Revocable Trust Vs. Prenuptial

It is not romantic for couples to make financial or estate plans before they get married, but it is the smart thing to do. If you are planning to get married, it is unlikely that you are thinking about the marriage not working out. And although the U.S. Census Bureau has found that the divorce rates have been dropping since 1996, divorce is a possibility you should keep in mind. It is also in your best interest to be prepared by protecting your assets with vehicles like a revocable trust or prenuptial agreement.

Prenuptial Agreement

A prenuptial, or ante-nuptial, agreement is a binding contract between two people who plan to get married. The agreement lists each party's individual and joint assets that are not to be included in a divorce settlement. Prenuptial agreements sometimes include wording on how financial and personal assets should be divided if a death or divorce occurs, the allocation of retirement or education funds, division of property owned by either party before the marriage or who will own the rights to life insurance policies.

Revocable Trust

A revocable trust is a legal vehicle that enables you to protect your assets. It allows you to specify your assets should be allocated to your beneficiaries; you also may include yourself as the sole beneficiary. You can place various assets, such as real estate, cars or investments, into the revocable trust. Any property you place in a revocable trust before you get married is often viewed as separate from your estate at the time of divorce and should be off-limits.

Loopholes

Prenuptial agreements, like all agreements, have certain legal requirements. If agreements are not written correctly, it is simple for attorneys to find loopholes. If the agreement is not in writing, or either party is not upfront about all of their assets, this could void the contract. Revocable trusts do not always provide the best shelter for your assets in the case of a divorce. Divorce courts are courts of equity, meaning they will do what is right to make both sides as equal as possible. It is essential that the trust is set up before the marriage or else these courts will see through the effort to the hide money.

Considerations

Whether you put in place a prenuptial agreement or revocable trust, you must take precautions. Your actions after these instruments are set up may void them. For example, after you are married if you add joint assets to the revocable trust, everything in the trust may be viewed as community property in a divorce.

About the Author

Based in New York City, Ben David has been a writer since 2006. His expertise extends into the fields of business administration, new media technologies, consumer electronics and mobile device technology and design. David studied Communications at Howard University.

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