
00:02:07.560 | I don't have car insurance
00:02:09.760 | because I think I'm gonna get into an accident.
00:02:12.000 | I have those things just in case the bad thing does happen,
00:02:15.000 | then I'm protected.
00:02:16.320 | So again, I kind of think of pre-nups in a very similar way,
00:02:19.120 | that it is an insurance policy on my marriage.
00:02:21.840 | I didn't get married thinking,
00:02:23.840 | well, this could go sideways and we could get divorced.
00:02:26.440 | I got married thinking this is my person forever,
00:02:29.680 | but life is long.
00:02:31.120 | And if something happens
00:02:32.840 | and we're no longer happy being married,
00:02:35.400 | then I have an insurance policy
00:02:36.760 | that will make it much easier to get divorced.
00:02:39.280 | And we will have made decisions
00:02:41.640 | about what feels fair and equitable
00:02:43.400 | at a point where we're very much in love
00:02:45.880 | and we'll have been kind to each other.
00:02:48.080 | And it will save so much money on the cost of a divorce.
00:02:51.600 | Divorce can be so expensive.
00:02:54.440 | And also no one talks about that part.
00:02:57.080 | And then finally, for those of you listening
00:02:59.160 | who are thinking, well, I just never leave my spouse.
00:03:02.280 | Listen, people think that for myriad reasons.
00:03:04.360 | It could be religiously, societal pressure,
00:03:06.960 | cultural pressure, personal feelings.
00:03:09.240 | You just would never leave this person
00:03:10.520 | no matter what happened.
00:03:12.320 | Well, you can't control what they will do.
00:03:14.760 | They could leave you.
00:03:17.040 | And that's always really hard to hear.
00:03:19.040 | But again, to have a document in place
00:03:22.480 | that stipulates what feels fair to you is important.
00:03:26.640 | Because finally, everyone listening here
00:03:29.880 | would not sign a contract for a business agreement
00:03:34.880 | or anything in the business realm.
00:03:37.880 | You would never join a partnership with a friend
00:03:40.600 | without having a contract about what feels fair
00:03:44.920 | and deciding what would also happen
00:03:47.280 | if things were to go south.
00:03:48.960 | Why are we all signing this very legally binding agreement
00:03:53.640 | that has huge financial implications
00:03:55.720 | without reading the fine print?
00:03:57.480 | And that is one thing too
00:03:58.560 | that I think about a marriage license
00:04:00.000 | is that's one of the biggest financial decisions
00:04:02.280 | you might ever make in your life.
00:04:04.240 | Why are we not knowing the terms and conditions
00:04:06.720 | prior to signing?
00:04:08.080 | - One thing that never crossed my mind
00:04:09.280 | with what you just said was that,
00:04:11.880 | I have at least a few friends now
00:04:14.560 | that have gone through the process of divorce.
00:04:16.880 | And even when amicable, it is very expensive.
00:04:20.720 | And I've always just put prenups in the light of
00:04:25.720 | this is a thing to make sure that you protect money
00:04:29.800 | in a situation where one person has more
00:04:32.600 | or might have more or something.
00:04:33.960 | That's the idea.
00:04:35.960 | But is there a world where someone could say,
00:04:38.040 | "Look, I believe that if we ever get divorced,
00:04:40.520 | "we should split everything 50/50,
00:04:42.360 | "but we should still have a prenup
00:04:43.480 | "so that if it happens, it just is a simple process."
00:04:47.160 | In the way that an estate plan might avoid
00:04:49.840 | the messy process of probate,
00:04:52.280 | but it might not change,
00:04:54.000 | you could decide how things get affected.
00:04:56.680 | Could a prenup just be something that adheres
00:04:58.760 | to the same process as what you'd thought
00:05:02.360 | what the state would do,
00:05:03.320 | but just does it more efficiently
00:05:05.480 | and saves you on attorney fees?
00:05:07.880 | - I would talk to an attorney about that before.
00:05:10.640 | I'm gonna be like, "Yeah, absolutely."
00:05:12.200 | 'Cause again, so much varies by state.
00:05:14.840 | If you live in a community property state,
00:05:16.920 | your divorce might actually be easier
00:05:18.800 | if you're not gonna contest anything
00:05:20.160 | 'cause they're usually just like,
00:05:21.240 | "50/50, down the middle, let's go.
00:05:23.360 | "It doesn't matter why."
00:05:25.080 | So again, knowing the laws of the land
00:05:28.120 | could impact whether or not you need one
00:05:30.160 | in the first place, if it feels super fair,
00:05:32.040 | and you also can see a world
00:05:33.600 | where you can get through a divorce quick and easy
00:05:36.480 | with minimal amount of pain and suffering financially.
00:05:39.880 | 'Cause if that stuff drags out,
00:05:41.440 | it is so expensive.
00:05:43.360 | But the other part, I sometimes feel like
00:05:45.280 | it's a bit of a misconception
00:05:47.400 | that a prenup is just to protect the one person
00:05:49.800 | who brings in all of the assets.
00:05:52.360 | Yes, obviously, if you come from wealth
00:05:54.800 | or you've already created wealth,
00:05:56.480 | those are two key reasons that you would want a prenup.
00:05:59.120 | A third being if you have a child
00:06:00.880 | from a preexisting relationship,
00:06:03.120 | that's another good reason to have a prenup,
00:06:04.840 | to protect the financial interests of your child.
00:06:08.040 | But it also can be about
00:06:11.760 | what would happen to, let's say, retirement accounts.
00:06:14.400 | Those are often forgotten about in these conversations.
00:06:16.920 | So even if you haven't accumulated
00:06:18.960 | a bunch of assets going in,
00:06:21.040 | if you have one that you know has the potential
00:06:23.360 | to get pretty significant over, let's say,
00:06:25.760 | 10, 15, 20 years of a marriage,
00:06:28.520 | those are often some of the first assets
00:06:30.320 | to get completely gouged in a divorce.
00:06:33.000 | So even just having a prenup
00:06:34.480 | that might be as simple as
00:06:35.960 | we're protecting our retirement accounts,
00:06:37.920 | we each just have the right to our own retirement account,
00:06:40.280 | we don't have rights to each other,
00:06:42.440 | that might be something that saves you
00:06:44.040 | a ton of money in the future.
00:06:46.560 | Now, a prenup isn't cheap.
00:06:48.560 | I look at it as an upfront lump sum
00:06:51.120 | on an insurance policy.
00:06:52.960 | So again, that amount of money
00:06:55.040 | might not feel good to you for doing something
00:06:57.240 | just like exclusively protecting a retirement plan.
00:07:01.320 | But if we wanna talk post-nups,
00:07:03.840 | this also might be an opportunity
00:07:05.360 | to bring that up with a spouse
00:07:07.520 | and post-nups are a really hard sell
00:07:10.600 | if you have not previously had the prenup conversation.
00:07:13.920 | I actually know a couple of people
00:07:15.640 | who wanted to have a prenup,
00:07:17.160 | just kind of ran the clock down on getting it done
00:07:20.360 | and then got married and had a post-nup instead.
00:07:23.960 | That's an easier pitch.
00:07:25.960 | You know, if you're 10, 15 years into your marriage
00:07:28.160 | and all of a sudden you're like,
00:07:29.000 | "Oh, post-nup sounds like a great plan,"
00:07:31.520 | and you pitch that to your spouse,
00:07:33.520 | it might sound like you're preparing to divorce them.
00:07:35.560 | So it's a much harder sell to be like,
00:07:37.360 | "Let's have a post-nuptial agreement."
00:07:39.560 | - But I guess conceptually you can make these changes
00:07:41.480 | at any point in time, it sounds like.
00:07:43.280 | It doesn't have to be done before marriage.
00:07:45.240 | - You can.
00:07:46.080 | And honestly, a lot of prenups should, again,
00:07:49.400 | like all the documents we've been talking about already,
00:07:52.400 | you should check in on that from time to time
00:07:54.520 | just in the sense of,
00:07:55.560 | has something big shifted in your marriage?
00:07:59.760 | So if you had outlined something in the prenup
00:08:02.280 | that now no longer feels fair
00:08:03.880 | based on the current ecosystem of your relationship,
00:08:06.640 | it might be time for a post-nup.
00:08:08.440 | And that could be something like,
00:08:09.920 | hey, if the two of you waived alimony in your prenup,
00:08:13.560 | but you're 10 years in, you've had two kids,
00:08:16.400 | and one of you has left the workforce
00:08:17.960 | for an extended period of time,
00:08:19.520 | that doesn't feel so fair anymore
00:08:21.320 | that you waived alimony in the prenup.
00:08:23.320 | So it might warrant having a post-nup
00:08:25.720 | to compensate for that.
00:08:27.400 | Or maybe you had kids and now you feel like the finances
00:08:30.760 | are a little bit of a different conversation,
00:08:32.840 | or maybe somebody, Bill Perkins style,
00:08:34.920 | received a lump sum inheritance early,
00:08:37.360 | and you bought property with it,
00:08:38.800 | and you wanna have a post-nup that accounts for
00:08:41.240 | who has rights to that property in the case of a divorce.
00:08:44.280 | - I know some people whose parents have asked
00:08:46.680 | to set up a post-nup as part of pre-inheritance.
00:08:50.680 | But a situation that you just alluded to
00:08:52.560 | that I thought was something that
00:08:54.600 | I'd never really thought about a prenup in this perspective
00:08:57.360 | was someone, one of the spouses
00:08:59.480 | was going to leave the workforce
00:09:00.600 | to take care of kids full time.
00:09:02.520 | And that would, in the future,
00:09:05.480 | kind of hinder their ability to earn income, right?
00:09:08.000 | They'd be out of the workforce maybe five, 10 years,
00:09:10.320 | they would be out of their career track.
00:09:12.320 | And so at that point in time,
00:09:14.320 | they actually talked about,
00:09:15.920 | can we set up something different?
00:09:17.720 | Because my ability, were we to get divorced,
00:09:20.400 | to go get a job is different going forward than it is now.
00:09:23.280 | So that was a point in time where someone brought that up,
00:09:26.360 | where it felt a little more natural
00:09:28.480 | than just out of the blue.
00:09:31.120 | - I haven't thought or done any of this stuff.
00:09:33.320 | Just, you know, we've never crossed our minds.
00:09:35.920 | And now, you know, it's something,
00:09:37.720 | I don't even know how I'm gonna think about it.
00:09:39.280 | Like you just threw this at me,
00:09:41.040 | like you're crazy to have not done something.
00:09:43.240 | I respect your opinion and I haven't done it.
00:09:45.760 | And I'm still have this like weird undertone of like,
00:09:48.600 | why would I do it?
00:09:49.440 | That seems crazy.
00:09:50.280 | I trust, you know, like,
00:09:51.840 | so it's just so funny. - I get it.
00:09:53.200 | - I'm trying to have this rational conversation
00:09:54.960 | and those emotions, I still see them.
00:09:57.200 | - Oh, listen, I have,
00:09:59.480 | I'm gonna say 85% of people react to this soapbox
00:10:03.840 | that I have in that way.
00:10:06.040 | You know, even if they see from like a very rational side
00:10:09.320 | of things that it makes a lot of sense,
00:10:10.840 | a lot of people still feel, yeah, it's not romantic.
00:10:14.600 | I get it.
00:10:15.440 | There's nothing about that process that is romantic.
00:10:19.120 | But even if you're not gonna sign on the dotted line,
00:10:22.400 | to have the conversations that are required of you
00:10:25.680 | when going through the prenup process,
00:10:27.800 | that is some of the best pre-marriage conversations
00:10:31.160 | that I could ever recommend somebody having.
00:10:33.080 | And even if you're not going to get married,
00:10:35.000 | but if you're in a long-term committed relationship,
00:10:37.360 | it is such helpful conversation to be having,
00:10:41.080 | 'cause it really digs into not only how each of you
00:10:43.560 | react to money, let me tell you,
00:10:45.720 | you'll be surprised what triggers you
00:10:47.240 | during the prenup process.
00:10:48.480 | You know, you might be like,
00:10:49.360 | wow, I did not expect to react that way to something,
00:10:52.200 | but you will.
00:10:54.360 | And it also gets into how each of you
00:10:56.600 | personally feels about money,
00:10:57.680 | how you wanna handle money in a marriage,
00:10:59.360 | what feels fair to you.
00:11:00.680 | And then, yeah, if certain things come up,
00:11:03.120 | what feels fair to you at that time?
00:11:05.560 | And again, that's gonna be an evolving conversation.
00:11:08.520 | What felt fair six years ago
00:11:10.560 | when my husband and I were working on this
00:11:12.120 | probably feels a little different than right now
00:11:14.600 | at this phase in our relationship and marriage.
00:11:17.320 | - Yeah, and I think the last thing I'll say on this
00:11:19.600 | is that if you had asked me a month ago,
00:11:22.640 | so I just, I binged part of Ramit's show,
00:11:26.000 | and I've listened to his podcast,
00:11:28.600 | it still amazes me,
00:11:30.600 | just given the way that my wife and I manage our finances,
00:11:33.200 | that there are couples where you can get married
00:11:35.760 | and find out later that one spouse has a lot of debt
00:11:39.080 | and the other one doesn't.
00:11:40.440 | It seems crazy that you could sign a contract
00:11:44.120 | that would require you to be equally liable
00:11:46.880 | for a financial situation in some ways
00:11:49.680 | without actually understanding that situation
00:11:53.120 | before going in.
00:11:54.480 | I know you have a few things to say here,
00:11:56.080 | so I'm just gonna leave that as an open door
00:11:58.480 | when it comes to if either spouse has student loans
00:12:02.640 | or credit card debt or anything like that,
00:12:04.560 | does that play into this situation and change anything?
00:12:07.800 | - It should.
00:12:09.360 | If your spouse has debt, first of all,
00:12:12.480 | again, know the rules of your state.
00:12:14.760 | Is there any possibility for you
00:12:16.600 | to become legally obligated to that debt
00:12:19.620 | as a byproduct of getting married?
00:12:21.760 | Oftentimes the answer is no,
00:12:23.960 | unless you accumulated it together in the marriage
00:12:26.960 | or they accumulated it unbeknownst to you in the marriage,
00:12:30.960 | it still could impact you,
00:12:32.360 | so that's an important thing to know.
00:12:34.200 | But student loans obviously being a big thing for millennials
00:12:37.880 | outside of you co-signing on it,
00:12:40.600 | typically you are not legally connected to that debt
00:12:44.760 | in the case of a divorce.
00:12:46.200 | Now, what happens if you get married
00:12:50.120 | and you graciously, aggressively help your spouse
00:12:53.640 | pay off the student loans
00:12:55.880 | and then your marriage goes down the tubes
00:12:57.760 | a year or two later?
00:12:59.800 | I've seen this on Reddit a few times.
00:13:01.640 | (laughs)
00:13:03.360 | And all of a sudden, you had paid tens of thousands of
00:13:06.760 | dollars to help your spouse get out of debt
00:13:08.720 | and they're like, "Okay, I'm out."
00:13:11.440 | A prenup actually could solve for that problem.
00:13:13.620 | You could, there's all sorts of different strategies
00:13:16.100 | that you could put in,
00:13:17.040 | but you could have kind of like a vesting period
00:13:19.720 | for what they would owe you back
00:13:21.960 | if you came in and paid off a huge amount of their debt
00:13:24.920 | and then the marriage dissolved
00:13:26.320 | in a certain period of time.
00:13:28.320 | Again, is that a romantic thing to be talking about
00:13:31.360 | when you're planning your wedding?
00:13:32.680 | Absolutely not.
00:13:34.440 | Does it sometimes sound like you don't trust your partner?
00:13:36.980 | It might, but that is an important conversation to be having
00:13:41.120 | 'cause again, you just don't know what could happen.
00:13:44.520 | And particularly if you have worked very hard
00:13:46.720 | to set up a solid financial life for yourself,
00:13:50.200 | you don't want something like a divorce
00:13:52.120 | to completely undo all of that work.
00:13:54.520 | But it sounds like even if you're four or five years
00:13:56.040 | into a marriage and you're like,
00:13:57.020 | "Let's use our savings to pay off your student loans,"
00:14:00.340 | that could be a time where you say,
00:14:01.520 | "Well, could we set up a very specific post-up
00:14:03.840 | for this situation?"
00:14:05.240 | And that, the thing that I never really considered is like,
00:14:07.640 | it doesn't necessarily have to change
00:14:10.640 | some of the default state rules, right?
00:14:13.300 | You can get a post-up, I assume, that says,
00:14:15.920 | "Hey, you're gonna have to pay back the student loans."
00:14:18.080 | But we still split all of our assets.
00:14:20.280 | You don't have to rewrite everything
00:14:23.440 | and kind of do it in a way that's like protecting your money
00:14:26.900 | and make sure no one ever gets it.
00:14:28.520 | It doesn't have to have all those stipulations.
00:14:30.560 | And it doesn't need to be adversarial truly at any point.
00:14:34.280 | That is the one beauty I see of doing it
00:14:37.380 | at what hopefully is sort of like a peak time
00:14:39.760 | of your love bubble when you're engaged
00:14:41.600 | and you're getting excited to be married
00:14:43.040 | and start this life together,
00:14:44.740 | that you will be kind and fair and generous with each other
00:14:47.320 | 'cause there's a reason you're marrying this person.
00:14:49.820 | And also depending on work situations,
00:14:53.200 | that person might've helped you
00:14:54.760 | get where you are financially.
00:14:56.880 | Like I know a lot of my career is owed to my husband
00:15:00.340 | handling a lot of things behind the scenes
00:15:02.640 | and being supportive and doing a lot for my household too.
00:15:06.120 | So yeah, he deserves some of the money.