Why It's So Hard to Protect Premarital Assets Without a Prenup
One of the most common questions about prenups is why are they needed to protect premarital assets. After all, the law pretty much everywhere says that your premarital assets are considered your separate property, which isn’t up for division if you get divorced. But at the same time, everyone knows that one of the primary reason people get prenups is to protect premarital assets – why?
Commingling of Marital and Separate Property
The money you earn during marriage is considered marital money. And if you put any marital money into the assets you owned before marriage, in the eyes of the law, you’ve commingled your separate property and your marital property. Typically what courts will say is that once you’ve mixed your separate property and marital property – we’re going to look at it as marital property unless you can prove that it’s separate, which can be very hard to do.
Retirement Accounts as an Example
The most common example is your retirement account. You’ve contributed to it before marriage, and you keep contributing to it after marriage. You’re mixing your separate property with your marital property. After 10 years, how do you prove how much of the increase in that account is due to what you had coming into the marriage, and how much of the growth is from the contributions you made during the marriage? Especially when you’re rebalancing the portfolio, selling and buying investments – the answer is many people can’t, and all of that growth ends up being divided.
Bank Accounts and Daily Transactions
It’s even tougher for bank accounts where money is going in and out several times – were you spending premarital money or marital money? You can’t prove which is which, so the court defaults to it’s all marital.
Realistic Asset Management
Unless you have an asset that you never touch at all, never put a penny towards it during the marriage, don’t improve it, nothing – which isn’t realistic for most types of assets – it’s likely that what you bring into the marriage will get commingled in some way.
The Importance of a Prenup
So even though the law says that what you bring into marriage is your separate property, it’s almost impossible to protect it unless you spell it out in a prenup.