When two people embark on their journey toward marriage, they may find themselves consumed by the excitement of planning their future together. Amid the anticipation and romance, more practical matters like their finances may not be at the forefront of their minds. More couples than ever are recognizing the importance of protecting their interests and their future by signing prenuptial agreements. Prenuptial agreements give engaged people a powerful tool to secure a worry-free future.
What is a Prenuptial Agreement?
Understanding prenuptial agreements is the first step in safeguarding your future. A prenuptial agreement, commonly called a prenup, allows a couple to define the distribution of their debts, assets, and financial responsibilities in the event of the death of one spouse or a divorce. Signing a prenup agreement is a wise way to safeguard your interests and protect both partners’ well-being.
The Benefits of Prenuptial Agreements
The ability to protect your personal and business assets is one of the critical advantages of a prenup. If you do not sign a prenup, your assets may be subject to division if you do get divorced. When a couple has worked hard to build a successful business or accumulate possessions, losing assets in a divorce can be concerning. With a well-drafted prenup, you can ensure your assets remain separate property and aren’t subjected to the division of your marital assets.
Prenumps Help Couples Agree on Their Financial Rights and Obligations
Financial challenges can be a source of conflict for many couples and are a leading reason couples get divorced. Taking the time to talk about the terms of a prenup agreement provides clarity about each spouse’s financial rights and obligations during the marriage and in the event of a divorce.
Taking the time to discuss how your responsibilities will be shared with your soon-to-be spouse, the allocation of debts, and the management of joint bank accounts can help you avoid conflict and disputes in the future. Discussing areas of potential conflict can help you focus on building a harmonious and strong bond with each other.
Safeguarding Children From Prior Relationships
For those who have children from prior relationships, signing a prenup can be invaluable in protecting the interests of their children. In a prenup, you can clearly outline how assets should be distributed should you divorce or one of you pass away, ensuring your children from a prior relationship are not disinherited unintentionally or become financially compromised.
Protection From Liabilities and Debts
When two people get married, every aspect of their lives merges together, including financial aspects. Without a prenuptial agreement, one spouse could become more responsible for the other spouse’s previous debts and other liabilities they incurred before marriage.
A prenuptial agreement is crucial when one spouse has significant school loans, credit card debts, business debts, or other debts. A well-drafted prenuptial agreement can ensure the spouse who does not have as many debts will be unaffected by the other spouse’s debts and liabilities.
Can a Prenup Protect Future Assets?
Prenups can protect current and future assets and cover various issues, ranging from marital obligations to finances. Some of the most common aspects covered in prenuptial agreements include the following:
- Confidentiality
- How the couple will file taxes during the marriage
- Division of assets and debts in case of divorce or death of a spouse
- Spousal support (also called spousal maintenance or alimony)
- Ownership of gifts or inheritance
- The management of joint bank accounts and other financial assets
- Social media image
- Pet custody
The language used in prenuptial agreements may say the prenup covers assets “acquired during the marriage,” which can be confusing. However, this phrase includes future assets because when you write a prenup. You are not married yet. Prenuptial agreements are only legally valid when they are executed before the marriage. There are many ways to protect future assets using a prenuptial agreement. Some of the types of future assets you should consider include the following:
- Future business interests
- Future income
- Future assets you purchase using separate property
- Future appreciation on separate property
- Future gifts and inheritances
Protecting Your Future Income
It is also important to consider a person’s future income, including any money you have not yet None of us can predict the future. You or your spouse may start a business or grow an existing one. Your prenup should include a future business clause and address what should happen to the future business and the income it earned. Income earned that is not currently held in one of your bank accounts. Anything you purchase with your future income should be considered separate property.
Whether it is future income, pre-existing assets, or the appreciation of your assets, anything you categorize as separate property may be exchanged for your future property. Suppose you own a vehicle before you get married, and it is considered your separate property. If you sell the vehicle after getting married and use the money you made to purchase another car, is the new vehicle considered your separate or joint property? You and your soon-to-be spouse can make that decision in your prenup.
Protecting Gifts and Inheritances
Prenups can protect your inheritances and gifts. For inheritances, you will need to outline the estimated value of the future asset. It is impossible to know exactly how much you will make in the future. However, with inheritances, you must try to estimate the amount. You may be able to ask the general amount your relative will pass down to you. As for gifts, you likely will not be able to estimate their value, but they are technically a future asset you need to protect, which you can do with a prenuptial agreement.
Contact a Texas Attorney as Soon as Possible
More couples than ever are using prenuptial agreements to clarify their financial roles and responsibilities, protect their assets, and secure their futures. If you have questions about prenuptial agreements, do not hesitate to contact Covington Law Firm, PLLC, to schedule an initial consultation.
