Prenups: the pros and cons

An antenuptial contract, known colloquially as a prenuptial contract, or “prenup”, is a private agreement entered into between a couple who plan to get married. The purpose of the contract is to change some or all of the automatic financial values of marriage. There are various pros and cons to getting a prenup, which you will need to consider before making a decision that will have a great impact on your future.

The pros and cons of antenuptial contract depend on what type of contract you choose. If you choose not to sign a prenup, you will automatically be married in community of property. 

If you create a prenup, you will have to choose between the following two matrimonial property regimes:

1. Antenuptial contract out of community of property with accrual

Under this regime, each spouse states the value of their respective assets at the beginning of marriage. Thereafter, any assets are shared 50-50. One can state that specific assets be excluded from the accrual, for instance, inheritance and donations. 

Advantages:

  • The couple shares the increase in their assets accumulated during the marriage and the economically weaker spouse benefits. 
  • The spouses do not share their assets acquired before their marriage. In this way, the accrual system appeals to people who are already wealthy at the time of marriage.
  • During the course of the marriage, each spouse handles his/her estate at will. There is no complex joint or equal administration.

The spouses are not liable for each other’s debts. All that they share is their net assets. Therefore, if one spouse becomes insolvent (bankrupt), the other spouse is protected against creditors. 

Disadvantages:

  • The financially stronger spouse is required to share the assets that he/she acquired during the marriage.
  • If one spouse is the breadwinner, the other spouse will be financially dependent on them. 

2. Antenuptial contract out of community of property without accrual

  • Under this regime, assets acquired before or during the marriage stay separate throughout the course of the marriage. Assets are not shared, and each spouse has a separate estate.
  • This type of regime is usually used by those who have accumulated substantial assets prior to marriage and want to protect them. 

Advantages:

  • The divorce process for a prenup without accrual is financially quicker and simpler.
  • The financially and/or economically stronger spouse is not legally obligated to share his/her assets with the financially weaker spouse.
  • If one spouse becomes insolvent, creditors may not attach the assets of the other.
  • Each of the parties is still legally obliged to offer financial support to one another should one spouse be unable to support himself/herself. 

Disadvantages:

  • In the case of divorce or death, a spouse is entitled only to those assets that he/she has accrued in his/her name – should one spouse choose to stay at home, say, to raise children, that spouse would not be entitled to the assets accumulated by the other spouse.

There are also general pros and cons to getting a prenup, which you ought to consider regardless of which property regime you choose.

Pros of having a prenup:

  • A prenup can protect the inheritance rights of children and grandchildren from a previous marriage. 
  • A prenup puts financial expectations out for discussion before your wedding. 
  • A prenuptial marriage agreement does not indicate that a couple is bound to divorce. 
  • Prenuptial agreements can preserve family ties and inheritance. 
  • If you have your own business or professional practice, a prenup can protect that interest so that the business or practice is not divided and at risk of being taken over by your former spouse upon divorce
  • A prenup can limit the amount of spousal support that one spouse will have to pay the other upon divorce. 
  • If your partner won’t sign a prenup, it is probably be best to discover this before the wedding, or even the engagement.
  • In the event of a divorce, a prenup saves you from going through battles over assets and finances. 
  • The financial well-being of children from a previous marriage can be protected. 
  • A premarital agreement can address more than the financial aspects of marriage. It and can include any of the details of decision-making and responsibility sharing to which the two spouses agree in advance. 
  • A premarital agreement can protect the financial interests of older persons, persons who are entering into second or subsequent marriages, and persons with significant wealth. 
  • A prenup helps you to document which assets a spouse may want to give to children or other family members in the event of death. 

Cons of having a prenup:

  • Some people consider the making of a prenup as “planning the divorce” before “planning the wedding.”
  • They are unromantic and uncomfortable to discuss, and can cause serious tension in the relationship.
  • Prenups can make it appear that there is a lack of trust or long-term commitment between the partners.
  • In the “honeymoon” stage of a relationship, one spouse may agree to terms that are not in his or her best interests because s/he is “too in love” to worry about the financial aspects and can’t imagine the union coming to an untimely end.
  • A prenuptial agreement could create resentment between spouses.
  • Prenuptial marriage agreements can be set aside for failure to disclose all assets, or if there is evidence of fraud, duress, unfairness, or lack of representation at the time of signing the agreement. 
  • The agreement may require you to give up your right to inherit from your spouse’s estate when s/he dies. By law, you are entitled to a portion of the estate even if your spouse does not include such a provision in his/her will.
  • If you contribute to the continuing success and growth of your spouse’s business or professional practice by entertaining clients or taking care of the home, you may not be entitled to claim a share of the increase in value if you agree otherwise in a premarital agreement. Under the laws of many states, this increase in value would be considered divisible marital property.
  • A low- or non-wage-earning spouse may not be able to sustain the lifestyle that s/he has become used to during the marriage, if the agreement considerably limits the amount of spousal support to which that spouse is entitled.

See this related article: Registering an antenuptial contract in South Africa.