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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance.

Prenups Aren’t the Only Way to Secure Premarital Assets

Prenups Aren’t the Only Way to Secure Premarital Assets

By Britt Erica Tunick

Anyone who is about to walk down the aisle is usually not thinking about what will happen should their marriage fail. The reality, however, is that not all marriages make it. If you have significant assets before you get married, you should think about protecting them against the possibility of a divorce down the road.

Though there has been a significant increase in the number of people within the U.S. who wait longer to get married in recent decades, and divorce rates have been trailing off for several years, divorce is still a reality that people cannot afford to ignore. Circumstances are also a major factor in many divorces and are something that is beyond your control. Take, for instance, the COVID-19 pandemic. After just the first four months of the arrival of the coronavirus and all the stresses and complications related to it, divorce rates within the U.S. rose by roughly 34%, according to data from Legal Templates.

While prenuptial agreements have been the traditional way for individuals to protect their assets against the possibility of a divorce, they are not the only way of doing so. Another way of protecting your assets from divorce is to create an asset protection trust prior to getting married.  Placing any assets within that type of irrevocable trust prior to marriage, particularly when it comes to real estate or a business, transfers the legal ownership of those assets to the trust instead of you. That distinction is important because it means that those assets would be protected against any claims from a spouse in the case of divorce, including any potential alimony you may be required to pay. It is essentially as if those assets do not exist.

Though a prenup is also designed to protect any assets an individual owns prior to getting married against a potential divorce, there is a major difference between the two vehicles. In the case of a prenup, both parties must divulge all of their assets to their future spouse prior to getting married and both must willingly agree that specific assets would be protected from a divorce. Setting up a trust is something an individual can do on their own and without the agreement or signature of a future spouse, as long as the trust is created before a marriage takes place.