Prenuptial Agreement Alternative: Establish A Trust

You have likely been told it is smart business to enter into a prenuptial agreement before getting married. Any person bringing business or personal assets into a marriage stands to benefit from planning ahead. Without proper planning, all of your assets can be divided up by a divorce court without you receiving any say in the matter.

With over 50% of marriages ending in divorce, it is sensible to be worried. What you're probably not told is a prenup doesn't solve everything and there is a better solution.

There are many good reasons to desire a prenuptial agreement. They avoid fighting at the end of the marriage and show that marriage is about more than just money. Some of our clients include those who have already experienced a failed marriage, have significant assets, are marrying young, marrying on a whim, or are choosing partners who are younger or from overseas. In each of these cases, it is wise to protect yourself.

There are, unfortunately, few natural segues into a conversation about prenups. Merely broaching the subject frequently invites disagreement and unpleasant questions from your significant other. Further complicating matters are the differences between states and even judges within the same state. As a result, prenuptial agreements have been invalidated on a variety of grounds.

For example, Elizabeth Petrakis was able to invalidate her prenup on the grounds that her husband made a verbal agreement not to enforce it. She now has a practice that assists others looking to get divorced.

Due to the uncertain outcome and potentially unpleasant conversation, not everyone who would benefit from a prenuptial agreement enters into one. This is unfortunate as it needlessly exposes assets earned prior to marriage to future divorce claims.

A popular belief is that a prenup will adequately protect you from divorce claims on your current assets. The reality is slightly different, however, as we can see from the number of agreements that have been ripped up.

There is, fortunately, an easier method to achieve the same aims without requiring signing a prenup. This is done through setting up a self-settled trust. This type of trust removes assets from your marital estate by removing them from your name altogether. When you enter into your marriage the assets in question are held in trust rather than in your name.

Removing assets from your marital estate prior to marriage provides more protection than a prenuptial agreement. With a prenup, the assets are still in your name and an overly zealous judge may either partially or wholly invalidate the prenup.

With a trust owning the assets, there is no comparable way to force a transfer to your ex-spouse. Such an arrangement often deters divorce attorneys who are accustomed to going after low-hanging fruit. The trust continues owning the assets while you negotiate a fair divorce settlement on your terms.