Should you consider a prenuptial agreement? Of course the answer depends on your particular circumstances, but there are some considerations to think about when deciding whether to enter into a “prenup”.
Georgia is an equitable division, not a community property, State. This means that in the event of a divorce, if you and your spouse cannot decide how to divide your marital property and debt, a judge will decide these issues depending on what he or she thinks is equitable under the facts and circumstances of your case (which may or may not mean “equal” division). Consideration of whether to enter into a prenuptial agreement should begin with an understanding of what “marital property” and “marital debt” are. Marital property is, in a very general sense, any property acquired during the marriage; it does not matter who “bought” the property, in whose name the property is titled, or who primarily uses the property – if it was acquired during the marriage, it is generally considered marital property. Marital debt works the same way – any debt acquired during the marriage is generally considered marital debt, no matter who incurred the debt. Marital property and marital debt go into the “marital pot” to be divided equitably in the event of a divorce; again, “equitable” does not necessarily mean “equal” and property and debt might be divided in a manner that is not equal or “50-50”
The exception to this general rule is that any property inherited individually or acquired by gift individually by either party is their separate property. In addition, any property or debt the parties brought into the marriage is considered their respective separate property or debt.
So, why might you want to consider a prenuptial agreement? It is very easy to comingle separate assets and to transform separate assets into marital assets, sometimes without even realizing that this is happening. For example, if one party owned a home before the marriage individually, and after the marriage placed their spouse’s name on the title, the entire property is considered marital property. This sometimes happens when a home owned by one party before the marriage is refinanced, and the other party’s name is added to the deed for any reason; the entire property is now marital property instead of separate property. One way to protect a separate asset such as a home owned before the marriage from becoming marital property subject to equitable division is to have a prenup that states that the property will remain the initial owner’s separate property no matter whether the other party’s name is added to the deed. Another example involving real property is when one party owns the home prior to the marriage and it remains in that party’s name alone, but the other spouse inherits some money and uses it to significantly pay down or pay off the mortgage; this is a gray area that can lead to litigation regarding just exactly how much of the equity is marital property and how much is separate property.
The parties’ incomes acquired during the marriage are also marital property. What about the case where one party has a retirement fund before the marriage, but makes deposits into that fund from their income received during the marriage (the income is marital property)? How much of the retirement fund is marital property and how much is separate property? You can spend a great deal of time and money on financial experts to help determine the answer to this question, or you can specify in a prenuptial agreement how the division of any retirement funds are to be handled in the event of a divorce. Are the accounts to be split equally? Will each party keep the entire value of their own account? Will some amount be defined as premarital or separate property and some amount as marital property in the prenuptial agreement? A prenuptial agreement can define exactly what is considered to be marital property and what is considered to be separate property in the event of a divorce.
There is also the case of appreciation in property. A prenuptial agreement can specify how any appreciation in separate or marital property will be handled in the event of a divorce, as well as how the proceeds of any sale, trade, or other disposition of the property will be treated.
If one of the parties owns their own business prior to the marriage and wants to ensure that the entire business remains theirs after a divorce, they should consider a prenuptial agreement to state that the business will remain the separate property of the business owner spouse and that the other spouse waives any claim to the business.
A prenuptial agreement will specify whether the parties waive any claim to temporary and permanent alimony, and can even put conditions on the right of either party to claim alimony; for example, the prenup can state that the right of one or both parties to claim alimony in the event of a divorce be tied to the number of years of the marriage (i.e., a party cannot claim alimony if the marriage lasts less than five years or any other amount of time). The right to claim alimony can be conditioned on the absence of certain behaviors, such as adultery, viewing pornography, violence, or almost any other behavior the parties wish to specify.
A prenuptial agreement will specify how certain marital property will be divided. For example, if the husband is an avid fisherman and he buys a bass boat during the marriage and outfits it with all of the latest expensive accoutrements, it is considered marital property and is subject to equitable division, regardless of whether the boat was titled in the husband’s name or what funds were used to purchase the boat. Rather than taking the chance of having such property go into the marital pot to be divided, the prenuptial agreement can specify that any such property that is acquired in one party’s name alone or for their exclusive use and enjoyment during the marriage is their separate property even though it was acquired during the marriage. A prenuptial agreement can also state that any property bought with funds from a certain account, such as a savings account in one party’s name individually, will be that person’s separate property (so if that bass boat was purchased with funds from a savings account that was held in the name of the husband alone, the boat would be considered his separate property).
There are cases in which one spouse, who is the spouse with the majority of premarital assets, might want to specify that a portion of those assets might still be divided in the event of a divorce. For example, a party with a significant investment account before the marriage might specify that a certain percentage of that account would be awarded to the other spouse under certain conditions, such as the length of the marriage (i.e., 10% of the account would be awarded to the other spouse if the marriage lasted 10 years, 20% if the marriage lasted 15 years, 30% if the marriage lasted 20 years, etc.).
A prenuptial agreement should also be considered by parties getting married for the second time and who want to specify the exact parameters of how the property they bring into the marriage and the property the acquire during the marriage will be divided in the event of a divorce, especially if the have children that are the beneficiaries of retirement, investment, or other financial accounts.
A prenuptial agreement can state that any debt incurred by one party individually or in that party’s name individually during the marriage remain their debt after the divorce and that such debt not be subject to equitable division.
A premarital agreement is not just for “rich” people. It can be a good idea for people who want to define what their separate property is, what marital property is, and how they are going to divide their assets and debts in the event of a divorce. The parties do not have to worry about comingling their assets, transforming separate property into marital property unknowingly and unintentionally, or the uncertainly of how courts would determine what property is separate and what property is marital and therefore subject to equitable division.
Consult with an experienced family law attorney to discuss whether a prenuptial agreement is right for you.