While prenups aren’t exactly the most romantic thing to think about when you’re getting married, the importance of considering a prenuptial agreement as a physician is something that often comes up on our Physician Community Facebook group. Interestingly, though it may not feel this way, the divorce rate amongst physicians is actually reported to be lower than the general population and hovers around 25% on reported statistics, compared with 40-50% of first time marriages in the general population. Regardless, the fact is that divorce remains amongst one of the biggest financial threats to a doctor’s financial security, and it is learning about prenups and seeing if they have a place in your relationship. Whether or not you ultimately end up adopting one will depend on your individual beliefs on marriage, your financial situations, and other factors that we discuss below.
Disclaimers: We do not provide individualized advice and are not formal financial, legal, or otherwise licensed professionals. Additionally, states and individual jurisdictions have varying and changing laws, so consulting expertise in your state will be important..
As always, you should consult appropriate expertise before taking action based on this content, which is not individualized to your personal situation and can not be guaranteed to be accurate or up to date. Additionally, states and individual jurisdictions have varying and changing laws, so consulting expertise in your state will be important. To learn more, visit our disclaimers and disclosures.
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What is a prenuptial agreement (commonly referred to as a prenup)?
A prenup is a contract that is entered into by two individuals who are planning on getting married that outlines what would happen in the event of a divorce or dissolution of marriage. What is included is to some degree individual preference and state dependent, but common things that prenuptial agreements dictate include how assets are divided, terms of alimony, and who is responsible for debt.
A good prenuptial agreement will spell out the terms of separation very clearly. It should specify what happens to assets you have going into a marriage, such as a house one party owned beforehand (even if it turns into the marital home), your retirement accounts, and inheritances. In addition to stating what happens to assets held before marriage, they can also delineate how assets that are obtained after marriage are divided. You can include how much alimony will be paid and for how long, and under what conditions. Depending on the reason for divorce or who initiates the divorce, you may want to customize certain terms and conditions. Importantly for physicians, it’s also worth considering how student debt or the value of a medical practice is handled.
There’s can also be more unique clauses people choose to add. For physicians, your professional reputation can be viewed as an asset, and your spouse may learn confidential information about you or your patients. Some people actually add confidentiality clauses or even social media clauses about what can be discussed publicly.
Entering a prenuptial arrangement should not be viewed as setting the marriage up to fail. We see it as being like an insurance policy that protects against financial devastation.
This doesn’t mean we think everyone needs one - that’s a very personal decision. But we do think it should be thought about the same way that you think about other financial decisions.
How does a prenup work?
Essentially, what you mutually spell out and agree to goes, although there are some notable exceptions, which is why working with an attorney well versed in prenuptial agreements and family law in your state is so important. You will want to make sure that what you include in the agreement would stand up in a court of law. This involves looking at your state laws and any specifics that may apply to your marriage. Some states actually will nullify a prenuptial agreement if there’s any suggestion that you coerced your fiancé into getting a prenuptial agreement, and therefore it's important to make sure adequate documentation is present. Other states do not allow a waiver of spousal support for alimony or have conditions that need to be fulfilled in order to do so. Your attorney will guide you through all of this.
How does division of assets work in a marriage if there is no prenup?
The short answer is of course that it depends. It could be determined by your state laws or by whatever agreement your respective divorce attorneys arrange. Also note that if your divorce attorneys are not able to come to a settlement agreement, a judge could ultimately decide what happens to your assets, and this could be a very subjective process that comes down to the opinion and possible biases of one person.
In some states, there are community property laws which dictate that everything is split evenly - both assets and liabilities/debts. In these states, it’s especially important to consider a prenup, as these are the exception to the community property laws.
While some community property laws may exclude assets prior to marriage, anybody that’s been married knows that keeping those assets separate in your marriage forever may not always be practical. You may use that money for a down payment on your house or to pay for your kids’ education, or to buy a new car. Bottom line is that unless you have some legal documents in place, the separation can get messy (and expensive) fast.
Are prenups common amongst physicians?
Even though people don’t talk about them publicly very often, the use of prenups on the whole is on the rise. This may be in part because of increasing awareness of them as social media publicizes messy divorces (we’ve seen examples of this on our groups), but is likely in large part because people are getting married later in life. Because of this, it is increasingly common to see people entering marriage with more significant assets.
What are some pros of doctors getting prenups?
Creating a prenuptial agreement when you and your fiancé are in love and want the best for each other is certainly a better frame of mind to create a rational, fair, and well thought out agreement than in the midst of a possibly contentious divorce. In addition to the benefits discussed above of being able to customize and solidify the terms of your divorce ahead of time, there are several other benefits to a prenup.
You can see how delineating these terms ahead of time would eliminate some of the costs, stress, and time associated with a divorce. Even when there’s not a lot of marital assets, simply eliminating some of the hourly costs from the divorce attorneys of both parties may make getting a prenuptial agreement pay itself off with dividends.
Even the most civil of divorces can get quite expensive, and more contested or hostile divorces can actually get outrageously expensive. We've seen posts in our communities where physicians have spent over$100,000 in legal fees alone for a divorce, in addition to the assets they lost in the settlement. While a prenup won't eliminate costs, they'll certainly decrease them. Depending on the complexity of a prenuptial agreement, typical costs for a prenuptial agreement range from $1,000-$10,000.
From a personal finance perspective, it also offers an opportunity for you and your future spouse to begin a habit of talking about finances and personal goals. This is likely the context where you might discover the debt that your partner has, the inheritance they’re set to receive, their career goals in the future, whether you will combine finances or keep them separate and how you plan on handling financial decisions, who may pay for what, and what each person’s spending habits and views on saving and debt are.
What are some cons of doctors getting prenups?
For most people, a big con is just having to talk about getting a prenup. Obviously, this can be awkward and in a worst case, even contentious. Family and friends on both sides may have opinions on the matter and may or may not be supportive of getting one. In some cases, one side of the family may be insistent on getting one due to wealth discrepancies, inheritances, or special family situations such as a special needs situation.
Even if both parties are in agreement, it's not particularly romantic to think about dissolving your marriage in the midst of your excitement about planning your life together. Nobody ever wants to think that divorce could happen to them, despite what the statistics show.
The other thing to keep in mind is that nobody has a crystal ball, and life when get married may not look the same a few decades, or even a few months, later. Somebody could win the lottery, could become disabled, or decide they no longer want to work. Some decisions will be made for the greater benefit of the family but may hurt one party financially. While there can be amendments made, a lot of people would argue that with how unpredictable life is, planning that is based on the circumstances at the time of marriage wouldn't make sense if a divorce were to happen two decades later, and therefore elect to just figure it out when and if the need arises.
Special considerations about Prenups for Doctors: Student Loans
Prenups can include clauses about who will be responsible for paying student debt. Allocating debt is often a tricky part of divorce proceedings, especially if you are in a state where the standard is to split assets, but the student debt remains the responsibility of the person who holds the debt. If you are a physician, you may find yourself in a situation where all of your marital assets are split evenly between the two parties, but the debt remains solely yours. You can see why this may feel unfair if the reason for over half of your family’s assets turns out to be your earnings as a physician, but those are split evenly while you still hang on to a six figure amount of debt.
Special considerations about Prenups for Doctors: Medical Practices
While every state is different, in many cases, privately owned businesses are considered a marital asset, regardless of if both spouses are listed as owners or participate in the business, and potentially regardless of when the business was started or you became a partner in the practice. In the event of a divorce, there may be a valuation on your practice and you may need to “buy out” your spouse’s rights to their half of the valuation. In a successful practice, this could translate to a LOT of money.
A well written prenup can specify that your existing or future practice is a separate asset rather than marital property, which would avoid this situation. These clauses don’t have to be all or none - many physicians may want to acknowledge the critical role their spouse played in helping them personally so that they could build the practice, and establish an amount or percentage of the practice or cap the amount that their spouse may receive in the event of a divorce.
Do I need a prenup if my net worth is actually negative as a resident or fellow physician?
You may feel like you have no actual assets to protect, but this won’t always be the case. As we said above, prenups can be written to protect future assets, terms of alimony, and handling of your medical debt, just to name a few. Without a prenup in place, how your assets will be split up will be determined either by the laws of that state or by what your divorce attorney is able to negotiate in a settlement, and if you are ultimately the higher earning spouse or sole breadwinner, you may not feel those terms are entirely fair (though many would argue that your spouse also needs protection, and hopefully when you’re drafting this agreement, you’re also well aware of everything they bring to your life and want to be fair to them as well).
Are prenups bad for the person marrying the physician?
Obviously, as this site is written by physicians for physicians and our mission is to advocate for physicians, there is some bias in this article. That said, the goal of a prenup should not be just to protect the physician - it should be good for both parties and acknowledge what both sides bring to the table, as well as acknowledge that the physician isn’t always the better financial catch.. Being married to a doctor is not easy, and physicians have a very unique financial trajectory. Although many people joke about marrying doctors, ask anyone married to a doctor if that’s always the case. The fact is that many physicians come into marriages as the financial drag on the relationship, especially if getting married earlier in their careers, where they may not even be bringing in a paycheck or only have a resident or fellow paycheck. Most physicians don’t finish training until well into their 30s, at which point their spouse may have already been working for a decade or more. And then, of course, there’s the student debt that most physicians carry. With most physicians graduating from training with close to $300,000 in debt, the average physician is not exactly the picture of financial health at the beginning of their career. Even more so than this, there is significant financial value to all the things the spouse of a married physician does to support that physician, regardless of whether they are helping with paying back student loans, a stay at home parent who is taking care of all the childcare and household responsibilities, or whether they are actually the major breadwinner in the family over the physician.
As such, physician families should be very intentional in how they discuss prenups and make sure that the agreement that they come to acknowledges all the sacrifices that the non physician makes, as well as the fact that the non-physician spouse may actually be the one who’s in a better financial position. This is an agreement made to take care of each other while you are each other’s favorite people on the planet, and should be approached as such.
Where and how do you begin the process to get a prenup?
First, you both have to be on board with getting the prenuptial agreement. This can be a sensitive topic, so it’s important to approach it in a careful way that emphasizes the benefits to both parties and acknowledges what each party brings to the table not just financially but as a team.
A good family law attorney can help you to do this. We hope to have some of these on our attorney database for physicians soon. In an ideal situation, though this could be drawn up by a lawyer that represents you both, it’s good to consider having a lawyer that represents each person and looks out for each person’s best interests.
This would also help avoid a situation where it could be construed that there was coercion involved in the prenuptial process, which could nullify the documents. For example, if your personal family lawyer drafts it on behalf of you and your future spouse, the spouse could make an argument that they didn’t know what they were signing and that the lawyer was protecting your best interests.
Can you retrospectively get a prenup after marriage?
Prenups are by definition done before marriage, but there are similar documents that can be drafted after marriage called postnuptial agreements. Like prenups, these are becoming increasingly common. Many circumstances can change after marriage, with inheritances, successful investments or businesses, or children or relationship dynamics, and there are usually legal options that can be considered at those times as well. Note that some states do have restrictions in this regard though!
Conclusion
Despite sounding completely unromantic, prenuptial agreements can actually be a very romantic way to take care of each other when you love each other the most. When drafted carefully, they can offer both parties some insurance. Like other insurances, in a best case, you’ll never have to use it! So many people wish that they had a prenup at the time of divorce, so we'd argue it warrants a conversation amongst couples going down the marriage route. Regardless of which way you ultimately fall on the issue of getting a prenup, taking some time to discuss this issue with the person you're planning your life with will be a good way to establish financial transparency and discuss goals and vision.