The word “prenup” used to make engaged couples uncomfortable.
Prenups (known formally as prenuptial agreements) historically have been considered exclusive and unromantic. They were thought to be only for the wealthy, who used them as tools to protect against a paramour whose real motivation was money, not love. Mentioning a prenup to your betrothed might suggest you doubt the marriage will last.
Today, attitudes about prenups are far more positive, and prenups are signed more frequently. In a Harris Poll conducted in 2023 for the news website Axios, 50% of the U.S. adults surveyed reported being at least somewhat supportive of prenups, up from 2022, when 42% of polled adults indicated support. Younger generations are shifting their attitudes and their actions; 47% of the Millennial Harris Poll respondents who were engaged or have been married said they signed a prenup. That trend is continuing with Gen Z, the oldest of whom are just now starting to get married. In the Harris Poll, 41% of the Gen Z participants who were engaged or have been married reported that they had a prenup.
The prenup has also been amplified in pop culture. In a November 2023 episode of The Kardashians, Kim Kardashian advised a friend to get a prenup and recommended them for everyone.
Why is this happening? Most likely because marriages are happening later in life (according to USAFacts, the median age of people marrying for the first time rose 32% between 1973 and 2021), and people enter marriages with more assets and possibly more debts. Engaged people’s desire to protect their own assets and to protect themselves from their partners’ debts appears to be behind some of this shift. Greater financial literacy and agency among younger generations may also be a driver. In the United States, between 35% and 50% of first marriages end in divorce, according to World Population Review. Those statistics get worse for second and third marriages.
Protection for family businesses
Family businesses are shared assets. Multigenerational family businesses may have many owners and often constitute most of a family’s wealth. A battle in divorce court could disrupt the family company. With uncertainty in ownership, operations might be interrupted, the company’s reputation muddied, employee morale dampened and the value of the business diminished.
Without a prenup in force, state law determines the distribution of assets. In 41 states, the requirement is equitable but not necessarily equal distribution, which can engender a drawn-out argument. In the nine other states (including Texas, where I live and work), a “community property” statute exists, meaning there’s an equal split of all assets. This could result in ownership of the business being awarded to an incapable or a disgruntled owner.
These challenges were depicted in the popular Apple TV+ series Ted Lasso. At the beginning of the series Rebecca Welton, the new owner of the AFC Richmond soccer team after her divorce from Rupert Mannion, hires Ted Lasso as the team’s coach. She is certainly a disgruntled owner whose original intention is to destroy the value of her ex-husband’s beloved team. Spoiler alert: It all turns out well in the show, but that isn’t likely in real life.
The good news today is that rising generations view prenups more favorably than prior generations did. They understand the importance of the prenup and initiate the conversation with their partner. The critical part of the process is to begin an open dialogue about assets and what being part of a family business entails. As a family business adviser, I recommend that a policy be established to require prenups for all equity owners and future owners. This can be built into family policies such as the family constitution. It is preferable to institute this policy before anyone in the rising generation announces their engagement; otherwise, the requirement can appear to be a personal slight against the future in-law. Policies are best when they are understood to be not personal, but based on principle.