John and Sarah are recently engaged. They are excited to blend their families and plan their life together. John has two kids from a prior marriage and Sarah has one child with her late husband who passed away.
John met his best friend for lunch one day, and his friend mentioned that he should consider a prenuptial agreement to protect him in case he finds himself in another divorce situation. Plus, divorce rates are even higher in second marriages.
John comes home and floats the prenuptial agreement idea to Sarah. Sarah is hurt by the suggestion and feels like they would be setting up their marriage up for failure because it would be a lot easier to leave the marriage during a challenging season.
Having the prenup conversation can be hard and even hurtful like it was for Sarah. Prenuptial and postnuptial agreements are both legal documents that address what will happen to marital assets if a married couple divorces or one spouse passes away. The main difference between the two agreements is that a prenuptial is signed before you marry, while the postnuptial is signed after marriage. While both prenuptial and postnuptial agreements can be a valuable financial planning tool for couples, there is a clear mindset distinction that we feel is important to highlight. Often prenuptial and postnuptial agreements can have a negative connotation because the agreement is done TO your spouse to protect YOU in the event of divorce (i.e. focus on yourself mindset).
What is an alternative solution? A Blending Agreement is done WITH your spouse and FOR your spouse, where BOTH spouses make promises to one another to lay a positive foundation for life together forever (i.e. focus on your spouse & your marriage mindset).
What is a Blending Agreement?
A Blending Agreement is a detailed financial vison for your life together and requires both spouses putting everything on the financial table – assets, debts, dreams and obligations – and deciding how you can both map out a plan to address all these points in a way that gives you both confidence about your future and brings you closer together by working as a team. A Blending Agreement provides for a positive and secure future that cherishes the permanency of your marriage. The Blending Agreement should provide couples with a peace of mind in terms of finances and their relationship, and it does so based on love, respect and compassionate commitments.
Who’s it for?
A Blending Agreement is especially valuable for couples in blended families, where issues are often complex. It’s a chance to take your marital vows to another level. It is, at its core, writing the rules for your marriage and blended family. If you’re like most blended families, you have a lot of life experiences, you’ve built wealth, perhaps have debt and maybe have hard to value assets like a business. Plus, there are the children’s needs and futures to consider. A Blending Agreement is a strategy that brings clarity to some of the most emotionally charged issues for couples while reaffirming their commitment to the permanency of their marriage.
What should be considered in your Blending Agreement?
· Assets (What you own)
· Liabilities (What you owe)
· Retirement Plans
· Executive Compensation Plans
· Business Ownership
· Insurance Policies
· Estate Plans
· Long Term Care
· Potential for Inheritance
· Obligations to your children
· Financial Dreams for both you and for your children
How to do it & alternatives?
Some couples will choose to have their Blending Agreement drafted by a lawyer and executed by both spouses so that it is binding (a legal contract), similar to a prenuptial or postnuptial agreement. By having more accountability, many couples may be more intentional to fulfill their portion of the agreement. However, others may opt for a more informal process of discussing the items at hand and documenting the shared plan in a more casual manner.
Lastly, the Blending Agreement may not be an option for all couples, and so utilizing estate plans and beneficiary designations maybe the only option at this time. The point is, the Blending Agreement isn’t about the money per se; it’s simply a process to intentionally plan for how money will be utilized to achieve your joint marital and family goals over time AS A TEAM.
If you encounter a negative reaction while trying to work toward a Blending Agreement, this may be an indicator of a deeper fear in you or your spouse. If this occurs, put aside money matters and make a good faith effort as a couple to talk about how past experiences might be driving you or your spouse’s strong emotional reactions. A good way to move forward is for each spouse to remain focused on how best to serve the other spouse. Remember, this is about reaching an agreement WITH your spouse, FOR your spouse, as a TEAM. Afterward you can return to your Blending Agreement.
What can it do for your marriage?
A Blending Agreement provides trust and greater security for both spouses. Having this agreement in place, either legally or informally, will help you to build a stronger foundation in your blended family. Because both spouses are open and transparent about their situation, each of you can agree that any challenges are merely speed bumps that can be discussed, planned for and overcome as you move forward in your marriage with open eyes.
Before you begin to create your own Blending Agreement, we suggest examining your current situation. Our blog Laying the Foundation in Your Blended Family will help you examine your current situation and give you great questions to discuss with your spouse.