Tis the season… for prenuptial agreements

Love is in the air, so protect your assets with a prenup.

While not the most romantic topic to be reading (or writing!) about on Valentine’s Day, in fact prenuptial agreements, or prenups, have an undeserved reputation as the destroyer of romance. Prenups offer a level of lifelong protection unmatched by any other contract you will enter, and so, like love, prenups transcend all things.

Is a prenuptial agreement worth it? The short answer is yes. The long answer is also yes. This is true for most people, but it is especially true for physicians. While doctors are not the most likely to get a divorce (quite the opposite according to this 2015 article published by Harvard Medical School), the possibility exists, and physicians (no matter their age) have much to protect.

A prenup need not be expensive or overly complicated to potentially save hundreds of thousands (even millions) of dollars while minimizing litigation (and all the nastiness that divorce litigation brings with it). It can protect generational wealth, help direct what will happen to your estate when you die and preserve assets for your children. It can even ensure clear communication and understanding of how money will be treated during the marriage, thus removing a typical cause of marital strife. The prenuptial agreement can actually help maintain marital relationships. Nothing is more romantic than a strong and healthy marriage!

But what is a Prenup, and should you get one? Prenups are not just for millionaires. They are a wise decision for most people. There are countless situations where a Prenup is an effective tool to both build and maintain wealth no matter the couple’s financial situation prior to the marriage. Prenups are insurance, plain and simple:

People do not want to be sued, but they carry malpractice insurance; they do not want to get sick, but they have health insurance; there is life insurance, and long-term care insurance, and disability insurance, and even key man insurance for partners in one’s medical practice, and no one questions that a sound financial plan includes these protections. It would be foolish NOT to have them. The same is true of a prenuptial agreement.

Simply stated, a prenuptial agreement is a contract between two people who intend to marry. Should the wedding not take place the contract is void. If the wedding does happen, then the Prenup is a valid contract that directs certain financial paradigms, and it does so algorithmically.

In Massachusetts, a prenup cannot direct matters regarding the couple’s children (custody, child support, college, etc.), but it can address:

Alimony, which is the money one party would pay to the other for support for a determined period. Without a prenup, this could be as high as one-third of one’s income for life. A prenup can wave alimony (no matter how much someone earns) or limit the amount or the duration of payments;

Division of Assets, which involves deciding what will be considered marital property and how much of the marital property each party receive (if any). Assets can be tangible (real estate, bank accounts, retirement, and investment assets) and intangible (business, licenses, certain trust assets, inheritance expectancies, etc.); and

Division of Debt, which involves deciding who is responsible for debt. This includes premarital debt (like student loans), unsecured and credit card debt, or any class of debt.

For physicians a Prenup will be useful in protecting income and assets, including a medical practice. Your practice may be (or will become) your most valuable asset. Absent a Prenup, closely held and privately owned businesses (even those started before the marriage) are considered marital property – no matter the duration of the marriage. If a divorce occurs, this asset may need to be valued, and then a buyout of the non-practitioner spouse’s share will take place. This could translate in a physician paying hundreds of thousands (or even millions) of dollars to an ex-spouse!

Enter the prenuptial agreement.

The prenup can declare that certain classes of assets (such as a medical practice) are separate property and, thus, no valuation and no costly buyout is necessary.

Marriage is a partnership, and where you would not enter a medical practice partnership without an agreement, you would also be wise not to enter the marital partnership without a prenuptial agreement.

Among other assets protected by prenups are houses (including the marital home), assets acquired before the marriage, retirement, family monetary gifts and inheritances. The list is endless. Of note, at least in Massachusetts, a medical degree or license and the effort it took to acquire it, is not considered part of the marital estate and not subject to division. Other states may handle professional licenses differently and there, a prenup can protect the medical license and assets (such as the practice and the physician’s income).

In Massachusetts a prenuptial agreement cannot be so draconian that a spouse is left with nothing, but beyond that, the parties may establish a contract that protects the wealth however they see fit. For a physician, the value of such an agreement can be invaluable.

Carolyn "CiCi" Van Tine is a prominent divorce and family law attorney at Boston law firm, Davis Malm. With nearly 30 years of experience as a compassionate advisor and tenacious litigator, CiCi is dedicated to all aspects of family law matters, including divorce, separation, custody, parenting plans, child support, alimony, asset division, pre- and post-nuptial agreements, parental relocation, paternity, modification, probate litigation, restraining orders and grandparents’ rights.