Should You Have a Prenup if You’re Broke?
A lot of people will say that you only need a prenuptial agreement if you have something to protect—a premarital asset like a house or inheritance—in the case of a divorce. So, if you and your spouse get married young and you’ve only got a few hundred dollars to your name, then you don’t have anything to protect with a prenuptial agreement. While a prenuptial agreement may be less likely to offer protection to a person who doesn’t have anything to protect, it doesn’t mean that it’s completely unnecessary and should be discounted without any further consideration. There may be some cases where a person who does not currently have a lot of money may want a prenuptial agreement to protect future assets.
Can a Prenup Protect Future Assets?
Yes, a prenuptial agreement can protect future assets, but only to an extent. For example, a prenuptial agreement can protect a future inheritance, a growing business, a growing retirement account, etc. However, it needs to be understood that protecting future assets is not the same as ensuring your spouse has no right to the asset whatsoever. When it comes to protecting future assets, prenuptial agreements can outline how the assets will be handled in a divorce, which can mitigate each party’s exposure to financial liability or division. This does not mean, however, that a prenuptial agreement can guarantee that all financial risk is eliminated. For example, your prenuptial agreement may say that each party will take their own 401k and that neither party will split their 401k. However, the prenuptial agreement may also indicate that you’ll both take half of the equity in the marital home in the event of a divorce. Your prenuptial agreement can contain such language even if those 401ks are still empty or the marital home has not yet been purchased, and equity has not yet accumulated.
Leaving a Spouse Destitute and Other Limitations
While you can protect future assets, there are still limitations to prenuptial agreements. For example, you cannot leave your spouse destitute per your prenuptial agreement. If you have the ability to pay alimony, and your spouse will be forced to rely upon public support if you do not pay alimony, then you could be ordered to pay alimony even if your prenuptial agreement dictates otherwise. It’s also important for both parties to have legal representation when signing a prenuptial agreement. Prenuptial agreements aren’t make-sure-she-doesn’t-get-a-dime-contracts; they’re designed to protect both parties. If you are looking to completely eliminate your financial risk, you may want to consider alternatives to getting married, as marriage will almost certainly come with some financial risk. Prenups can reduce the risks but not completely eliminate them. How your prenuptial agreement affects your future assets may vary depending on what the financial situation looks like when the divorce occurs.
Misconceptions about Prenuptial Agreements and Future Assets
When it comes to protecting future assets, there tends to be a misconception about what can be protected, and how much protection you can get. Prenuptial agreements can offer a lot of protection for future assets, but the agreement would need to be worded carefully in order to be effective. While this doesn’t mean that you automatically should avoid getting a prenuptial agreement if you don’t currently have anything to protect, it also doesn’t mean that everyone should have one in order to protect vaguely defined assets they may one day acquire.
Would a Prenuptial Agreement Help You?
A prenuptial agreement may be beneficial to those who already have assets, or those who have specific assets that they will one day acquire. For example, if you are entering a career field where you are likely to earn a lot of money—medicine, for example—it may be worth it to consider a prenuptial agreement, especially if you are going to marry someone who will make substantially less, or will be a stay-at-home parent. If you know you’re at the beginning of your earning potential, and you reach a catalyst in your career, that’s when you should consider addressing a prenuptial agreement with an attorney. In this example, a prenuptial agreement could potentially mitigate the higher earning spouse’s financial obligation in the event of a divorce.
When You’re Considering a Prenup
If you are considering a prenuptial agreement, having legal representation can be extremely important, especially if you’re looking to protect future assets. Contact CoilLaw today to set up your initial consultation.
