How to start a conversation around a prenuptial agreement

April 05, 2021 | RBC Wealth Management


While there may never be a perfect time to broach the subject, doing it early, honestly and sensitively can help remove a lot of the emotion and maintain family harmony.


It's not hard to understand why many people attach negative connotations to the idea of a prenuptial agreement. They're a decidedly unromantic part of what should otherwise be a joyful preparation for marriage, and many assume they represent a lack of trust of someone marrying into an affluent family.

But a prenup can be an important and useful document for marriages involving families with significant assets.

What is a prenuptial agreement?

Prenups are often motivated by concerns about protecting family wealth, inheritances and businesses but, like wealth planning, if done right and discussed early, they can be an effective solution for all parties involved.

The alternative could be a lengthy and often public trip through the court system, as divorce court records are publicly available in most provinces in Canada.

“If you have a prenuptial agreement where you can avoid the court system entirely, you can bypass all of that,” says Tullo Mumtaz, a family law attorney and founder of Mumtaz Law Group in Los Angeles, California.

But bringing up the idea of a prenup with a potential spouse can be a delicate matter. Brian C. Adams learned this the hard way when he was newly engaged and working to finish law school. He had a sense he would be expected to sign a prenuptial agreement but was still caught off guard when, in the middle of exams, a lengthy document and disclosure agreement appeared in his email from an outside law firm.

“I was not prepared at all for what was in that disclosure document, nor what the process was going to be,” says Adams, now the president and founder of Excelsior Capital in Nashville, TN. He shared his experience at a virtual seminar hosted by RBC and Campden Wealth for the next generation of wealth holders.

Adams ultimately worked through the process, got married, and later helped other family members go through it when they married into the family. But at the time, it was a difficult way to begin a new and happy phase of life.

Start prenup discussions early

The first step for multi-generation wealth holders is to have the conversation early with their children around the expectation that their future partner will be asked to enter into a prenuptial agreement.

When families have a prenup conversation early—perhaps even before the child has met their future partner—it reduces the emotion attached to the topic. The focus should be on how a prenup can protect the family's wealth and legacy, and not an emotional reaction to the person joining the family.

That crucial conversation also needs to start well ahead of the marriage.

In Adams' case, there was a period of negotiation involving lawyers for his fiancé's family. “You want plenty of time between the initial conversation and actually signing these things versus when you tie the knot,” he says.

Leaving it too late could lead to a scenario where one spouse feels pressured to sign an agreement just days before the wedding date. If this happens, the agreement could be challenged in court.

“You're really opening up the door down the line, if you do end up separating and going towards divorce, to give your spouse a case to say 'I was under duress when I signed this,'” says Mumtaz.

To avoid this, it's important to broach the subject both well ahead of time and in a sensitive manner. Adams believes sending in a lawyer or future in-law as a messenger is not the right approach.

“This really goes much easier when the spouse is the one who brings it up early in their relationship so it doesn't seem like they're being caught off guard by a third party,” he says.

At the same time, he suggests communicating the message that the prenup is simply part of the family culture and one that all new members are expected to sign. “I think just being ultra-transparent and clear on the front end is the best medicine,” he says.

Wealth managers and lawyers can help you create a plan

A key element is making sure the person being asked to sign the agreement is represented by their own attorney so there's no sense of bias, says Mumtaz. She often recommends her client pay for the fiancé's attorney, but make sure the fiancé chooses the lawyer.

Another way to ease someone into the idea of a prenup is to bring up the idea of a cohabitation agreement, which can be appropriate for a couple that's serious but not yet—or perhaps never—contemplating marriage.

The agreement can cover many of the same elements of a prenup for couples in a common-law relationship, such as establishing who has rights to what property and end-of-relationship issues, such as debt and financial support.

If the relationship doesn't last long enough to reach common-law status, it could still be helpful by establishing which partner is responsible for which expenses and who moves out and in what timeframe when the relationship ends.

Mumtaz says cohabitation agreements are a great tool for people early in a relationship when one partner has significantly more wealth than the other. It sets the foundation and expectations well in advance of having a conversation about a prenup to avoid a surprise. If the couple does decide to marry, the agreement can then be replaced by a prenup.

“I work with a lot of athletes and the minute they tell their wealth advisor that they want their girlfriend to move in, we all jump on a call together and we discuss what exposure they may have and how to address this with their significant other,” she says.

What is a postnuptial agreement?

After the marriage takes place, there's also the option of updating or replacing a prenup with a postnuptial agreement. This can be used to make changes brought on by significant life events or to amend a prenup if it was hastily entered into before the marriage.

It's also important to provide full and complete disclosure in the process of drawing up a prenup. ”Finding out down the line that one spouse failed to disclose something could lead to the document being ruled invalid,” says Mumtaz.

While there may never be a perfect time to broach the subject, doing it early, honestly and sensitively can help remove a lot of the emotion and maintain family harmony going into what should be a happy occasion.

In Quebec, financial planning services are provided by RBC Wealth Management Financial Services Inc. which is licensed as a financial services firm in that province. In the rest of Canada, financial planning services are available through RBC Dominion Securities Inc.