Most of us know that marital contracts are often used for financial purposes. Many people with high assets, for instance, create prenups strictly for this purpose.
What is less well known, however, is exactly how this works. We see movies and TV shows with rich people fighting over premarital agreements, but we don’t receive a lot of details on exactly what that means.
In this article, we will offer a broad overview of how prenups work, revealing the ways they can protect your property in case of a divorce.
- Marital Contracts Can Name an Asset’s Owner
Within a marriage, property generally comes in two classifications: marital property and separate property.
Marital property consists of assets that originates within the marriage, and the spouses have equal ownership of it. Anything that either spouse purchases, for example, can qualify as a marital asset. This includes gifts from one spouse to another.
Separate property comes from outside the marriage. It includes inheritance, gifts from people other than your spouse, and anything you owned before the marriage. Only one person owns separate property.
If you look closely, you’ll realize that within a marriage, anything you purchase may not be truly “yours,” even if you are the only one who uses the item. A prenuptial contract can bypass this problem. You can decide, before you solidify the relationship, exactly what items will belong to each person.
- Prenups Can Designate and Protect Money
Sometimes, people must protect their money from themselves. They set up an account that they can use only for specific purposes.
A premarital contract can do this for both spouses. It can set money aside, keeping either person from using it. This will be helpful for savings, college funds, and so on.
- Marital Agreements Can Determine How to Handle a Divorce
It’s unpleasant to think about the possibility of divorce, especially before the marriage begins. The unfortunate reality, however, is that about half of all marriages will end. Before you tie the knot, you should consider this fact.
Using a prenup, you can decide how to split your assets, what to do about spousal support, and more in a divorce. Otherwise, you are subjected to whatever the state believes is best.
Most states use an equitable distribution system, meaning they give property to the person they believe deserves it. A good attorney could argue for entitlement to property that has no business going to their client. Kentucky is an equitable distribution state.
Other states use an even more antiquated method. They operate under an “equal” distribution model, where they attempt to give each spouse 50% of the overall marital assets. This means that, even if you keep your property, you will owe your spouse half its value.
A prenup can bypass all this. You can decide for yourselves who deserves what, put it in writing, and rest assured that you will be treated fairly.
Our firm can help you and your spouse craft a prenuptial agreement that is fair and beneficial for everyone. For a free consultation, schedule time with us online or call us at (270) 977-8910.