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What are the alternatives to a prenuptial agreement?

On Behalf of | Mar 4, 2024 | Divorce

Prenuptial agreements can be an effective tool for protecting assets if a married couple decides to separate. However, a couple might have reasons for not wanting to draft a prenuptial agreement or may not have created one due to a lack of planning.

Fortunately, other options exist that allow people to protect their assets, whether entering a marriage or after already forming the union.

Create a postnuptial agreement

A postnuptial agreement is a legal document couples use after getting married to outline how to divide assets in case of separation or divorce. Both partners must agree on the terms and sign it. This requires listing all assets and debts or liabilities and agreeing on how to handle them.

The document should be clear about each partner’s rights and responsibilities regarding finances during the marriage and in case of divorce. Couples should be sure to update the agreement if circumstances change, like having children or acquiring new assets.

Establish a trust or use other financial vehicles

To safeguard personal assets without a prenup, individuals can turn to trusts and limited liability companies. Trusts allow a trustee to manage assets, shielding them from marital disputes. By transferring ownership to a trust, assets remain separate from marital property. This can include real estate, investments or business interests.

Furthermore, LLCs offer protection for business assets. Through an LLC, ownership interests can remain separate, protecting them from marital claims.

Both trusts and LLCs provide a layer of protection while maintaining control and ownership over assets. It is usually better to establish these structures before marriage to ensure they retain recognition as separate property in the event of divorce.

Separate finances and keep them separate

A married couple could also opt for separate and joint accounts. They can designate specific assets that they acquired before marriage as separate property, ensuring they remain individually owned. This option requires maintaining clear records of ownership and contributions to avoid confusion. As a result, solely relying on the separation of finances is not practical for most couples because of the effort it requires.

A prenup is a popular tool for individual asset protection in a marriage. If a prenup is not the desired option or a couple neglects to handle this matter before getting married, there are still ways to protect one’s separate property.