Prenups Are For Lovers w/ Aaron Thomas #743

out there. Aaron has decades of experience in his clients range from NBA Hall of Famers to the little couple that you know who lives down the street. He founded prenups dot Com, and he's recently published a new book, The Prenup Prescription, where he argues that a proper prenup can not only protect, but actually improve your relationship. That's what we're going to be talking about today, So Erin, thank you so much for joining us on the podcast.

right thing. We're saving and investing simultaneously. So what's that splurge look like in your life?

has risen quickly compared to previous years. Millennials are five times more likely to get a prenup than twelve years ago. Why do you think this perception is shifting so fast. Why are folks just so much more open to the idea of prenups.

One is for millennials and you know, kind of the cohort of people who are getting married today, they saw their parents go through probably the biggest, you know, the highest divorce rate period of the nineteen eighties here in the US, and saw the strife that came from that, all of the you know, money spent, you know, how long the litigation lasted, and they're saying, you know, no way am I going to you know, end up in that kind of position that I saw, you know, my parents'

older generations. And then I think there's also just kind of like a difference in a generational difference in the way that they look at marriage and that you know, not that it's not romantic or not that they're you know, expecting to get divorced, certainly, but that you know, practicality kind of wins out, and that it's just kind of the smart thing to do. A lot of the stigma has resided when it comes to prenups.

away in your retirement accounts. So does that kind of change in stage life stage of when people are getting married, does that impact kind of how I don't know how they feel about prenups and their willingness to partake in one totally.

So you know, in the nineteen sixties, when a couple got married, the average age of marriage was about twenty one years old, and a couple back then had very simple finances, so they were likely to have you know, zero maybe one bank account between the two of them. Credit cards didn't really exist. Four to one k's hadn't been invented yet. You could still work your way through school, so there wasn't kind of the six figures of student

loans type situations. So, you know, the couple getting married in you know, say the mid nineteen sixties or nineteen seventies, it was like a startup you know, you're starting from completely from scratch, and two people were coming together and

moving in together and building their life together. Whereas you compare that to today's couples who get married on average at age like thirty, and each spouse is likely to have four or five bank accounts, three or four credit cards, a retirement account or two, a car with an against it, maybe a conda with some equity, maybe a small business, right,

and so it's so much more complex. You know, if if the couple in the sixties was a startup company, the couple getting married today is like a corporate and merger, right, and you just you wouldn't do something of that magnitude without taking little more seriously and putting some more thought and planning into.

And I'm curious if any part of you just thinks that, like going through the legal marriage process, like, does any part of you feel that that's kind of outdated or that things are better off now that fewer folks are getting married.

a positive thing for society and for myself personally. I'll tell you though, you know, being a divorce lawyer will scare you a little bit when it comes to marriage. I mean, I started practicing family law, you know, many many years ago, and after a few years of watching what divorce really does to people and does to families, I started warning friends and family and anybody who would

listen against marriage. You know, I not the commitment. You know, sure, get committed, you know, have a have a big party, wear a white dress, change your last name, move in together, but don't go through the actual legal relationship, you know, the legal step of getting married, because people don't know what they're signing up for, you know what the legal you know, aspect of it is. Obviously, I've you know,

changed my view on it. I'm now, you know, happily married myself, and I think that there is a way to do it correctly. I just think that it is much more complex than it used to be.

is the biggest financial decision you'll ever make. And from the day that you get married forward, every dollar that you earn, that very first paycheck that you get after the day of marriage is considered marital property, and so it no longer belongs just to you. Everything belongs to you as a couple. And this it really doesn't matter whose name is on a bank account, whose name is on a piece of property, whose name is on a

retirement account or a credit card. It's all considered, you know, one pile of finances from the day that you get married, and a lot of people don't figure that out until they are in you know, unfortunately, a divorced lawyer's office years down the road and they're saying, what do you mean he wants half of my retirement? What do you mean she wants half of the house. I kept it in my name only, and I paid the mortgage review month.

And I would have to explain to people that, well, once you were married, that was no longer just your money. It was y'all's money. You can come from the South, it was you know, that's money belonged to the two of you. And so there was a lot of unintended consequence and things that people own prior to marriage getting commingled accidentally, and so you know, people are really in need of like some clarity in terms of what it is they're signing for, signing up for in.

you seen the Melissa Kearney. She's an economist and a lot of research has come out recently regarding just the power the advantage that two parent households have in particular when it comes to raising up children. Right, it's and it's not only it's not only like a financial advantage, it's also kids don't get in trouble at school, they're less likely to be arrested, they're they're more likely to

actually complete school. So some of those behavioral issues kind of melts away a little bit as well, because I feel like that, you know, faced with this new research and data, which surprisingly there hasn't been a ton of up until recently, it kind of, in my mind, puts marriage in particular in a new light. What are your Do you have any thoughts on that?

it really is compelling. And you know, my kind of reluctance when it came to marriage didn't have anything to do with you know, being scared of the lifelong commitment and all the advantages that come from an intact household. I wanted those things for myself. It was really fear of messing it up. It was fear of ending up in a divorce. And you know, in my view, a messy divorce was best avoided at pretty much any cost.

You know, I don't think that's that controversial for a statement to say that you should do whatever you can to avoid a messy divorce. And you know, there's two ways to do it right. One is not to get married, and two is trying to try very very hard to

keep your marriage together. And then you know a third would be, you know, put yourself in a position so that if your marriage does come to an end that it is not kind of the expensive nightmare year and a half of litigation in a very public courtroom that I witnessed as you know, a divorce litigator.

happens in our culture. And it's not half of divorces, but it's somewhere close to half of marriage is to end in divorce. So I guess my question to you is what do you do on the front end, right the getting financially naked sort of thing, at the very beginning, What sort of things need to be discussed as you're dating, as you're like working towards engagement, thinking about marriage, starting to talk about that stuff. What needs to be put on the table on the front end.

That means creating a net worth statement for yourself and for your spouse so that there are no surprises trading that information. And I find that just that step alone, you know, number one, it's something that a lot of couples haven't done because there's there's no kind of natural time to say, hey, by the way, i've got twenty grand a credit card debt, or you know, I haven't saved as much for a retirement and as I wish

I had. But it's kind of you know, you get a little bit of an amnesty because Okay, we're planning our life together. We need to you know, be completely transparent in terms of what we're bringing in. But it will also spawn what I think are very necessary conversations about your habits. You know, how you view money, what your kind of relationship was money growing up in your household. You know, do you like to carry debt on credit cards? Do you pay everything off you know month to month?

What's your investment strategy? And you know, we talked about how much more complex people's finances are when they get married, because we're getting married older But the other aspect of that is we're coming in with a decade or more of financial habits that we've built up on our own since we left our parents' household, and sometimes that can be the more tricky thing to combine than just the bank accounts and the credit cards.

a month. And without knowing anything else about that couple, you could probably intuit some other aspects of their relationship.

laws in our state. It's the default essentially that we're going to come up against no matter what.

contract has changed. And very few of us, if any of us, read the quote unquote contract the default prenup meaning the law because of your state as it pertains to your assets. Prior to getting married. Almost everyone only figured these things out in the context of a divorce, and so I think that the real there is real power in deciding what works for you and your spouse and your marriage based on where you are in your life, rather than accepting this kind of one size fits all,

cookie cutter approach. And you are putting yourself in the hands, potentially where of a judge who is randomly assigned to your case, who could have views on life and marriage and family and money very very different from yours. And I have seen firsthand, you know, situations where you walk into one courtroom and one judge looks at the situation that says, well, you aren't all the money, and what did you do? So, yeah, you're gonna get eighty percent

of the assets. And you go to the very next courtroom down the hall and a judge says, I'm going to split everything in this in this case fifty to fifty, no matter what, and that that kind of uncertainty is just unnecessary. When you can choose your your own rules and kind of voluntary commit yourself to a situation that you and your spouse personally agree.

any other contract. There can be good terms that are you know, that are great for your relationship, or there can be bad terms that are a huge red flag. So a lot of it is in your approach. I think that you know, if if it is done as a collaborative process where you and your partner come together and sit down and talk about what do you want your financial marriage to look like? You know, should you be transparent on the front end? Should you both have

equal access to money during the relationship? Do you both have a say in kind of spending and investment decisions that and it? Can you agree what would be fair if you know, God forbid the relationship comes to end. Can we agree will be fair while we love each other, while communication is high, while we trust each other, then it can be a real positive for your relationship. If the only thing you're doing is protecting what you had from your spouse going in, then yeah, I can see

that having a negative impact on your relationship. So you know the devil's in this.

Like you're talking about making financial goals for yourselves. You're talking about how it is that you're going to achieve those things. It's establishing healthy communication. It's just that you are doing it inside the bounds of a contract as opposed to, I guess, just a conversation that, in my mind feels less I don't know, less loving, I don't.

I guess when you think about it from the standpoint of counseling or goal setting or a couple's retreat, it's to me that it seems more edifying as opposed to the contract.

fifty to fifty on the front end. Unfortunately, you know, when marriages dissolve, people are no longer in that same headspace, and they're much more likely to act out of anger and think you know that they should be you know, shooting for the majority of the assets. And there's also kind of this this weird thing that I've noticed even

in you know, good relationships like mine. You know, if you're in a relationship and each of you are doing fifty percent of the work, percent of the labor in the relationship, it feels like you're doing seventy percent of the work, right because because we only see what we ourselves are doing. You know, I don't see what my wife is doing when I'm not around, so it feels like, yeah, right, right, right, But you didn't you didn't see me take out the trash.

So you know, I think that there's you know, a protective mechanism there. And also, you know, putting in writing, you know, there's something about making it formal, making the

process formal. One you've got something you can look back on and say, hey, you know, we agreed, for example, that we're going to sit down, you know, once a year, we're going to make sure that we've disclosed all rassets and debts and updates, and we're going to go through an agenda of things and talk about, you know, our spending from last year and where there any surprises, and you know, what do we want to plan for next year?

Should we put away some money for travel or is this year that we you know, buy an investment property? And having that in writing, you know, reduces or eliminates any confusion about what you agreed to on the front end. But there's also the ceremony of it as well, you know, I mean, we we do do vows when we get married. We walk down and we pronounce what we want to do in front of everyone that we know, and there

is real power in the ceremony of it. The same way as putting something down on paper and you know, taking ink you know, to the page and putting your signature on it and saying this is what I'm willing to commit to in writing, that I think makes people want to stick to it. It gives them clarity and they know that you know, you can't go back on it, you can't change your mind. We've committed to this in writing, and it's going to be enforceable.

about that? I think the most famous stories are often ones of the rich and famous, but is that what our prenups should kind of look like too?

marriage becomes worth five million dollars. And you know, people hear it and they may have some kind of visceral reaction to it. I think it is something that for them was probably fair. It probably works for them because Michael Jordan gets the knowledge that he is going to have, you know, the protection for his assets, which you know, trying to value interests in Nike and you know NBA

teams and clothing lines would be a nightmare disaster. I mean you're talking about multi year litigation that he'd be drawn up in, you know, regardless of the amount of payout that it would eventually come. And for his wife, I think she gets some protection of knowing, you know, if anything happens, I'm going to receive enough money that you know, I can I can take care of myself. You know, she is giving up, you know, kind of her privacy for life by being married to one of

the most recognizable athletes on the planet. And you know, you know, other people may have their own, you know, views on you know how much it's worth, and it feels very you know, so you can feel a little icky because it feels very economic. But it is something that for them gives them both a sense of security that they clearly wanted. And so while that kind of prenup is likely not going to work for you or me, it is something that I think does work for their situation.

for every couple. But what I recommend is having kind of three categories or three buckets of accounts mine, yours, and hours and sitting down and thinking through what qualifies as a joint expense for us. You know, so for most couples, their mortgage or their rent, their utilities, their grocery bill, the meals they eat out together, insurance, those things are gonna fall, you know, pretty squarely into the

hour's bucket. And then there are things that you know, I think can clearly fall into these separate buckets, you know, things that you could pay from your own spending money. So if I go, you know, out and have a meal with my buddies and wife's not there, that's something I would pay for my own expenses. And what that does for a lot of couples today who are getting

married later in life. You can know that the joint expenses are being paid, but you also maintain some level of autonomy over your own spending and don't feel like every time you stop by Chick Gilay is being scrutinized by your spouse because it's coming out of you know, the joint bank account. And setting things up in that way, I think can prevent a lot of arguments over things that are otherwise, you know, unnecessary. There's a couple different

ways that people will do it. My wife and I do what's called the inside out plan, where all of the income for the household goes into our joint account initially, and then we each get an allotment or disbursement from that allowance, if you will, but it's equal amounts for both of us that comes out of that joint account and goes into our separate accounts that we can spend, you know, without any oversight of our spouse, and I

think that's helpful, you know, in my situation. It allows us to do some spending that our spouse might not agree with, you know, without having to worry about it. You know, like I like to get my daughter, you know, nikes, even though she's gonna outgrow them, you know, in three months, and my wife probably wouldn't spend the money on those kinds of shoes, but I get to do because it

came out of my money. And my wife has similar things that she would spend that I might see, as you know, potentially frivolous, but she can do it because she's spending it from her money. And then when it comes to the joint account, we have a rule that says neither one of us can spend more than five hundred dollars from the joint account without without agreement from the other spouse. And you know, some people say, oh, you got to get permission, you know, from your wife,

and I don't look at it like that. I look at it as a mutual respect thing.

for sure. I think one of the other things Aaron that really kind of put me more on on board with with your argument was was how much money a prenup can save you. So, yeah, a prenup costs money on the front end, and you got to go through that setup process. But from everything I've I've heard, divorce is just about one of the hardest things you can endure. And even if your marriage ends amicably, it can be it can be a really difficult process. Even if you're

still and still remain friendly. But how how bad can a divorce be for your finances? And like a ton of lawyers fees stuff like that. And how much is that pre nup although it's you know, cost some money in the beginning, how much can that potentially save you?

per spouse. It means a lot of people pay a whole lot more than that, So you know, if you're talking about thirty grand for a couple, you know, and there are certainly cases that go into you know, the hundreds of thousands. I've worked on a case before where just our client alone paid over a million dollars in

fees over the course of four years. Of litigation, and the way that it kind of works is the more money that you have at the time of the divorce, the more likely you know your divorce is going to be more expensive itself, because if you think that, you know, taking your case to court can win you two thirds of the assets instead of half, the more money you have, the more it's worth to spend that money on the

lawyers to get you there. And so a lot of people, you know, this is important when it comes to a lot of people say well, I don't need a print on because we don't have anything. Well that's coming into the marriage. What makes the divorce expensive is what you've got on the back end, which you can't know, you know, until you get there.

for both people to hire their own attorney. Me personally, I will never discourage someone from having a lawyer on the other side of this kind of transaction because you need to talk about you know what your fears are, you know what keeps you up at night, you know what worries you when it comes to, you know, making these kinds of decisions about what your financial life with your spouse looks like, and have somebody that can advise you just from your point of view. So certainly it

should not be adversariable. You don't want to get into a situation where it's a lot of back and forth. You know, most of my clients will kind of, you know, waive their attorney client privilege, so that everything that I talk to them about is shared with their spouse, so everything's done out in the open. This ideally should be a collaborative process. You don't want, you know, you don't draft an agreement and hand it to somebody a week before the marriage. That's you know, icky thing to do.

It's not fair and it's not the right way to start off a relationship that you hope will last forever. But legally.

what it is that you want to accomplish. I have found that most people don't object to the the you know, the terms of the prenup itself as much as they do the the word prenup or the idea of a prenup. And so you know, if you start with kind of the component parts, you know, Uh, I think that we should be transparent. I think that we should write down all of our assets and debts and share it with

each other. I think that it's a good idea for us to decide how we want to set up our bank accounts and how the money is going to flow, you know, through our joint bank accounts and our separate bank accounts. I think we should have kind of some ground rules for spending and budgeting and saving. Uh, you know, can we agree that if either of just wants to go to counseling, that we're going to go to counseling,

no questions asked. Can we agree on, you know, an annual meeting where we discuss and update each other on, you know, our financial lives and make sure that things are still working because you can't just set it and forget it for life, right? And then yes, can we talk about, you know, God forbid if things came to

an end? Can we agree what would be a fair way to you know, have our our money split up that we decide and that you know, keeps us from spending a year or two in a courtroom slinging mud at each other and making lawyers rich instead of doing what is best for the two of us. And if you can agree on those kinds of things, then what you're talking about is really the same thing as as getting a prenup. Even if you know the the word doesn't reflect that in your mind when you first hear it.

joint bank account. Those are easy things to agree to, or easier when they are a concept rather than when something has you know, has happened and it feels punitive because they're saying, oh, you spent five hundred dollars from now on, you can't you know, you can't touch the joint account without my approval. That tends to be the wrong time to, you know, have these kinds of discussions.

And given you know how important your financial life is to your marriage, I mean, I think you guys would probably recognize given your industry that you know, the fights over money is one of, if not the biggest reasons that couples break up. And so you know, being aligned when it comes to your finances is mission critical to the success of your marriage. And so this is something that has to be done with a lot of forethought. You've got to give it more time then you do

the guest list for your wedding. You know, this deserves the kind of import that you would give any other major decision in your life, like starting a business or buying a home. If you agree that getting married is one of the biggest financial decisions you'll ever make, then you've got it. You've got to give it at least as much forethought.

I have prenups in our marriages with our wives. Is that is that something like it's called the post up, right, So is that something that more people should be considering And how do you approach that because that seems like it's maybe an even more delicate conversation, especially since we just like my wife and I just celebrated thirteen years, that's a long time kind of considering everything equal for ourselves.

Do we need to put something down in writing? How do you talk to people who are currently married about this idea.

still you know, considered a post up. There are other situations where people so to speak, read the contract of marriage years into their marriage and they realize that they've been living a way that is different than the law would treat their finances. So, you know, there are couples who have gotten married and decided okay, you know, I you know, had a rental property coming in and you had a house coming in, and I'm gonna pay for my property, You're gonna pay for your property, and we're

gonna keep those things separate. And then they're married for a little while and they recognize that a court is not going to honor that kind of informal agreement between the spouses and they want to just go ahead and put it in place, or protect each other from debts or when you know, one spouse has a business and they want to make sure that that's kind of outside of the marital estate, both in terms of, you know, the value of it as well as the debts or

potential liabilities of it. And there are some couples who, you know, they're on the ropes and they want to give it another go, but they've had financial issues that are part of their problem, and they want to correct it with a prenup that defines, you know, kind of their access to money so they're not in that kind of situation where one spouse makes two undred grand the

other one has a three hundred allouns. They want to fix some of the problems that I've gotten them to this space while also saying, all right, if things don't work out, can we agree now it's Fairwell, we've still got some communication and some trust alive, so that we don't end up in a situation like we've all seen some of our friends go through, where you know, things devolve and all of a sudden they're not speaking to each other and everything is going through the lawyer, and

those hourly rates are starting to stack up, not to mention the impact on kids and family and your lives and the stress and everything else that comes from it.

in the creation of these. I would love to hear your thoughts there.

so they just weren't seeing as very profitable. You know, you make a lot more money off of a divorce than you do off of a pre nup, and people just didn't have a lot of experience with them, so it took people longer to give people what they wanted.

And over the years we've started to figure out, you know, what are the best ways to help couples set up their finances and what are the kinds of things that couples want to see in their agreement, So we can do it a lot more efficiently, and as a result, it's a lot more accessible to people.

need necessarily the services of a blower? And I don't want to sound overly cheap, but I guess I'm curious to know, Like, have you seen people do IY a prenup, write it down in like magic marker on construction paper and have that actually work out for them? Or is it like, no, you definitely need a third party to help you figure this out.

a posting up later on down the line. But the problem is a lot of people don't know that it's not enforceable until they need to actually enforce it, and they're in front of a judge, and so it's risky. You know, I don't want to pay lawyers. I'm a lawyer myself. I don't want to pay lawyers anymore than I have to. But when I need something done correctly, then I, you know, I go hire a lawyer myself that is an expert in that thing. You know, you can, you know, if you want to do some of the

leg work, you can. You can read the book and learn kind of some of the steps to make it easier for the lawyer that you approach, or if you draft something on your own, I think you would be well advised to at least take it to an attorney, pay that attorney for one hour of their time, and tell them to look it over and make sure that the basics have at least been covered.

your relationship where communication is your default. Whether it's about expenses, whether it's about going to therapy, whether you know it's about you know, what your needs are in your family life. You know, you can't go wrong with putting an emphasis on communication.

think I will though. That's the thing, like, even after talking with him, like, well, you know, we'll Kate and I go and get a post up, I don't think we will. But that doesn't mean that it's not right for some folks. Right at the root of a lot of what he's basically talking about, Like I like at the end he talked about communication, and so much of what he is discussing, and so much of what goes into a prenup is actual communicating. It's figuring out those goals.

It is, well, if this happens, what happens, then it's essentially a great Like it's budgeting, right, Like he's talking about, oh, I've got my money, she's got her money, and we have our money, the joint money, and he's talking about his the freedom he has to be able to go and go out with some friends or buy some nikes for his daughter.

if things don't go as you hope and plan. And the other thing is just that you kind of have a prenup based on your state laws, and those state laws are different all over the place, and you know, whether it's a community property state or whether you live in a state where a judge gets to kind of decide the details of how things are div beat up, you might prefer to have some say over that on the front end then leaving it to chance. So I guess I have kind of come around to kind of

Aaron's way of thinking on this one. My biggest takeaway though, was on approach and if you're going to talk about having a prenup so much, you're going getting married to this person because you love them, and so you need to approach a conversation about a prenup with care and with love. And so if you're going to have this conversation, if you're going to go in this direction, certainly make sure you're treating that person. You're not being defensive, being selfish,

trying to protect yourself. You're trying to protect both parties in this whole endeavor.

more in that no better. Yeah, that being said, I just had a sweet apple on my walk right after lunch, and so I was wondering, is this having an impact on now I perceive this beer? Perhaps, but there are some biscuity vibes going on, I'll say, to very refreshing, great one. This is actually this is another beer that was donated to the show by Bob out there in New Mexico. So again, thank you so much for sending this one hour away.