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Thanks for coming back for the latest edition of Planning for your Purpose; Telos Financial’s blog where I discuss different topics related to financial planning. Dennis LaVoy, CFP®, CLU® is Detroit’s CERTIFIED FINANCIAL PLANNER™ Professional serving clients throughout southeast Michigan as well as across the country.

The purpose of the blog is to introduce financial planning concepts and questions I receive from clients that I believe are important. I want to start discussions about that will educate, benefit, and improve your financial life. Ultimately, to help you focus on your telos!

A prenup is a legal agreement, so we classify it under estate planning. Remember, I’m not an attorney and this isn’t legal advice, just meant to help provide information. While it isn’t related to death, it is something that comes into play in a situation that’s probably not well planned and may or may not be favorable for one or both parties. I think prenuptial agreements are one of the more under-utilized planning documents. I think they should have a much larger role in planning and they should be an agreeable among parties who are willing to have the hard conversations.

A prenup is a document that sets out in advance how property would be split in a divorce. Like much other estate planning, discussing this is difficult. You can imagine, you’re newly engaged to be married, in love, everything is all rainbows and unicorns, then your fiancé drops a legal document on you, not exactly a getting in the mood kinda discussion. I get it. It’s not sexy. None of estate planning is.

I think there are a few truths about this that hopefully will convince you it’s worthwhile.

First, marriage (in my culture) is a personal decision you make about someone you love (obviously, there are other cultures that view this differently). But, it is also a legal and business decision. There may be name changes and you’re probably combining finances either wholly or at least to some degree.A prenuptial agreement is not about the personal aspects, it’s about the business portion of the marriage. When you buy a car or house, open a bank account, any major legal or financial decision, there are contracts involved to protect both parties. This is no different. You and your partner should have a contract on how you are going in and how you would go out if it ever came to that.

Second, it requires you to have that difficult conversation with your fiancé about finances. I’m sure you’re aware, but something like 50% of marriages in our country end in divorce and one of the main causes of arguments in our country that lead to divorce is financially related. By opening this door early in the relationship (or at least before legally making it permanent) you are having a hard discussion which will help ease future hard discussions. It will help you have more open communication and a stronger relationship if you’ve never discussed these areas.

Next, it’s a reality check; honesty and values will be on display. This will give you and your partner a chance to compare values and see where you stand. Do you feel that society is too materialistic and shallow? Does your partner want to keep up with the Whosits? Time to have these conversations.

Part of the hard discussion is disclosure. Have you and your partner been honest about everything? Have you shared your feelings about the other’s position? If you have assets or debts, you should be able to have a realistic conversation with your partner about them and how they will be handled going forward. You should also be able to have the same conversation about your expectations for assets in the marriage and what you would expect if it doesn’t work out. From a business lens, I’ve seen many businesses fail and relationships dissolve due to dishonesty and poor communication. This is no different.

Last, a prenuptial agreement could save you money. It will probably be cheaper than divorce. Think of it as a type of insurance policy. Regardless of who has more stuff, makes more cheddar, or whatever differences there are, you should be able to have a realistic discussion about where you stand today. Whether you’re in love or not, if you’re getting married, you should at least like each other and have good wishes for one another.

So, before the nuptials, it’s a good time to come to a mutual agreement that says, listen, if things don’t work out for whatever reason, I wish you no ill will. I may not want to ever see you again, but you can take your marbles and go and I’ll do the same. If you are in a relationship and you are wronged, you’ll be mad and may want to take everything you can out of spite. Who’s the real winner in that situation? The attorneys. Nothing against attorneys, I have many attorney friends and they are wonderful. But when you are emotionally compromised, you shouldn’t be making major financial and life decisions, for example, like how far to chase a divorce or how hard to fight, how much to spend, etc. With a prenup, it’s all laid out. Still get an attorney to interpret the document, but you’ll save LOTS in time missed fighting in court.

In business school, my business law teacher would frequently talk about money. How much he made, how much he lost in choosing bad stocks, it was all in jest and he was actually funny. I think he got serious when he’d tell the story of what his answer was to people who asked him where his biggest investment was, he always said divorces.

The key consideration of this point is you are truly, madly, and deeply in love when you’re getting married. Having these difficult discussions and coming to a fair and reasonable agreement JUST IN CASE of separation will be easier than ever at this point, as long as you have the ability to communicate. Yes, if you get divorced, it may be amicable, but it may not be. If you end up hating each other, it’s going to be much more difficult to agree on anything, so agree on terms and conditions upfront. Spending a little now on this document may save you a lot in the future in a contentious divorce.

Want to talk more about financial planning? Call 734-468-3050 today for a free consultation with CERTIFIED FINANCIAL PLANNER™ Professional Dennis LaVoy or email [email protected] to schedule a free appointment to talk it through.

Telos Financial is Ann Arbor’s financial advisor for Young Professionals. That includes Millennials, Xennials, Generation Xers, & anyone who is still saving for retirement. Telos is a fee based, holistic financial planning firm located in Plymouth, Michigan founded to help young professionals and families. CERTIFIED FINANCIAL PLANNER™ Professional Dennis LaVoy, CFP®, CLU® founded Telos Financial and uses his experience, knowledge, and expertise to help families and individuals in Plymouth, Ann Arbor, Detroit, and across the country achieve their financial objectives.

The views expressed are my own opinions and do not apply to every situation. Your situation may vary so make sure to consult a professional for advice prior to making any decisions.