Why We Recommend "Title-Based" Prenups
Understanding Ownership Before Marriage
Before you’re married, knowing what you own and what you don’t own is pretty simple. If your name is on a bank account or a car or a piece of property, you own it. If it’s not, you don’t.
The Impact of Marriage on Finances
When you get married, a strange thing happens to your finances. The title on an asset isn’t what determines ownership. If you’re married and don’t have a prenup, your spouse legally owns part of your paycheck and anything it touches – your retirement account, your checking account, your savings, a rental property – even if you owned those things prior to getting married. Anything your earnings touch can become marital without you knowing, often accidentally. Many married couples aren’t aware of this rule until they’re going through a divorce and are shocked to hear that they have to divide assets that have always been in their own name, sometimes dating back to before they even got married.
The Concept of Title-Based Prenups
This is why we recommend that couples use a title-based prenup, where we go back to what most people intuitively understand. If something is in your name, whether it’s an asset or a debt, it’s yours. If you and your spouse put an asset or a debt in joint names, it belongs to both of you, 50/50. This is extremely helpful on a couple of levels. For one, it makes it easy to know where you and your spouse stand when it comes to ownership of assets and responsibilities for debts. If you and your spouse want an account to be joint, you are doing so intentionally by titling it in joint names, and you can keep other assets and debts from becoming accidentally commingled by titling them in your own names.
Benefits of a Title-Based System
The second reason this is a great system is because it allows you to continue to acquire assets in the future without having to come back and re-draft your prenup every time you open an account or purchase something. If you open a bank account in the future and you want it to be jointly owned, then you just title it in both names. If you start a business in the future and it’s going to be just your project, you’ll own it and be responsible for any debts of the business, you can just title it in your own name and know that it’s categorized the way that you want it.
Empowering Couples for Financial Flexibility
Using a title based system makes categorizing your assets and debts as joint or separate simple and intuitive as opposed to the default approach of the law which results in a lot of unintended consequences. This gives you and your spouse the most power and flexibility over your financial lives.