Understanding how a prenup could work for you

If you aren’t sitting on a pile of cash you may think that a prenuptial agreement is not worth entering into before marriage. A prenuptial agreement can be used to protect more than cold hard cash however which could make it worth exploring. Some of the ways in which it may be used may be surprising to readers.

The first is that a prenuptial agreement may be used to protect a professional license. Depending on the state in which someone resides these licenses—such as those secured by nurses, financial advisors, lawyer and doctors—are considered to be marital assets for purposes of dividing assets in a divorce. Among other things, the future earning potential associated with it may be taken into consideration.

A prenuptial agreement might also be used to protect a family business. While without a prenup any increase in value a business sees during the course of a marriage could be considered a marital asset, addressing a family business in such an agreement can keep it completely separate.

Inheritances via a trust fund might also be protected by a prenuptial agreement. Even if money inherited is comingled with other marital assets a prenuptial agreement can keep the inheritance from being considered a marital asset should the marriage later end in divorce. To work, it needs to be made clear in the prenup that a trust is not a part of marital property. Similarly, a prenuptial agreement might make it clear that any assets purchased with funds from a trust are not marital property.

Asset protection is not the only way a prenuptial agreement might be used. I can also explain whose debt is whose. This could be of particular help in situations where one of the spouses enters the marriage with a large amount of student loan debt.

To make sure that prenuptial agreement does what each spouse intends, it is important to work with someone who understands what is necessary to include. Accordingly, most find it beneficial to work with a lawyer.

Source: MainStreet, “Why You Need a Prenup to Marry Even If You Think You’re Poor,” Marc Levy, Oct. 6, 2014