You’ve been dating this really great person. It’s a fantastic relationship. You’ve been together six months, and you both are on the same page that you want something long-term. You’ve started talking about moving in together and marriage, and as part of that conversation, your boyfriend says he won’t move in without a “prenup.” You feel like you have been punched in the stomach and feel like maybe you really don’t know this person. This is a huge red flag. You should immediately reconsider whether you should even stay in this relationship. This isn’t the case at all. In fact it is the opposite.
A lot of people think that someone who wants a prenup is greedy and selfish. He doesn’t want to share his things or his life with me. Having a prenup means he has an easy escape hatch and always has one foot out the door. He is not committed. He doesn’t trust me. Maybe he isn’t trustworthy. What is the real hidden meaning behind the prenup? Why isn’t he all in on our relationship? Why is he betting we will fail?
All of these are assumptions. This creates a big gap in communication between couples, when one person assumes the why behind the request for a prenup without finding the truth. It becomes a snowball. One assumption leads to the next, and then the next, and before you know it, you are down a rabbit hole where you have convinced yourself that he doesn’t love you when that isn’t the case at all. It’s incumbent on the person asking for the prenup to explain things clearly and on the person being asked to sign a prenup to ask more questions. Clarity is critical. One you have had this meaningful conversation; you will likely recognize that this has little to do with you and your relationship and more about him and his past and future financial planning.
The problem is that prenups get a bad rap, mainly because of how they are depicted in movies. The ultra-rich person needs to be protected from the conniving gold digger. This is not the case in 99% of situations.
What Exactly is a Prenup?
What exactly is a prenup? First off, we don’t call them prenups in Canada. They are called cohabitation agreements or marriage contracts.
A marriage contract or a cohabitation agreement is an agreement that the couple reaches, while they are happy and in love, outlining what happens to their money, if they break up. Emphasis is on the “if.” The agreements are not when you break up but if you break up. So the idea is that you draft it, sign it, put it in a drawer and hopefully never see it again as you live happily ever after.
But if not, and if you break up, you both have a plan in place. Imagine how much better the plan looks when you have created it together while in a loving, caring relationship versus after break up when your emotions are running wild and you aren’t thinking clearly. Your partner wants to make sure you are taken care of after breakup and that the two of you aren’t at each other’s throats fighting over money. It seems to me this is a very kind and loving act.
Change your Mindset
A prenup is also an opportunity to get a clear financial picture of your current net worth and your future planning. Both people prepare a net worth statement, so they are on the same page before they sign. Sitting down with your partner, who you want to share your life with, and planning your financial future together – what’s not romantic about this?
Many people wrongly assume that prenups only protect one person’s net worth from the other. So one person wins and the other person loses. This isn’t the case. Many prenups are designed to ensure the couples’ assets are divided fairly and both people have financial security after break up. Both people win because they have certainty.
Now that you have shifted the mindset from “he is planning on us breaking up” to “he is planning our future together,” it is often useful to ask why he wants the prenup. And I bet the why will surprise you and not at all be what you expected.
Some people want to avoid the bitter, nasty divorce their parents went through. Another was gifted a significant inheritance from his grandmother he loved dearly. It had tremendous sentimental value that sharing it after a breakup would be devastating.
Other couples borrow or are gifted money from their parents and don’t think it is fair to share their parents’ money if they break up. One person saved up a significant nest egg from their first professional job and remembered all the hard work it took to save that money. She didn’t want to give half away. Many people have very significant pensions or will have substantial pensions, and sharing the pension means their retirement plans are out the window.
All of these reasons make sense, and they are all very logical. If you shift your focus from an emotional reaction to getting a prenup to one of a business focus, it will make more sense. Learning the why behind the prenup is very important and can change your reaction.
How to React to the Request for the Prenup?
Now that the topic has been brought up, and you are still very much emotionally reeling, what should you do? The first step is to calm down and take some time to process before jumping into a more in-depth conversation. You can respond by saying, “I hadn’t thought about a prenup. Can we discuss this next week when we have more time to sit down and talk about it more in-depth?” Take a week or two to process your emotions, and don’t go down the rabbit hole of assumptions. It’s unnecessary stress.
When you reconvene with your partner, make a list of questions you want to ask him? Start with the why do you think we should get a prenup? Ask as many follow-up questions as you need. Don’t make accusations if you don’t like the answer. You should also look at your portfolio and decide if there are any assets or investments you want to include. It’s not often these days that only one side has some net worth. Sit down and map out your financial future. What are your goals? How will you reach them? What timeline? Think of how impressive it would be to show your partner you care enough about each other to put this much thought into your future.
Some couples make a night of this conversation. They order an expensive dinner in, pop open a bottle of wine and start planning their future.
Another very common misconception is that the prenup isn’t ever going to be upheld by a Court, so why bother? If it’s challenged, this was all a waste of time. This is not true. It is rare that these agreements are overturned, when properly drafted. Challenging an agreement in Court and losing is a very costly endeavour for the challenger, as they are on the hook for the other side’s legal costs. We only hear about the rare cases where an agreement reached years before has some terms that no longer can apply to the couple for various reasons. This is the exception, not the rule. There are many ways to create an agreement that will withstand scrutiny.
Don’t Dismiss the Prenup
It’s very easy for people to dismiss the “prenup” and say that in a relationship, everything should be shared equally. If he wants a prenup, he’s not the right guy for you. This is an immature and overly narrow view. This is also not at all in line with reality. Without a prenup, there are many situations in a divorce where assets or debt are not shared equally, and one person pays significantly more on break up. The biggest complaint divorcing people have is that the payout is not fair. The law does its best to share the family’s net worth equally, but it rarely happens so clearly. It is also a big misconception that everything is just divided 50/50. The equalization formula is not that clear and simple, and many nuances can swing the division in favour of one side. The prenup is the solution to all of this.
The better question to ask yourself is – are we on the same page financially? If we aren’t, can we get on the same page and work through his. The right partner will be one who is in line with your values. A partner who can raise concerns with you and in a mature way you not only communicate but problem solve a resolution. Couples who are not on the same page financially are more likely to divorce. It is the number one reason why couples break up.
If you are opposed to a prenup, it might be a deal-breaker for your relationship. If you can’t negotiate this, it’s a sign you may not be able to negotiate other essential things during your marriage. Everyone loves the romance of the relationship and being in love, but many people forget there is also a business to marriage. The ones who navigate both are the ones who are more likely to live happily ever after.
Speaking with an experienced lawyer can help you make sure you’re fully considering the impact of protecting your assets and moving forward with your Toronto prenup in a way that is fair.
Anna-Marie Musson is the co-founder of Love & Money. Learn more about “prenups” at www.loveandmoney.ca.