Advisors highlight ways to frame prenups for lovestruck clients

To a marriage officiant, a wedding is poetically referred to as the union of two separate souls into one.

Financial planners, however, tend to see matrimony from a different, more practical angle. In their view, it’s the joining of two distinct balance sheets into a single tax filing.

Hence the prenuptial agreement and the tricky conversation that wealth managers are often forced to have with clients or their children.

Amanda Campbell, managing director & advisor at Wealthspire Advisors, for example, said she typically enters into the conversation about prenups with engaged clients with openness, kindness, and the acknowledgment that it is an uncomfortable topic. She lets them know that while divorce is something no one wants to think about, it is something that cannot be ignored.

“As their financial advisor, it is my duty to make sure they’re protected in the best way possible in the chance that divorce does occur down the line and a prenup is just that, protection,” Campbell said.

Abbey Flaum, wealth strategist and shareholder at HB Wealth, meanwhile, believes the most constructive way to broach the subject of establishing a prenuptial agreement is to be direct and frame it as part of the couple’s broader financial and estate planning. Just as couples discuss where they will live, whether to have children, or how to merge their finances, she counsels the couple that a prenuptial agreement is one more step in building a foundation for their future together.

“When I practiced law, I often explained that a prenuptial agreement is not about expecting or planning for a divorce; it’s about ensuring clarity and fairness no matter what life may bring. I encourage our wealth management clients to start the conversation early – ideally while they are dating, but if not then early in the engagement,” Flaum said.

In her view, positioning the establishment of a prenuptial agreement as an act of mutual respect - rather than one of suspicion or doubt - helps both partners feel more comfortable with what is generally classified as a taboo idea.

Elsewhere, David Handler, trusts and estates partner at Kirkland & Ellis LLP, said when a client tells him their child is engaged, he immediately asks if they are considering a prenup.

“We discuss the pros and cons, including how much protection their current estate plan and trusts already provide against a divorcing spouse, and what additional benefits a prenup could provide. We discuss the disclosure of assets that is required, the need for both parties to have separate counsel, and that it should be negotiated and signed as early in the engagement as possible,” Handler said.

Protect your client and their future spouse 

As to what other financial protections couples should consider before walking down the aisle, Campbell said keeping inherited or gifted property separate is an important consideration before marriage. Accounts of this nature should not be comingled as joint property once the couple is married unless both parties truly understand the impact of comingling previously separated assets, according to Campbell.

She added that during the marriage, inherited or gifted property should also remain separate, or again, if comingled, the outcomes should be thoroughly understood and discussed with a professional.

“I do not recommend comingling pre-marital, inherited, or gifted assets unless a discussion has been had with a professional who can guide you through the ramifications of such a decision,” Campbell said.

Advisors also say that estate planning vehicles like wills, trusts, and beneficiary designations should also be reviewed. For couples entering a second or third marriage or blending families, planning for children from prior relationships is critical.

“The law of each state sets rules for how various assets may be classified for division in the event of a divorce; a prenuptial agreement is the only method that allows a couple to opt out of the rules that the state sets and create their own rules for the classification of their assets - hopefully to be aligned with their frank discussions about such assets,” Flaum said.

Framing in the right light 

Even when all the interested parties come to the table - and often its more than just the couple – the mood can turn sour quickly. And it’s up to the financial advisor to save the day by framing the agreement as a proactive planning tool rather than a negative step.

Campbell, for example, likens prenups to life insurance to keep the situation in check. Working through the division of assets during the divorce process is emotionally, physically, and mentally draining and clients are usually not in the best frame of mind during that process. Prenups, like insurance, are protection against life’s toughest - yet biggest - events.

“We buy life insurance while we’re alive and healthy as protection against the unimaginable happening. Prenups are much the same. You create them with your partner when you are happy and before there is anything to disagree over so that if the time for divorce comes, the big decisions have been made and they were made during a time when you and your partner were in your best frames of mind,” Campbell said.

For her part, Flaum presents prenups as forward-looking instruments that foster transparency and financial discipline, much like shareholder agreements in business.

“A prenuptial agreement establishes rules and expectations to minimize or eliminate potential conflicts later. By providing clarity on asset ownership, income allocation, and estate-planning priorities, prenuptial agreements serve not as harbingers of divorce but as tools that strengthen the marital partnership through candid communication and mutual understanding,” Flaum said.