How to Protect Yourself Financially Before You Get Married
Navigating the path to marriage can be an exciting time filled with love and anticipation. However, amidst the planning, it’s easy to overlook a less romantic yet essential topic: how to protect your money before marriage.
Feel a flutter of unease?
Don’t worry. Our New Jersey family law attorneys are here to help you through the process.
This guide offers practical, easy-to-understand advice to help you safeguard your financial future. Think of it not as predicting rain on your wedding day but as preparing for any weather.
Let’s dive in.
Understanding the risks: how marriage can affect your finances
A marriage signifies the joining of two lives. It binds two hearts together, as well as two sets of finances. It’s important to have a good understanding of the financial implications of marriage in order to safeguard your assets in the event of a divorce.
In New Jersey, the assets in a marriage are classified as either marital or separate property. Marital property consists of all assets acquired by either spouse during the course of the marriage. This includes earnings, property bought with those earnings, and any debts accrued during the marriage.
On the other hand, separate property refers to assets one spouse owned before the marriage or received as an inheritance or gifts from a third party during the marriage. Gifts between spouses are generally excluded and would be considered marital property. Separate property remains exclusively owned by the spouse to whom it originally belonged if the property was maintained as “separate” and not commingled with marital property.
The distinction between marital and separate property influences how assets are divided if a marriage ends. While marital property is subject to division based on New Jersey’s system of equitable distribution, separate property is not affected by a divorce.
Before you marry: the benefits of a prenuptial agreement
So, how do you protect your assets before saying, “I do”? The answer can be as straightforward as deciding to sign a prenuptial agreement.
In the past, and often in popular culture, prenuptial agreements haven’t always been seen in a positive light. Some believe that they are only used when spouses go into a marriage unsure of whether they’ll stay together, but these days, plenty of couples with all types of relationships and from all walks of life can benefit from a prenuptial agreement.
Just as a bike helmet doesn’t cause a bike accident, a prenup doesn’t cause individuals to opt for a divorce. But just like a helmet protects your head in case of an accident, a prenup protects your assets if the unexpected occurs.
A prenuptial agreement helps to determine who gets what property in the event of a divorce. It can cover a wide range of assets, from real estate to your grandmother’s precious heirloom. Prenups are especially crucial for those who own businesses, possess significant assets, or have children from previous relationships to consider.
During your marriage: ways to protect your assets
Keeping your money separate doesn’t stop at prenuptial agreements. You can adopt numerous tactics to safeguard your assets during your marriage. Here are some steps to consider.
Maintain separate bank accounts
Having a joint account for shared expenses like groceries, utilities, and vacations is convenient. However, keeping separate bank accounts can also allow you to retain more control over your personal funds and ensure that they remain separate property. This may help reduce the risk of them becoming marital property in the event of a divorce.
However, most income earned during a marriage is considered marital funds, with a few exceptions. The key is understanding what constitutes marital and separate property and avoiding commingling those assets.
Establish a revocable trust
In New Jersey, a revocable trust can offer another layer of protection for your assets. Separate assets placed in this type of trust remain your separate property and generally cannot be divided in a divorce. Transferring your separate assets into a trust adds an extra layer of security to protect your financial health.
Separate gifts and inheritance
Under New Jersey law, gifts and inheritances received during the marriage are considered separate property. Gifts from spouses are generally an exception to this rule. Therefore, make sure to keep these assets in your separate account or revocable trust to avoid commingling them with marital assets.
Keep records
Meticulous record-keeping is critical if you want to trace your separate property and assets back to a separate source. Detailed financial records can be instrumental in proving the nature of these assets if needed.
Understand the value of your assets
Knowing the value of your assets can help protect your financial future. Hire a professional appraiser if necessary to ensure you have an accurate understanding of what you own.
Ensure business assets are protected
Business owners who enter into a marriage may want to consider safeguarding their business assets.
A proactive approach can involve establishing a buy-sell agreement, a contract that outlines the disposition of a partner’s business share upon their exit due to death, divorce, or another event. This legal instrument ensures the business remains separate property, immune from division during a potential divorce.
The value of consulting a financial advisor before marriage
Implementing these strategies can make a significant difference in maintaining financial stability, giving you peace of mind during your marriage and protection in the event of a divorce.
Of course, every situation is unique. That’s why it’s important to tailor these methods to your specific needs and circumstances. By consulting with a financial advisor in addition to seeking the services of a family lawyer, you can craft a well-thought-out plan that ensures your financial well-being, no matter what life throws at you.
A financial advisor can help you:
- Document your assets and liabilities
- Create financial plans and goals
- Evaluate estate planning documents
- And more
Get a personalized solution for your financial security
Marriage is a legal and an emotional compact, and navigating the financial implications of this major life choice can feel overwhelming. But remember, you don’t have to walk this path alone. At Dughi, Hewit & Domalewski, we combine the robust resources of a large firm with the personalized attention of a boutique practice. Our dedicated team of family lawyers, skilled in navigating complex high net-worth cases, trial appeals, and litigation, is uniquely responsive to your needs.
With a transparent, client-centric approach, we’ll empower you to make informed decisions that protect your financial future. Schedule your consultation with our team today.
