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Divorce | Family

Do Prenups Protect Future Assets?

7 min read
Francesca Toledo, J.D.

by Francesca Toledo, J.D.

Prenups are popular among the wealthy, but in reality, they can serve a purpose for any couple. Prenups are useful to protect assets and provide provisions for future asset distribution.

When crafted correctly, prenups can and do protect future assets, earnings, and debts.

If you’re contemplating a prenup, consider hiring a lawyer to help create a favorable agreement. We can connect you with an Unbundled family lawyer in your area today.

What Is a Prenup?

A prenuptial agreement, also referred to as a prenup, antenuptial agreement, or premarital contract, is an agreement created between a couple before they get married. This type of contract has many uses, but most frequently serves as a roadmap to simplify divorce or make provisions in case of a spouse’s death.

Many view prenups unfavorably, especially the individual whose future spouse is proposing the agreement. Many believe prenuptial agreements cast a negative shadow on a marriage, looking ahead to a future divorce. Prenups must legally be fair to both parties, not just one. If created correctly, the agreements can be a beneficial tool.

When Is a Prenup a Good Idea?

While a prenuptial agreement can be right for any couple, there are certain people and instances that would benefit significantly from having one in place.

A prenuptial agreement is helpful in any of the following situations:

  • You or your fiancé are entering the marriage with substantial wealth, assets, or property
  • You or your fiancé expect to accumulate wealth or an inheritance in the future
  • You or your fiancé own a business
  • You or your fiancé are entering the marriage with considerable personal debt
  • You or your fiancé have children from a previous relationship

Additionally, prenuptial agreements can eliminate much of the stress and contention if the marriage ends in divorce. Prenups serve as protection and provide much peace of mind. 

What Assets Can a Prenup Protect?

A prenuptial agreement can protect assets, big and small. These are some assets prenups can protect:

  • Real property
  • Financial assets
  • Businesses
  • Vehicles
  • Inheritance
  • Jewelry
  • Family heirlooms

If a couple wishes to protect certain assets, it is best to mention them with specificity in the agreement. 

Does a Prenuptial Agreement Protect Future Assets?

While a prenup can protect future assets, the agreement needs to be created strategically if it is to be useful in the future.

To successfully protect future assets in a prenuptial agreement, the prenup must describe the assets in detail. Without this, the court may deem the agreement vague and make its own determinations regarding ownership and distribution. 

Future assets can encompass many things, for example, a trust set up for the future or future income. For example, if one of the spouse’s grandfathers set up a trust and that spouse expects to gain control of the trust in the future, they can use the prenup to protect the assets in that trust.

A well-written prenuptial agreement can also protect a spouse’s future earnings. Perhaps the spouse does not have a significant income when they enter the marriage, but they expect to start a business or work on their career. That spouse can include protection for these future earnings in the agreement.

A prenup not only protects future assets and income but can also provide details for future debts. This is beneficial when one or both enter the marriage with large personal debt, or either spouse is not financially savvy. If one spouse incurs debt during the marriage, the prenuptial agreement can protect the other spouse from having to take responsibility for that debt. 

Spouses create prenuptial agreements with the future in mind. This does not mean the spouses foresee divorce in the future, but some individuals feel more comfortable having a plan. While you and your spouse may never need the prenup, it provides assurances and protection. 

Prenuptial Agreements in Community Property States

Prenuptial agreements are especially popular in states that follow community property laws for divorce.

Community property is property acquired during the marriage, regardless of which spouse acquires it. Separate property is property each spouse acquires before entering the marriage. In community property states, when a couple divorces, the judge deciphers between separate property and community property. Spouses are entitled to keep their separate property, and community property is divided equally between the spouses.

Prenups are beneficial in community property states because dividing property equally between spouses can be unfair in many circumstances. If, for example, the husband earns significantly more than the wife, and he purchases two homes during the marriage, these homes would be considered community property and would be divided equally between the two spouses. 

If you live in a community property state, you can use a prenuptial agreement to protect these future assets in case of divorce. This can give you comfort, knowing your hard-earned assets will remain in your possession no matter what happens in the future.

Can a Postnup Accomplish the Same Goals?

Prenuptial agreements are most common, but there is a similar type of contract: the postnuptial agreement

A postnuptial agreement is essentially the same as a prenuptial agreement, except the couple enters into it after they marry rather than before. There is no time limit for these agreements, and a couple can create a postnup any time during their marriage. 

Postnups have the same requirements and involve the same topics as prenups. Therefore, if you marry and decide you’d like to protect your future assets or earnings, you can create a valid postnup to accomplish your goals.

Can We Modify or Revoke a Prenup in the Future?

Prenups are not forever, and situations change. In many cases, couples enter into a prenuptial agreement and down the line circumstances change, requiring a modification or revocation of their prenup. This can be accomplished, but only if both parties agree. The agreement cannot be changed or revoked by one spouse.

To modify or revoke a prenup, both parties must sign a written agreement specifying their intention to change or cancel their agreement. 

Can You Protect Future Assets without a Prenup?

There are no guarantees you’ll be able to protect future assets or earnings without a valid prenup in place.

Couples can attempt to keep their finances separate by having their own bank accounts, purchasing real estate separately, and filing taxes separately. Taking these steps can help the court determine who owns what and make issues regarding finances clearer. However, there are no guarantees any of these actions will protect you in the future. 

If you’re serious about protecting yourself in the future, a prenup (or postnup) is the way to go. Nothing else comes close to providing this level of protection.

What Happens When You Get Divorced and Have a Prenuptial Agreement?

If your marriage ends in divorce, but you have a prenuptial agreement, the prenup can make the process much simpler. Usually, if the prenup is valid, enforceable, and unchallenged, whatever is stated in the prenup will occur.

So, for example, if your prenup dictates that everything you purchase on your own remains in your possession after the divorce, this is what will result.

Divorce is frequently emotionally and mentally taxing, and it can bring out the worst in both individuals. A prenuptial agreement will not eliminate all stress, as certain topics, including child custody and support, can still remain on the table. Nonetheless, having a prenuptial agreement in place can help eliminate some difficulties and make the process easier for everyone involved. 

Do I Need an Attorney for a Prenuptial Agreement?

You are not required to have a lawyer draft and execute your agreement, but having a qualified attorney can prove better in the long run. A family lawyer knows what is required to create a valid and enforceable prenup and the laws that affect your agreement. 

Additionally, both spouses should have their own respective lawyers. While some states allow spouses to share a lawyer, it is always best to have your own. Having a lawyer exclusively represent you can help ensure your rights and interests are protected throughout the process.

An Unbundled Lawyer Can Help Protect Your Future Assets with a Prenuptial Agreement

If you’re considering a prenuptial agreement, an unbundled lawyer can help you greatly.

An unbundled lawyer is the same as a traditional family lawyer, but the services they offer vary. While a regular lawyer will handle your matter from beginning to end, hiring an unbundled lawyer means having a lawyer available only when you need them most. Therefore, you can handle your matter on your own to help cut costs, while still feeling secure having a qualified lawyer available for you.

Unbundled Legal Help strives to provide affordable and accessible legal help for all. We have an impressive network of skilled lawyers, and we can match you today with a lawyer in your area.

Don’t handle your prenuptial agreement on your own. Contact Unbundled Legal Help today.

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