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  • How to Structure a Fair Prenup

    I've felt overwhelmed even beginning to read around this topic--will absolutely hire legal counsel, but appreciate some peer gut reactions to what may be fair.

    I'm a 29 y/o IM PGY-2 planning to pursue GI fellowship. Fiance is 29 y/o in private equity. I have 250K of medical school debt; he is debt-free and just signed on for his first job post-MBA at ~500K/year and will likely hit the 1M mark by his mid-30s plus significant investments if he stays with this firm. Happen to be deeply in love but wildly disparate in our current financial circumstances. My main concerns revolve around the risks I'll be taking--I'll be applying only to our current city for fellowship (thus risking not matching), I'm the one more likely to go part-time/take time off when we have kids, and I'm generally the household manager (he's very good at his job, but that laser focus comes at the cost of maintaining his surroundings--remembering bills, scheduling appointments, trip planning, cleaning are not his strengths)

    My feeling is that what we bring to a marriage should be protected by a prenup, and thus he should be protected from my debt (receive the amount of my debt plus some interest) in the event of divorce. I think that whatever we actually earn within the marriage though is a product of both his work inputs and my above risk tolerance/supporting role and income. He feels less warm to this idea given that a split of our assets in half in the future would very likely eclipse what would've been my maximum independent earning potential, thus making it feel unfair from his vantage point. We could also write in contingencies pending the outcome of my fellowship match, but I think this overcomplicates things and I remain philosophically with the same opinion that assets accrued in a marriage are a product of teamwork. I can see it both ways though. We are very open with these discussions and will likely read through responses together. What's fair here? How would we divide assets in the event of divorce?

  • #2
    You guys seem pretty equally balanced, financially. If you were my clients (and you’re not), I would not encourage a pre-nup unless your financial goals and attitudes toward money are wildly disparate, at which point you are not equally balanced I would probably recommend 6 mos of financial and marital counseling before tying the knot.

    I think it is impossible at this point given your goal of (I’m still not quite sure what), unless you live in a CP (Community Property) state. In that case, you’ll be much more likely to keep all assets grown during marriage at 50:50 if you were to divorce.

    Totally jmpo.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Originally posted by jfoxcpacfp View Post
      You guys seem pretty equally balanced, financially. If you were my clients (and you’re not), I would not encourage a pre-nup unless your financial goals and attitudes toward money are wildly disparate, at which point you are not equally balanced I would probably recommend 6 mos of financial and marital counseling before tying the knot.

      I think it is impossible at this point given your goal of (I’m still not quite sure what), unless you live in a CP (Community Property) state. In that case, you’ll be much more likely to keep all assets grown during marriage at 50:50 if you were to divorce.

      Totally jmpo.
      This.

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      • #4
        lucuw: your earning potential as an attending appears (on first glance) to be pretty asymmetric to your fiance's. jfoxcpacfp is correct: premarital financial counseling is probably the best first move. If your philosophies are widely diverge, you were not to find employment in your city, and you stayed for your fiance, well, those seem like some pretty hard pills to digest. It strikes me as a breeding ground for resentment and an unstable foundation for a marriage...

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        • #5
          You: much higher floor, lower ceiling, more debt upfront
          Fiancé: much lower floor, much higher ceiling, no debt upfront

          He sounds like he’s working at a hedge fund/private equity. Maybe he makes it big. Maybe not. Your career path and income is a lot more predictable.

          He can be the stock and you can be the bond.

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          • #6
            Originally posted by lucuw View Post
            I've felt overwhelmed even beginning to read around this topic--will absolutely hire legal counsel, but appreciate some peer gut reactions to what may be fair.

            I'm a 29 y/o IM PGY-2 planning to pursue GI fellowship. Fiance is 29 y/o in private equity. I have 250K of medical school debt; he is debt-free and just signed on for his first job post-MBA at ~500K/year and will likely hit the 1M mark by his mid-30s plus significant investments if he stays with this firm. Happen to be deeply in love but wildly disparate in our current financial circumstances. My main concerns revolve around the risks I'll be taking--I'll be applying only to our current city for fellowship (thus risking not matching), I'm the one more likely to go part-time/take time off when we have kids, and I'm generally the household manager (he's very good at his job, but that laser focus comes at the cost of maintaining his surroundings--remembering bills, scheduling appointments, trip planning, cleaning are not his strengths)

            My feeling is that what we bring to a marriage should be protected by a prenup, and thus he should be protected from my debt (receive the amount of my debt plus some interest) in the event of divorce. I think that whatever we actually earn within the marriage though is a product of both his work inputs and my above risk tolerance/supporting role and income. He feels less warm to this idea given that a split of our assets in half in the future would very likely eclipse what would've been my maximum independent earning potential, thus making it feel unfair from his vantage point. We could also write in contingencies pending the outcome of my fellowship match, but I think this overcomplicates things and I remain philosophically with the same opinion that assets accrued in a marriage are a product of teamwork. I can see it both ways though. We are very open with these discussions and will likely read through responses together. What's fair here? How would we divide assets in the event of divorce?
            Isnt he going to get cut in half no matter what? You dont have to sign a prenup, and it will be that way for him anyway, and doubt a prenup that isnt on its face very fair will hold up, its one of the tenets. Amd I dont think student loans are ever something much considered in divorces as like transference, that seems crazy and I missed an opportunity if so. Hes already protected from your debt, non issue.

            It doesnt really matter that your full on income may not be as high as his, while PE etc..do and can make very good money, they also change jobs and are out of work quite frequently and the whole sector could go out of favor. You're certainly viewing it fair. I mean I understand the disparity idea, but thats marriage and he cant pretend his job is super secure.

            In fact the better he does the more likely he's retired or moved onto being a VC by 40.

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            • #7
              A prenup only covers assets liabilities brought into a marriage. Much of what you are concerned about is the future. His job and earnings and your career path earnings are not covered.

              Right now the debt is about the only liability that comes into play. Don't see any assets. Just exactly is it you are trying to split? Future earnings or expenses? What you think might be "fair" in 2 years is likely to be "unfair" in 20 years. Dangerous for both in the marriage. Get that counseling before you both before pursuing any discussions about property split in a divorce.

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              • #8
                Effectiveness of the prenup is dependent on both divorce precedents in the state, as well as the history of prenups in the state. My state splits most things close to 50/50 no matter what the cause of divorce was- even in situations of abuse. Your state might not be that way. Also, your attorney should know the likelihood of certain contingencies to be held up.

                You probably want your prenup to be written with as few wrinkles as possible. The more contingencies in there, the less likely the thing will be held up (at least as was explained to my in my state in the midwest).

                Remember- child support isn't apart of this.

                It's less favored to get a prenup on this board (and probably everywhere- at least it's not talked about openly). For me, I viewed it as insurance. Luckily, over a year in I wonder if it was a waste of money- which I see as a good thing.

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                • #9
                  ugh.

                  this is a depressing post.

                  i am very much in the camp that your first marriage really shouldn't have a prenup barring some kind of very odd circumstances like asymmetric wealth.

                  presumably by limiting your fellowship applications you are taking a real risk to your long term earning potential by being with this person. you also note that despite having a $500k earning potential he relies on you to pay bills on time. i think given that he should be able to cowboy up and not try to micromanage a potential divorce.

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                  • #10
                    A pre nup should be to protect assets obtained prior to marriage. Neither of you have any. So I don't see much point here. Just because he *thinks* he will make more, doesn't mean he will. You never know what the future holds. I've been married 17 years and we always thought I'd be the higher earner but in our time together I've only made more in like 5 of those years. Quite honestly your fiancee's attitude is a little worrisome because in my marriage, what's mine is his. Of course we would split assets equally if we divorced because we earned it together. I'd be worried your fiancee does not look at it that way and that he's going to be keeping score, which gets real complicated, real fast if kids enter the picture. Do y'all plan to have joint or separate finances? Will he help pay off your student loans? Does he understand the sacrifices you are making? Does he value your contributions? What would it mean for you financially if you were part time? I think you two need to make sure you're really on the same page before getting married.

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                    • #11
                      Are there any other signs that your fiance values you as much as he values himself? The difference in income is window dressing. I would think long and hard about the kind of guy you want to marry. If you do go ahead and you do circumscribe your career opportunities to keep this relationship then put a dollar value on what you are giving up and get an annual credit for it written into the prenup.

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                      • #12
                        Oh gosh. You sound like such a nice person and excited to plan a life together with someone you love. As others said you guys have no need for a pre-nup unless there’s significant generational wealth/assets (doesn’t sound like there’s trusts involved). The student debt is yours, otherwise you build a life/future together and it’s 50:50. Agree with others get both of the to pre-marital counseling and work this out in advance. Good luck!

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                        • #13
                          Sounds like a potentially great life. Life has risks. Marriage is a risk. From what I know I do not think a prenup would help in this case.

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                          • #14
                            Like others have said, I don’t think a prenup works for future earnings and your 250k in loans will be insignificant in the long run.

                            The GI docs may be able to chime in here. But I wonder if you’re selling your own potential future income short. If you were able to move anywhere for your job (rural Midwest), open your own practice and work as many hours as you want because your spouse was watching the kids, I don’t see why your potential income as a high volume gastroenterologist could not also be 500k- 1 mil.

                            Either way you both have very high income potentials and should be extremely wealthy if you just manage your finances right and avoid wasting extraordinary amounts of money. Given that you both should have more than enough money, I’d be more worried about developing a healthy mindset towards money.

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                            • #15
                              Thanks for all of the thoughtful replies! I think premarital financial counseling is a great suggestion.

                              It seems the comment section is concerned about my choice of partner so I’ll shed some light on his enormous positives—he’s an all-star chef, been incredibly generous during our relationship (paid the security deposit on my apartment when we lived separately and I was flat broke before residency started, not to mention footing the bill for all of our dates when he was working before school), and is extremely kind to my disabled parent/loving to me. We would share finances during a marriage, this we’ve already discussed. If I didn’t match fellowship, he’s willing to relocate if subspecializing is truly critical to my happiness. The loans we (really he, since this will be money he’s earned prior to our marriage) will tackle early too.

                              It sounds like most commenters agree with me that it makes most sense at this point not to include any language about assets accrued during the marriage—those would be split evenly in the event of divorce. I still favor one to protect him from the monster student debt though. Wouldn’t feel good to pay those off during wife’s fellowship only to get a divorce and just be out that cash. This isn’t my plan, but divorces are never planned.

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