By Robin Catlin
Prenuptial agreements are a commonly stated area of anxiety for both children and parents in wealthy families. They’re complicated – this article does a great job explaining some of the different forces at play in these situations. At Matter, we have seen prenup-related discussions play out many times with a variety of outcomes. As a trusted thought partner for our clients, we have participated in these discussions and provided counsel to families, collaborating with their other advisors throughout the process. There’s no question that helping a family handle prenups, as well as other key milestones, is a great example of how a multifamily office can provide support and value.
However, at Matter, helping families handle life milestones is an important part of our work, but not the most important. In fact, it’s all the work we do with families before we ever reach a milestone that truly sets the stage for families to be successful. Success with prenuptial agreements is far more likely if the parents choose to invest in foundational work starting when their children are young, years before they have met their partner.
In our experience, preparing for prenups (and other major milestones and transitions) starts with a family commitment, often years ahead of time, to preparation, skillful communication and shared values.
Building knowledge about financial concepts and terms, and practicing increasing levels of responsibility related to wealth over time, prepares the next gen for critical decisions and conversations they will participate in as they reach adulthood.
- Set the stage early with skills development. In its earliest stages, this will be as simple as learning about the difference between a “need” and a “want,” identifying coins, or building understanding of the relationship between work and money.
- Layer on responsibility and disclosure over time as the next gen grows and matures. For example, to work toward full balance sheet disclosure (which is necessary in a prenup), a child might become involved on the family investment committee and/or become responsible for managing and investing smaller amounts of money.
- Familiarize family members at a young age in their late teen years with the concept of a prenup and how it relates to the family legacy.
When children see skillful communication modeled and have taken steps to become more effective themselves, they are setting the stage for a successful marriage, even in light of the additional complexity entailed because of their wealth.
- Practice skillful communication regularly- learn how to have hard conversations.
- Build self-awareness about your listening and communication skills and those of your family.
When values around family wealth are clarified and communicated to children all along, difficult conversations become easier. Sensitive topics can be understood within the context of deeply rooted family values. A few key perspectives families should further define for themselves and share with all family members:
- Beliefs about the purpose of wealth
- Long term view of wealth
- Seeing the family as a steward of wealth
A prenup can be contentious, but it doesn’t have to be. In fact, a prenup can be a moment for a new couple to begin to establish their own framework for preparation, communication and common values. The process of creating a relationship-focused prenup, an exercise in values and shared decision-making in and of itself, is a powerful opportunity for a new couple to define for themselves the purpose of their wealth. With this view, each new marriage in a family is a time for growth and enrichment, a chance to set up the next generation, and future generations, to thrive in the context of wealth.