5 Ways to Protect Your Money Without a Prenuptial Agreement

A prenuptial agreement is prepared when a couple has decided to marry and one person wants to protect their assets or perhaps one person is coming into the marriage with more wealth. The idea of signing a prenuptial agreement is not romantic, however, given the rise in the divorce rate there is a greater chance marriages will not last.  If your soon-to-be spouse does not want to sign one or you have recently been married but still want to know how to protect your money here are a few tips:

  1. KEEP YOUR FUNDS SEPARATE. Any money you earned or received prior to marriage is your own money. Do not commingle or mix this money with your spouse’s. Just because you are married does not mean they are entitled to money you had prior to your marriage. California is a community property states, which means anything you earn after marriage is both of yours. There is an exception for any money received through inheritance or a non-marital gift. TIP- keep all money you receive during the marriage through an inheritance or non-marital gift separate from community funds. This is your separate property.
  2. KEEP REAL ESTATE SEPARATE. Many people own a home prior to getting married. After a couple gets married, the home-owner may decide to put their spouse on the deed but this could be viewed as gifting your spouse half the interest of the home. You may be thinking that you want to make sure your spouse is taken care of if you happen to die before them. However, if there is a divorce later on down the road that explanation may not fly in the court. There are other ways to protect your spouse in the event that you do predecease them, such as getting an Estate Plan in place. A revocable living trust in California is necessary to avoid probate. You could get a separate property trust drafted that would essentially provide for your spouse without giving them ownership of the property.
  3. USE NON-MARITAL FUNDS TO MAINTAIN NON-MARITAL PROPERTY. So you have decided to keep the title of the house in your name. Now you are married and you are earning money, which in California is deemed community property money. The mortgage has to be paid so you use your community earnings. Well what happens is you create a very complex situation. As you pay the mortgage, with community property money, your spouse is slowly gaining an interest in the property, which means over time they could have a significant interest. In order to avoid this, if you have money that you had acquired prior to marriage you should use that money to pay the mortgage until you are no longer able to. This will reduce your spouses’ interest in the property. Make sure you are able to trace the source of funds to pay the mortgage.
  4. KEEP DOCUMENTS FROM THE DATE OF MARRIAGE. Many times in a divorce one party needs to prove what the value of a certain asset or the balance of a certain account is for the purposes of dividing the asset or account. If you do not have statements or are unable to retrieve them then you will be playing a guessing game as to the value or balance. It is smart to document the following assets values:
    • Value of home at the time of purchase
    • Value of home at the time of marriage
    • Balance of mortgage at time of purchase
    • Balance of loan at the time of marriage
    • Balance of bank accounts at the time of marriage
    • Value of all retirement accounts at the time of marriage, including but not limited to:
      • Pensions
      • Stocks
      • Bonds
      • IRA’s
      • 401k
      • 403b
      • 457 plan
      • Money Market Accounts
      • SepIRA
  5. GET A VALUATION OF BUSINESS AROUND DATE OF MARRIAGE. If you own a business you should get it valued because the court has the potential to award your spouse the appreciated value of the business during the marriage.

A prenuptial agreement is the most ideal way to protect your assets in the event there is a divorce. However, if you follow the tips above you can reduce your potential liability if you did not get a prenuptial agreement. Before you decide to get married consult with a family law attorney to determine if you should get a prenup or other ways to protect your assets.

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