Fifteen years ago, only 3% of Canadians who were married or engaged had signed a marriage contract, or “prenup.”
By 2022, this number had grown to 15% for U.S. couples, indicating an increasing awareness of how marriage affects personal finances and potential property division. Experts say the increase comes from a variety of factors, including couples marrying at an older age — 34.8 years in 2020 — with a higher net worth and more assets they’d like to protect, such as property and pension plans (1).
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And that figure will keep climbing, according to investor and entrepreneur Kevin O’Leary, who believes signing a financial agreement before marriage should be as natural for engaged couples as choosing flower arrangements for their wedding reception.
However, prenups still carry a stigma, and other experts like financial guru Dave Ramsey strongly advise against signing one, warning that it can doom the relationship.
Ramsey has said it is like planning the divorce in advance. “It cheapens the whole affair and puts a dollar figure to it,” he has said on The Ramsey Show, his syndicated radio show.
In a recent conversation with Moneywise (2), O’Leary didn’t mince words when it came to his thoughts on this way of thinking, calling it “moronic.”
Here’s why he thinks it’s the “stupidest idea I’ve ever heard.”
To merge or not to merge
According to O’Leary, one of the main reasons a prenup is important is because it allows women to protect themselves.
“A woman should never, ever give up her financial independence,” he said.
A few years ago, the former Dragon’s Den judge invested in HelloPrenup, an online platform created by two women that democratizes access to prenups. The founders made their pitch on Shark Tank.
“What HelloPrenup has done so well and why it’s growing so fast, is it really makes women understand that they need to maintain their own financial identity their entire life. Never merge it with their husband’s,” O’Leary said.
Marriage is about being a team, but a prenup is designed to protect each individual spouse — and their respective assets — in the event of a divorce. In order for a prenup to hold up in court, couples need to avoid co-mingling their assets.
Co-mingling is when separate property becomes marital property. This can happen in various ways, such as depositing your earnings in a joint account. A judge can overrule a prenup in such a situation.
That’s why couples with prenups need to keep finances separate. And this is a good thing, says O’Leary.
“It’s OK to share a credit card and each put 2,500 bucks into it a month, but your entire savings, your credit rating, your own credit card, your own investments, your own savings account, whatever it is, it has to stay in your name,” O’Leary told Moneywise.
“And even if you change your name, that’s fine, but it has to be your identity, your Social Security card, to protect you in the unfortunate event of separating from your significant other.”
Read more: Here are 5 expenses that Canadians (almost) always overpay for — and very quickly regret. How many are hurting you?
Prenups’ effects on marriages
O’Leary’s argument that women need to protect themselves financially is an important one. Studies have shown that divorces tend to have a more negative impact on women’s finances, as women recover more slowly than their ex-husbands after divorce (3). Also, a report from the Canadian Centre for Woman Empowerment found that one in three women will experience financial abuse at some point in their lives (4).
However, Laurie Israel, an attorney who represented clients in prenuptial battles for around two decades, thinks prenups set up a “very unequal power dynamic” that damages the relationship and the marriage from the beginning (5).
“Usually the process begins with the wealthier spouse’s lawyer showing up with an entire prenup with all the terms they want, which can be very coercive,” she told The Cut. “It’s harmful to the goodwill that’s necessary for a healthy marriage. I believe that marriage is about sharing, and the more you share, the more likely your marriage is to thrive.”
Israel thinks there are some good reasons to have prenups, like if one spouse is in a family business or when it’s a second marriage with kids, but when it comes to things like debt carried by one spouse, she believes it’s better for couples to tackle it together.
Meanwhile, Ramsey is against most couples signing a marriage contract unless there are extreme differences in wealth.
His primary criticism of financial experts who push prenups is that they only focus on protecting wealth and not the marriage.
“Our approach is that the prenup could actually end up stunting your growth because you’re not all-in on working together,” he said.
This idea has some scientific support, as some studies suggest merging finances leads to more trust and marital happiness (6).
The HelloPrenup website calls Ramsey’s advice “misguided” and says he’s wrong for a few reasons: Prenups are like insurance and not a sign of impending doom — they foster financial clarity and establish healthy boundaries that create a sense of financial responsibility (7). Life circumstances can change and one member can out-earn the other by a lot later on in a marriage.
What are the limitations of a prenup?
O’Leary, who has been married for several decades and says he has signed a prenup himself, admitted that the agreement becomes “kind of irrelevant” once a couple has children. He has two.
“You take on a dual responsibility to support a family unit,” he explained. “There are two forms of marriage. There’s the euphoric phase where you go in because you love each other and that’s a wonderful time. But then reality strikes about 24 months later and you start contemplating family. And when that happens, you better have money at the table. … You need to have a plan to be able to support a family, support yourselves, and provide for those children as they come.”
Legally speaking, a prenup can’t determine the terms of child custody, visitation or support. Those matters are decided by a judge whose priority is the best interests of the child. Also, it’s not always possible to enforce a waiver of spousal support or alimony. The judge may consider it unfair to one spouse.
If you’re considering signing a marriage contract, it’s smart to do your research and talk to experts to decide whether it will fit your specific needs and relationship.
And when should you talk about money with your partner?
As soon as the third date, says O’Leary. He also recommends sharing a nice bottle of Chardonnay.
“When you talk about money, actually, it makes it even more romantic. It means that you’re really interested in that person and you’re thinking about a future with them,” he said.
“Talking about money is ‘l’amore.’”
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
The Harris Poll (1); Moneywise and Kevin O’Leary (2); Statistics Canada (3); Canadian Centre for Women’s Empowerment (4); The Cut (5); Science Daily (6); HelloPrenup (7)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.