Divorce | Family
What Assets Can a Prenup Protect?
by Philip Ahn, Attorney
Couples create a prenuptial agreement to protect their assets. Signing a prenup can give you peace of mind and guarantee that you know where you stand financially in case of a divorce. But what assets can a prenup actually protect?
It can protect assets you owned before the marriage, from real estate to retirement funds, and more. It can also protect future assets you acquire as an individual, such as a business you start or an inheritance you receive.
When two people decide to get married, they often start planning a future together. In many cases, this involves financial planning. A prenuptial agreement is an opportunity for the couple to sort out their finances before the wedding bells. It’s also a way for the spouses-to-be to explore what financial options they have and make more informed decisions in the future.
Having a prenup in place can secure you and your future spouse’s financial well-being. It can also protect your other family members, future children, and children from previous relationships. We can connect you today with an Unbundled family lawyer in your area to assist you with a prenup.
What Is a Prenup?
A prenuptial agreement is a written document signed by two people who are about to get married. It typically lays out the financial obligations and rights of both partners in case of a divorce or the death of one partner.
The core of a prenuptial agreement is a list of individual assets each spouse owns prior to the marriage. Most prenups don’t cover assets that each spouse may acquire in the future — but it can be done. You can also add clauses to the prenup on spousal support (alimony) and other financial arrangements.
Does a Prenup Protect Future Assets?
Yes, you can also use a prenuptial agreement to protect future assets. A prenuptial agreement can define what marital property is and what happens to it after a divorce.
Marital property is any property acquired in either of the spouse’s names between the date they are married and the date they file for divorce.
Marital property may include real estate, bank accounts, investments, prized possessions — and more. In most cases, marital property is considered to belong to both spouses in equal part. This means that in case of a divorce, marital property will be divided equally between the spouses.
However, you can add specific clauses to your prenuptial agreement that will help you protect not only existing assets but also assets you plan to receive in the future. Here are a few examples:
- You can add a provision to the prenuptial agreement saying that if the property obtained during the marriage can be traced back to one of the spouse’s separate properties, it will then be divided in accordance with the contribution of each spouse to this property.
- You can add stipulations to the prenup that will protect your future income. For example, if one spouse starts a business at the beginning of the marriage, a clause in the prenup can specify that the future earnings from this business will belong to the one spouse in case the marriage doesn’t work out.
- A prenup can also protect a future inheritance. For instance, if one spouse expects to receive a sizable inheritance, they can add a clause to the prenuptial agreement that will protect the inheritance to come in case of a divorce.
As you can see, a prenuptial agreement can protect a variety of future assets. With that, it can also protect one spouse from being liable for the other spouse’s debt. You can add clauses to the prenup that will address each spouse’s potential financial liabilities. This way, the debts of one spouse will not become the responsibility of the other spouse in case of divorce or death. For example, if one spouse incurs credit card debt during the marriage, the other spouse can rest assured that they won’t have to worry about having to pay back the debt if the marriage ends.
Another strategy to protect future assets is to use a postnuptial agreement. A postnup serves the same purpose as a prenup — but the couple signs it after they are officially married. In many cases, a postnup is used to update a prenup if a major change in the financial circumstances of one spouse has occurred. If you could not add proper provisions to your prenuptial agreement regarding your future assets, you can do this with a postnuptial agreement. In fact, it may be the only way to ensure that the assets you require after you get married remain in your full control.
How To Draft a Prenuptial Agreement?
In most states, a prenuptial agreement will only be valid if a lawyer has looked it over. Moreover, in most cases, each spouse will need to have legal representation before signing the prenuptial agreement. The job of each lawyer here is to make sure that the agreement does not violate the rights of the spouse they represent and does not compromise their best interest. They will also need to explain the real-life consequences of each clause in the prenuptial agreement so both parties understand what this means for their financial situation.
This means both spouses will need separate representation. So, what does this amount to in legal costs?
The cost of prenup-related legal services varies from $1,500 to $5,000 and more, depending on your circumstances. Most lawyers charge a specific amount for a package of services that include drafting, negotiating, checking, signing a prenup, and more. If your prenuptial agreement is complicated (for instance, both spouses have substantial assets or there is a need for a lot of negotiation), there will be additional charges. Most lawyers charge from $300-$500 per hour for any additional time spent on your case.
The process for signing a postnuptial agreement is very similar to that of signing a prenuptial agreement. To sign a postnup, both spouses will need separate legal representation. The costs of drafting a postnup can equal those of signing a prenup.
How To Save Money on Legal Costs when Making a Prenup?
A prenup can be an effective way to protecting your assets in case of a divorce. In fact, having a prenup will help you cut down on divorce-associated legal fees.
With your financial matters already settled, you may file for an uncontested divorce. An uncontested divorce means that you and your spouse agree on all the divorce-related issues and, thus, don’t need to go to court.
An uncontested divorce is straightforward and substantially less expensive. Each state has their own requirements that the couple must meet to file for an uncontested divorce. However, the main requirement for settling a divorce out of court is the absence of custody and financial disputes.
Still, drafting a prenuptial agreement is not cheap. This is because most lawyers will charge you a fee for a full package of services which include everything from drafting to negotiating and signing a prenup. However, sometimes, you may not actually need a full package of services. For example, you may only want a lawyer to look over your prenuptial agreement and make sure it’s drafted correctly and respects the rights of both spouses. If you just need a specific legal service, you can turn to Unbundled Legal Help and use unbundled legal services. Here’s how it works: with unbundled legal services, you will be able to select and pay for only the legal services you need in your specific case. Potentially, this can help you save thousands of dollars in legal fees.
On the other hand, not all cases are a good fit for unbundled legal services. Sometimes, if you have many assets to protect, or you and your spouse do not agree on some positions in the prenup, it is probably best to hire full legal representation. But you can still use unbundled legal services in this case. At Unbundled Legal Help, we work with many smaller firms and individual attorneys. Their cost for full legal representation when drafting a prenup can be substantially lower than what you might find on the legal market.