Prenup vs Trust: Which is Right for You?

Prenups and trusts are legal tools couples use to plan for the future. But which one is right for your relationship? While they both aim to strengthen your financial future, they differ significantly in function, scope, and execution. Understanding these differences can help you and your partner pick the right option for your relationship.

A strong relationship requires open conversations about money. That’s where prenups shine, as they facilitate a clear, upfront agreement between two people building a life together. 

If you decide a prenup is the right choice for you, an advantage of working with Neptune is that the service is built for partnership. Whether you’re entering marriage with equal assets, income gaps, or future earning imbalances, Neptune ensures both partners receive dedicated support and legal representation.

By centering both voices in the process, Neptune replaces the typical tension and power imbalances of a traditional prenup with confidence, alignment, and a plan for the future.

In this article, we’ll break down what prenups and trusts are, how they function, and how they differ. This will help you make the right call about your financial future.

What is a Prenup?

Think of a prenuptial agreement as a blueprint for your financial future with your partner.

Prenuptial agreements allow two people in a committed partnership to have a dialogue about finances, values, and the goals they have in mind for their future. Prenups must be put in place before a couple weds, hence the “pre” in “prenup.”

And while prenups once weren’t seen as mainstream, they truly are for everyone today. Modern couples are entering marriage with more complexity, like equity, real estate, dual incomes, inheritance, and career gaps. 

As a result, prenups are on the rise: today’s couples are up to 6x more likely to get one than they were 15 years ago.

But the systems around them haven’t caught up. Money is still treated as taboo. The legal process is convoluted and often adversarial. Couples navigating a prenup are left guessing who to trust, what questions to ask, and how much to pay. There’s no clear roadmap for turning this moment into the foundation of both their wealth and their partnership.

A few other essential aspects to know:

•  Prenups should be executed in writing and signed by both partners. 
• Each partner should have their own lawyer. Courts can strike down prenups if a couple shares a lawyer.
• Each partner must sign the agreement voluntarily.

What is a Trust?

Think of a trust as a legal document that creates a container of sorts that holds assets. And then you and your partner serve as what’s called the ‘grantor’ or ‘trustor’ of the trust because you manage the trust’s assets. You may give control of your assets to someone else, who would be called the ‘trustee.’ Eventually, the assets will be transferred to the beneficiaries of the trust.

Couples turn to trusts as part of planning for the future for many reasons. Trusts make it easy to transfer belongings to the people and places of your choice after you pass away. A trust reduces the tax burden that those beneficiaries might face. Also, some trusts protect your assets from challenges such as probate, lawsuits, and the IRS.

There are many different kinds of trusts, but the most common are revocable (often called living trusts) and irrevocable. Both types focus on managing and protecting assets as the trust grantor (or owner) ages.

What’s the difference between the two? Revocable trusts, i.e., living trusts, can be amended or cancelled, while irrevocable trusts can’t be easily changed once created. If flexibility is right for your future, consider a revocable/living trust.

Key Differences Between Prenups and Trusts

Both prenups and trusts offer financial security to individuals, yet they differ in several areas. Understanding these differences can help couples pick the right option for their finances and life together. Here are the key differences:

Purpose and function

Prenup: It’s an agreement couples make before getting married. Standard terms address how assets and debts would be handled if the future doesn’t go as planned. They also may address separate versus marital property.

Trust: It's primarily an asset management and estate planning tool. Its primary purpose is to define how assets are managed during the grantor’s lifetime and distributed after their death.

Parties involved 

Prenup: This requires both partners to agree on the terms. Each partner should have their own, independent lawyer, list all financial information, and voluntarily sign the agreement.

Trust: The trust grantor is the person who creates and funds the trust. When a couple sets one up together, they're usually called co-grantors. They can also serve as co-trustees, meaning they manage the trust together, but those are separate roles

Timing

Prenup: This must be created before partners marry. If you’re already married, you can make a postnuptial agreement instead.

Trust: A trust can be created at any time before or during the marriage.

Assets covered

Prenup: It covers all types of assets and debts, including those brought into the relationship and those acquired during the relationship.

Trust: This manages specific assets that are transferred into the trust. 

A couple of notes on assets and revocable vs. irrevocable trusts:

• A revocable (living) trust helps avoid probate, which can be lengthy and expensive for your beneficiaries.
• A benefit of an irrevocable trust is that it offers your assets the most protection from creditors and lawsuits.

Flexibility 

Prenup: This is amendable or revocable by partners but requires mutual agreement in writing.  

Trust: A revocable trust can be changed or terminated by the grantor, but an irrevocable trust can’t be amended without the consent of beneficiaries or a court order.

Which is Better: Prenup or Trust?

Prenups and trusts are both powerful tools to help couples plan their financial futures. However, they serve very different purposes.

A prenup is best suited for committed, collaborative couples who want to create a clear financial framework for their marriage, including what happens in the event of a separation.

Trusts, on the other hand, are designed for estate planning, inheritance distribution, and asset protection from creditors or lawsuits. While couples can set up a trust together, trusts don’t help navigate the day-to-day or long-term dynamics of a relationship. A trust holds assets while a prenup defines how those assets will be treated over time.

If you decide a prenup is right for your relationship, Neptune is the financial concierge couples trust to build their future. With emotionally-intelligent AI, vetted legal experts, and a flat-fee model, Neptune makes the prenup process less stressful and more aligned.

Chat with Neptune today.