Getting married is one of life’s biggest decisions. In the exciting days and weeks leading up to a wedding, it’s easy to get caught up in the whirlwind of wedding planning rather than considering how marriage affects your financial future. While you’re selecting venues and picking wedding party colors, there’s another decision you need to make. You need to decide whether you’ll protect your assets.
Planning for what to do in the event of a divorce may seem like setting yourself up for failure. However, that’s not the case. Being prepared for a possible negative outcome is just a way to ensure that if the worst happens, the consequences won’t be nearly as severe for either party. Whether you own a business, have substantial savings, expect an inheritance, or simply want clarity about your financial future, taking steps now can save you from devastating losses later.
In this article, we’ll explain how to protect your assets before getting married and show you why it’s a good idea:
- Why Should I Consider Asset Protection Before Marriage?
- The Most Popular Method: A Prenuptial Agreement
- Ways That a Prenuptial Agreement Can Fail
- The Strongest Method: An Offshore Asset Protection Trust
- How To Protect Your Assets Before Marriage FAQ
Why Should I Consider Asset Protection Before Marriage?
The reality is that nearly half of marriages end in divorce. Even if you believe your relationship is different, you can’t predict the future. People change. Circumstances shift. What seemed impossible on your wedding day can become an unfortunate inevitability years later.
Smart couples recognize that choosing to protect assets before getting married is simply good planning, not a sign of doubt. When done openly and together, setting up asset protection before marriage can give both partners peace of mind and establish clear financial boundaries from day one.
The Most Popular Method: A Prenuptial Agreement
When most people think about asset protection before marriage, they immediately think of prenuptial agreements. It’s not hard to see why. This legal document is constantly referenced in movies, TV shows, and even popular songs.
A prenuptial agreement (often called a “prenup”) is a legal contract created by both parties entering into a marriage. It outlines how assets and debts will be handled during a divorce. These agreements have surged in popularity among younger couples, many of whom saw firsthand how messy an unplanned divorce can get.
When properly structured, a prenup clearly defines what belongs to each spouse. This includes property you owned before the marriage, businesses you built yourself, inheritances you expect to receive, investment accounts, and even how future earnings will be treated. The agreement can also address debt protection, ensuring you’re not responsible for debts your spouse brought into the marriage or accumulated without your knowledge.
Once a prenuptial agreement is drafted, signed, and notarized, it establishes separate property designations. In most states, everything that a couple acquires during marriage is considered marital property and can be divided during a divorce. A prenup does away with that default toward marital property.
To be legally enforceable, prenuptial agreements must meet four key requirements:
- Both parties must sign voluntarily without pressure or coercion.
- There must be full financial disclosure—hiding assets or lying about debts will invalidate the agreement.
- The terms must be fair and not dramatically favor one spouse over the other.
- It must be executed well before the wedding, not days before when emotions are running high and one party might feel pressured to sign.
However, even if you meet all those requirements, there are still flaws in prenuptial agreements that prevent them from being the end-all-be-all of asset protection before marriage.
Ways That a Prenuptial Agreement Can Fail
Despite their popularity, prenuptial agreements aren’t bulletproof. If you fail to adhere to all four key requirements, they can be nullified, which opens the door to a contentious divorce. And while meeting those requirements may sound simple, you might be surprised at how easy it is to get them wrong.
One of the most common reasons prenups get thrown out in court is a lack of full financial disclosure, even if the failure to disclose was a mistake. For example, if you get married and suddenly realize you forgot to include an inheritance account from your grandmother, which was gifted to you at the age of four, it could completely invalidate the agreement.
Even if you do everything by the book, a prenup can still fall apart. For instance, if you and your spouse worked with a single attorney while crafting the agreement, the court may feel like only one party understood the full terms of the prenup. If that misconception works in favor of your ex-spouse, you can rest assured that their divorce attorney will use that opportunity to rip the prenup to shreds.
Ultimately, though, the biggest flaw is that prenups only work for assets that are specifically addressed in the agreement. Even certain expected assets, like wages earned, can fall outside of your agreement if one party ended up making substantially more or less than they expected when the agreement was drafted. A judge can review a by-the-book prenuptial agreement and modify the terms at will if they feel anything was unfair. That judicial uncertainty can doom your hopes at a fast, clean divorce and throw your whole life into chaos.
The Strongest Method: An Offshore Asset Protection Trust
So, if a prenuptial agreement isn’t the best way to protect assets before getting married, what is? The answer: an offshore asset protection trust (OAPT). These trusts are established in overseas jurisdictions and are completely exempt from U.S. court rulings, including those that take place during divorce proceedings. Anything you place into an OAPT is completely beyond the reach of your ex-spouse and their lawyers. Even better, putting assets into an offshore trust protects them from other threats like creditors and lawsuits.
To use an offshore trust to protect your assets before getting married, you must establish it prior to your wedding, then transfer assets into the trust. Because the assets were moved before you got married, they remain separate property and never became marital assets. Even if your prenup fails, your offshore trust will continue to protect your assets.
Protect Your Assets Before Marriage With Help From Asset Protection Planners
Don’t let a difficult conversation stand in the way of protecting your wealth. Both you and your fiancé deserve the security and peace of mind that comes with protecting your assets before marriage. By working together now to create a plan that fairly accounts for everyone’s needs, you can prevent a contentious divorce should your marriage not go as planned.
If you’re ready to get asset protection that can stand up to even the most scrutinizing divorce lawyer, call Asset Protection Planners. Our team has set up countless offshore asset protection trusts, and we’re ready to establish one for you. Contact us today for a free consultation.
How To Protect Your Assets Before Marriage FAQ
How do I protect property owned before marriage?
Premarital asset protection has become an increasingly popular decision as divorce rates have increased over the past several decades. By protecting what you own before getting married, you can rest assured that even if your marriage doesn’t work out, you will at least walk away with all the wealth you accumulated before your wedding. But what exactly can you do to protect your assets in the event of a divorce?
To this day, the most popular option is a prenuptial agreement. Put simply, it’s a contract signed by both parties stating which assets belong to each party. However, these agreements have some issues. For instance, a prenup cannot favor one party over the other. While that might sound good at face value, it’s not always fair when two people with disparate net worths get married. Most importantly, a prenuptial agreement can be challenged during a divorce. If your marriage lasts a long time before you and your partner separate, chances are good that the circumstances that were in place during the original agreement are no longer the same. That being the case, any good divorce attorney can essentially shred your prenup.
To account for a prenuptial agreement’s shortcomings, some people have opted to create offshore asset protection trusts to hold their premarital assets. These trusts, when created prior to a wedding, essentially hold a person’s assets in a totally secure location. If someone with an asset protection trust goes through a contentious divorce and receives an unfavorable ruling from the judge, their assets will still be safe. Why? Because an offshore trust isn’t impacted by U.S. court rulings. Keep in mind that only offshore trusts can provide this degree of protection. Domestic asset protection trusts won’t protect your wealth from divorce because ex-spouses are often considered exception creditors and can breach defenses that would usually hold creditors at bay.
Interested in protecting the property you own before a marriage? Follow this step-by-step guide:
- Write a list of all your assets, including real estate, investments, business interests, and valuable personal property.
- Consult an experienced asset protection attorney to discuss your options and determine the best strategy for your situation.
- Decide whether a prenuptial agreement or an offshore asset protection trust is right for you. If in doubt, you can choose to use both.
- If using a prenuptial agreement, fully disclose your finances to your partner and sign the agreement well before the wedding.
- If using a trust, establish the trust one to two years before your wedding and transfer your pre-marital assets into it.
- Once married, avoid commingling pre-marital assets with marital property.
- Carefully document the source of any funds and assets placed into the trust.
- Regularly review and update your asset protection plan as your financial situation changes.
- Keep all trust and prenuptial agreement records organized and up to date.
- Seek legal advice before making any major financial decisions during your marriage.
- Periodically review your plan with your asset protection planner to ensure it stays compliant.
- Stay informed about changes in trust laws that may affect your asset protection strategy.
