Discussing a prenuptial agreement with your adult children

By Edward W. Kramer, CFP®, EA

Should you require your children to have a prenuptial agreement? This question can be very important if you have a family business, financial wealth, and/or family property that you would like to maintain as part of your family’s legacy. You may be concerned that dissolution of a marriage in the future could jeopardize a family asset. How do you move from merely thinking about this question to assisting your children with a financial contract that addresses these important concerns?

A prenuptial agreement is an agreement wherein a couple, before marrying, agrees what should happen to assets in the event the marriage should end. Planning for the end of the marriage is not necessarily planning for divorce—the couple is also planning for what should happen to assets if one person should die.

The driving force behind this sensitive issue is often parents’ fear that family assets could fall into the wrong hands—the hands of an in-law unfit to manage the family assets. Addressing this fear allows the parents to understand and to help their children understand that their highest good is to focus on and encourage the success and sustainability of their children’s relationships. The outcome they desire for their children is a successful marital relationship. How do you, as a parent, remain open to your fears while at the same time address this sensitive topic with your children?

One method of discussing the agreement might be to say to your adult children before marriage that prenuptial agreements are “just what our family does.” You could explain that the prenuptial agreement takes money off the table and allows a marriage to take place for all the other positive reasons like love, friendship, and family. You could explain how your child’s spouse will enjoy the benefits of the family’s money for a long time. While this discussion can seem well intentioned (and may work in some families), it often does not address the reality that this topic is rife with anxiety.

This important and sensitive topic can only be addressed with openness and honesty from both parties. Parents may begin with a conversation to explore and understand one another’s feelings, concerns, and desired outcomes around family money and a prenuptial agreement. The following are some questions to explore when considering the discussion of a prenuptial agreement:

• Why is the prenuptial agreement important?
• What is the prenuptial agreement meant to accomplish?
• What worries you about your children’s possibly divorcing?
• What is the best way to bring your children into a conversation about a prenuptial agreement?
• Will you allow your children to make the final decision?
• How do you want to include your future in-laws in our family wealth? Or do you?

Timing is crucial. After you have reached a decision, the next step is to engage your children in conversation about a prenuptial agreement (before wedding plans are in place). You may choose to have separate conversations with each child or talk with your children collectively. Some questions for this discussion include:

• What is your dream for the future of your family?
• What is the purpose of an inheritance for the next generation?
• Could you maintain separate financial resources and have a viable marriage?
• What obstacles do you see in creating a prenuptial agreement?

This conversation requires parents and children to be open and honest about a sensitive and difficult topic before a “significant other” is in the picture. While it is never too late to have this conversation, if your child is in a serious relationship, it could be more challenging to remain objective about financial matters—for both parents and children alike.

When you engage each of your children in conversation about the distribution of your family wealth and prenuptial agreements, you can create a sense of family ownership and desire to maintain the family legacy. This (sometimes) difficult family conversation can build trust and understanding between the generations, whether or not you (and your children) decide to move forward with a prenuptial agreement.

Edward W. Kramer, CFP®, EA is a 2004 graduate from Texas Tech University with a BS in Personal Financial Planning. He received the CFP® designation in August 2006. Eddie was a financial planner on Abacus’s financial planning team from 2004-2009 prior to returning to Texas, his home state, to work as a Wealth Manager at USAA. Eddie returned to Abacus in 2014 and earned the EA designation in February 2016.

Abacus

Abacus is a financial advisory and investment counsel firm known for its passion in creating abundance for clients and family businesses through skillful listening and smart financial decision making. Managing over a $1.6 billion on behalf of its 250 plus families, Abacus consists of a team of multi-disciplinary experts who work collaboratively to serve its clients.