A Prenup to Protect Your Spouse from Third-Party Creditors
Most people think prenups are an underhanded way to prevent one’s ex – in the event of divorce – from obtaining what should belong to him or her in the first place. In other words, prenups have a bad reputation that they really don’t deserve. Prenuptial agreements are legal contracts that help to delineate how assets will be divided if a couple does divorce – thus allowing the couple to potentially bypass an arduous and contentious divorce process. But there’s more to prenups than this alone. A prenup can also help you protect your spouse from third-party creditors associated with your own debt (if you enter the marriage with a considerable amount of debt). Whatever your prenup concern, an experienced Florida prenup attorney can help.
What a Prenup Can’t Do
One point that it’s important to make is that no prenup or postnup can relieve you or your spouse of your financial obligation to pay back debt that is considered marital property. Generally, any assets or debts you accrue during the course of your marriage are considered marital property, which will be divided in a manner that’s deemed fair in relation to the circumstances in the event of a divorce. Prenuptial agreements can’t alter this fact. If, however, you are bringing considerable debt into the marriage, a carefully crafted prenup can help protect your spouse in the event of a divorce or upon your death.
A prenuptial agreement is only binding for the two parties involved – and does not affect a third-party such as a loan holder or credit card company or their ability to come after money that’s owed them. If both of your names are on the loan or card, then you are both on the hook financially. Further, if the debt was accrued during the course of your marriage (regardless of whose name it is in), you’re both likely financially responsible. A prenuptial agreement, however, can allow one spouse to go after the other to obtain reimbursement for third-party debt payments (that are delineated in the prenup).
Many people are confused by the idea of prenuptial agreements, but the basic facts are fairly straightforward, including all of the following:
- Prenuptial agreements are signed before you marry and are executed upon your marriage.
- Prenuptial agreements are recognized in all 50 states.
- Prenuptial agreements establish how your assets will be divided if the marriage ends in divorce.
Prenuptial agreements can clarify which premarital debts are separate and can delineate which marital debts are separate.
Pursuing a Prenup
If you think a prenup is a good idea for your situation (such as if you are interested in protecting your soon-to-be spouse from your own debt), there are several points to keep in mind:
- Timing Matters – If your prenup is signed right before your marriage (either several days or several hours ahead of the event), it can smack of coercion. Both of you need to take your time and carefully consider the ramifications of your prenup. If you allow a month or more to lapse in between the time that you sign the contract and when you are married, the more legal integrity your prenup is likely to have.
- You Need Separate Legal Counsel – For your prenup to hold up in court, you both need to have your own legal counsel. Again, if your future spouse isn’t represented by an attorney, the prenup will have the taint of coercion. If you need a prenup, you need it to stand up to legal scrutiny, which requires that you both have legal guidance. Further, a prenup has far too many important potential ramifications to leave to chance.
- Postnups Can Also Offer Protections – If you’ve already married but believe your spouse is too vulnerable to your considerable debt, a postnuptial agreement may help. While postnups don’t have the same legal pull as prenups, they can bolster your commitment to your intentions regarding your debt. What a postnup can’t do, however, is artificially dump all your marital debt on one or the other of you in an attempt to offload it via divorce (when the spouse with the debt declares bankruptcy). In other words, the court will be on the lookout for financial shenanigans.
- Prenups Can Change the Horizon of Your Estate Planning – While estate planning is incredibly important, it’s critical to understand that if your widowed spouse doesn’t agree to the terms proposed in your will, he or she can opt out, move through probate court, and receive his or her court-mandated share of your estate. With a prenup, however, your spouse will have signed off on your mutually agreed-upon plans, which makes legally altering them far more difficult. While this generally won’t be an issue if your motivations are to protect your spouse from your debt, it’s an important point to keep in mind regarding whom you want to receive what when you’re gone – and is especially pertinent if you have children from another marriage.
- Prenups Are Superseded by the Law – A prenup cannot alter any legal financial requirements. For example, a prenup can’t alter the amount of child support that will be owed if the marriage ends in divorce (unless the specified amount exceeds Florida’s child support calculation), and a prenup cannot void a spouse’s pension rights.