Knowledge Is Power – Understanding Marital Property
When a couple become engaged, they are thinking of uniting, not dividing and many are reluctant to enter into a prenuptial agreement. A prenup may be everything but romantic, but establishing “financial intimacy” and having a clear understanding of what will happen to their assets once they are married is actually a key component to a secure marriage. This is why it is so important to have a prenuptial consultation even if you choose not to sign it.
The term “Marital Property” refers to ALL property, cash, and investments a couple accrues after marriage, and it encompasses assets acquired by one or both spouses. Virtually anything that has a value can be defined and considered as marital property. Homes, real estate, autos, boats, airplanes, furniture, artwork, cash, cryptocurrency, bank accounts, financial securities— stocks & bonds, retirement accounts, pensions, gold and other precious metals, businesses and professional practices, gifts from one spouse to the other, contributions made to a 401k or retirement plan, even the family dog can be considered an item of “value”.
In the event of divorce, marital property is divided by the court. The court determines what is fair in the process of division, and this is not necessarily what is equal. For couples considering divorce this information can come as a shock and often leave parties bewildered. One party may not have understood that the house they inherited before marriage is now considered marital property because their spouse invested in it, or funds were co-mingled, or things were paid for through a joint banking account. The lines can easily become convoluted and blurred when it comes to identifying marital property and this can be quite confusing and even devastating for some.
Knowledge is power and having a clear understanding of what could happen to hard earned, long-term investments down the line is critical when planning for the future. So, while it might seem unromantic and even somewhat cold-hearted for soon-to-be married couples and/or newlyweds to be contemplating this stuff, a clear and collective understanding of marital property and how assets can be combined and/or protected in a marriage, will lead to informed decision making as well as more control over future events and ultimately a stronger union.
**It is highly recommended to seek counsel in order to truly understand what is considered in the marital asset bank.
Elephant in the Relationship?
They say love is blind…and because talking about money, debt, previous marriages, illness, dependents and other forms of financial burden can often be scary and/or awkward topics for engaged couples (not to mention a real romance killer) many chose not to talk about them at them at all. Not wanting to bicker or fight with their partner, they figure that maybe after the wedding, when they are legally one unit, it will be easier for them to address these issues with their partner. But this is not necessarily the case.
When forming a business partnership there is typically a legal agreement/contract which both parties acknowledge and sign. These documents establish the legal parameters of the relationship, clearly defining expectations as well as consequences should one partner decide to jump ship. Both parties are provided with a guide for legally navigating the future whatever it may bring, be it great success or ultimately a breakup. Marriage is also a legal partnership, but it can be more important than any other kind as theoretically it represents a life-time commitment and will no doubt have a direct impact on one’s personal life, assets, debt, inheritances, and business. When it is successful, marriage is a partnership that becomes a couple’s main livelihood.
Talking about money, assets and debt is usually considered to be taboo, but it is super important for couples who are planning to marry. What will each partner bring to the marital table? It could be anything from student loan debt, alimony payments, child support or a declining start-up business to a giant family inheritance, real estate investments or some other highly successful business venture. Couples who want to safe guard what they have achieved financially as individuals in addition to what they may achieve in the future often consider prenuptial agreements. Gone are the days when prenups were considered to be contracts for the rich and famous only. These days it’s more about two individuals forming a partnership and their need for legal protection. Having a clear and understanding of what the fiscal future will look like, whether together or dare say apart, can actually serve to strengthen the bonds for many couples.
Each state has laws that govern division of property, retirement benefits, savings, alimony, etc. Entering into a prenuptial agreement before marriage can help couples to determine their own fiscal path as opposed to having to comply with the default marital laws that exist within their state. It can also help with clarifying estate shares should a spouse become bankrupt or deceased. Ultimately a prenup is a protection plan with the power to supersede state laws, allowing couples to personalize their wants and needs in terms of future outcomes.
This is nothing new. Hanging on the walls of the Oriental Institute of the University of Chicago, is an Egyptian marital document over 2,480 years old. This written agreement, signed by both parties, states that if the marriage didn’t work out, the wife would be adequately provided for. It goes on to outline exactly how many pieces of silver and how many bags of grain she would receive every year for the rest of her life.
The foundation of a strong relationship is trust, and this is especially true when it comes to money. Discussing a prenup is inherently awkward for most couples, but you don’t want finances and money management to become the elephant in your relationship. So, how do you get the conversation started? Maybe it is as simple as stating that you want to protect your partner, or explaining that this is something your family has always done, or letting them know that you are thinking of both your futures. Whatever you decide, be prepared to listen to your partner and to make the discussion a collaborative one. Also…timing is everything. A prenuptial agreement should be considered carefully and under the advice of a legal professional, but it is definitely something worth thinking about and discussing.