You are here:

Insights

Marriage… or Merger

June brides, summer weddings, endless rounds of parties: the time is upon us. A $50-billion-plus wedding industry has mushroomed to ensure that individuals, supported by their families and friends, celebrate and participate in an event that expands beyond a day or weekend into a full season of activity. But there can be an unwelcome twist in the months of planning that lead up to the special day. For young couples in love, few words conjure up as many emotions as those two straightforward words: prenuptial agreement. They find themselves asking, “is this a marriage, . . . or a merger?”

Young people have heard about “pre-nups” for as long as they can remember, and popular culture has reinforced their consciousness of the phrase (as do the occasional nightmare stories of “friends”). The result is that “pre-nup” has become part of the bride and groom’s thoughts about marriage from the moment they start contemplating a union. And now, a boardroom is filled with suit-clad professionals and two twenty-somethings who were just trying to plan one of the happiest days of their lives. A time of joyful anticipation has become one of confusion and distress. What’s wrong with that picture? Well…everything.

Most couples assume that the process of reaching a prenuptial agreement is about money and power instead of fairness and communication. In our experience, it doesn’t have to be this way. Ensuring that it’s not requires affection, respect, candid conversation and planning. There may be uncomfortable moments when different perspectives arise, but the communication process that leads to a successful pre-nup can strengthen the couple’s bond and set minds at ease on both sides of the aisle.

Who Needs a Pre-nup?

And the vision of that handsome young couple in love? Hold that thought for a minute and let’s not forget about a glowing middle-aged couple caught up in the joy of a mid-life romance or those in the winter of their lives who have the great fortune to find a beloved late-life companion. There are complex realities – including geographical distance and cultural and financial differences – that arise when two people discover that they are better together than apart, and it is an act of love and respect to consider all the ramifications of their life together. Therefore, as a rule of thumb, a pre-nup is called for when any couple (or their families) wants to create a higher level of predictability in the event something unexpected occurs.

The Pre-nup as a Process

I like to think about pre-nuptial agreements as a process rather than a document. Moving through the stages of an agreement and talking clearly and openly about the concerns and goals of the participants is just as important as the agreement itself. Attorneys should be chosen for both parties, but they should be chosen in part for their civility and ability to express the interests of their client precisely and humanely.

Attorneys and other advisers should be the most helpful people in the room, but this happens only if they collaborate and work together towards a fair and equitable arrangement for both parties. The “given” that should open every conversation is that the marriage will be long, successful and enduring, but the conversation should also come with the acknowledgement that the unexpected can happen. Advisors should be realists, not pessimists.

The Process: Talk About It

The first and critically important step is a conversation about what wealth means to each partner. Is it a vehicle with which to secure a particular way of living? Comfortably? Luxuriously? To signal status? Is money more than a vehicle? Is it a way to “keep score,” a way to build and grow something lasting, a way to change society? Is it a way to measure success in life? Are both parties philanthropic? Neither? How will you make financial decisions together? What if you disagree? It’s good to talk about family backgrounds—who handled finances when each of you was growing up? How much did you know about the family’s cash flow and household bills? What did you learn from that? Couples often think they’ve had these conversations, but find that they are very different when a third party leads them through it.

The Process: Record It

Anything that goes without saying should usually be said: each partner should provide the other a complete list of assets and liabilities that the individual brings into the marriage. Attorneys and financial advisers often take charge of preparing these lists, but the couple should review and discuss them. Talk about any recurring expenses that support either party’s needs or interests. Even if each partner is fully bankrolling his or her own amateur racing, hang-gliding, sailing, yachting, horses, mountain climbing, travel, cars, shopping or other expensive activities that do not represent investments, those can often create tension in a household striving towards the goal of becoming a family.

It’s also helpful to talk about each person’s expectations around education, vacations, holidays and involvement of the larger family circles in the life of the couple. Will the couple provide vacations, gifts or general support for either party’s parents? Or receive them? What about siblings? In the case of more mature couples, what about each set of children or grandchildren?

Set Goals—For the Marriage and the Pre-nup

If we were honest with each other, we would acknowledge that people enter into marriages for a wide variety of reasons. Young people usually have the primary goal of building a life together, including a safe and loving home for children. The marriage (and pre-nup) goals for such a couple might include securing the welfare of the hoped-for children, protecting the assets and earning power each party brings to the marriage. Another might include preserving the financial well-being of the mother should the couple anticipate her leaving the workforce for a period of time to rear the children and run the family’s households.

For a middle-aged couple with children, goals would almost invariably focus on protecting and providing for the welfare of each party’s children while also ensuring a foundation for the happy companionship each finds in mid-life marriage. For older couples, the goal of a pre-nup might be entirely focused on establishing the independence of each party’s asset base so that philanthropic commitments and interests or the needs of grown children and grandchildren can be met. In some situations, a goal of a pre-nup may specifically ensure that a particular family member has no claim on the assets of the couple. And, although some difficult and painful family issues may be uncovered—or admitted—in the discussions around a pre-nup, those issues represent a reality that the couple will need to either manage at this stage or at some point in the future.

Establish a Reasonable Timeline

The more complex a couple’s financial situation, the longer the discussion of the pre-nup will likely take. Be realistic and deliberate about scheduling conferences. Organizing a couple’s financial welfare for the rest of their lives should take longer than choosing a china pattern or a honeymoon trip. Ideally, once the excitement of the wedding proposal has been communicated to family and friends, normal discussions about the pre-nup should begin right along with the wedding planning. Depending on the length of the engagement, the pre-nup should ideally be completed and signed a month or more before the wedding date. Working towards that deadline will dictate the pace of information gathering, discussions and document production. The end goal should be a document that both principals feel is fair, represents their interests and protects them. It should be a document worthy of a glass of champagne and a toast to the prospective marriage.

There may be times when progress toward the final agreement feels mechanical and legalistic. Marriage, after all, originated not as the romantic union idealized in late 19th century popular culture, but as a legal construct sanctioned by the Church, Temple and state as a way of joining families, building wealth and, perhaps most importantly, ensuring the preservation and well-being of children. Inevitably, the language embedded in the documentation of a couple’s agreement is somewhat mechanical and legalistic. That, like many elements of effective wealth management, “goes with the territory.” Under normal and less emotional set of circumstances, most couples would strive to be responsible stewards of their own or their family’s wealth. But a wedding is by no means “normal” circumstances! Emotions run high, and not only those of the happy pair.

Although individuals entering a marriage may understand intellectually that a successful prenuptial agreement represents responsible stewardship, popular culture suggests that if true love and trust are present, no other understanding is necessary. But when two people marry, they usually bring their families and histories with them. When one or both of them come from families of wealth, the complexities can expand exponentially.

So, marriage or merger? Well, both. If you consider in a positive light the metaphor of a business merger, you might think in terms of successfully combining cultures, of using all assets to best advantage and retaining the best of what each family brings. Isn’t that what we want for a successful marriage? Marriage and merger—and as little ambiguity as possible about how some basic tools of life will be handled—may be the best recipe for the success and happiness of those you love.