The Power of Marriage Agreements
There are many stereotypes about women siphoning off money from their husbands when their marriages end, but in reality, a 2016 article in the Atlantic claims that women see a 20% decline in income after a divorce. In fact, in that same article, the author argues that the person most benefited by an agreement is statistically likely to be a woman — maybe she’s a stay-at-home mom, or maybe she decided to put her partner’s career first in a move. Whatever the case, she’ll be better cared for in the event of a divorce if she has an agreement in place.
We’ve all read the eye-popping numbers thrown around about the amount of money celebrity spouses do or do not inherit in the event of a divorce, but marriage agreements can be a useful tool for everyday people, too. Marriage agreements are just contracts that detail how assets will be divided in the event of a divorce, so if you have assets you care about protecting, putting together an agreement is, at the very least, worth investigating.
As a family law practitioner, I see the power of having – or not having – an agreement in place all the time. When you have one, agreements can protect an inheritance, shield your spouse from debt, provide for pet ownership and care, and be instrumental in providing for out of court asset division if you get divorced. Agreements almost always make the process less public, less painful, and less costly.
Nobody wants to think about the fact that their marriage might not work out, but the reality is that marriage is hard work, and by putting an agreement in place, you’re going into it with your eyes wide open. You’re making sure that if you throw all of your effort at making your marriage work and it still fails, you have a plan in place that guarantees you’ll still care for each other.
At its best, marriage is wonderful. It is about two people loving and supporting each other. But marriage is also a legal status that can have very real, very measurable effects on your financial life. Think about it: Your wife gets a job across the country, so you resign from your partner-track position at a job you love. That has a real, measurable impact on your lifetime earning power. Even more dramatically, when kids enter the picture, your family elects to have a stay-at-home parent. You leave the workforce and your earning power stagnates. That, too, has very real impacts on your financial health. When a couple decides to put one career first, an agreement can be an excellent way to ensure the other partner isn’t punished for their sacrifice down the road.
Another group of people who should think seriously about marriage agreements are small business owners. If you build a business from scratch, even if your spouse does nothing at all to contribute, they are entitled to half of it. What’s worse, your business will have to go through a lengthy valuation process in the event of a divorce, which can be even more time consuming and frustrating than a tax audit. By having a marriage agreement in place, you can decide how you’d like to divide the asset of the business and avoid the lengthy and expensive process altogether.
At first blush, talking about the importance of forming a marriage agreement might seem as far from romance as you can get, but real love isn’t a Hollywood movie. Agreements force both partners to lay all of their cards on the table and to slow down and really think about the hard work they’re signing up for. By forming an agreement when you’re still in love, you are saying you care so much about your partner that you’re not willing to leave the way they’ll be cared for in the event of a divorce up to chance, and you’re willing to do the work now, on the front end, to make sure nobody has to suffer needlessly.