Did you know that two-thirds of adults under the age of 43 receive financial support from their parents? If you’re one of the lucky ones receiving financial help from your parents as an adult, you’re also probably aware of how much that help can ease som of life’s big (expensive) moments—whether paying for a wedding, a down payment on your first house, or even helping with your kids’ education. But here’s something that might surprise you: if you get divorced, any money your parents have gifted to you during your marriage isn’t automatically protected. Yes, it was their money until they gave it to you. The good news? A prenup can help make sure your parents’ money is protected. Let’s discuss everything you need to know about protecting parental support with a prenup.
Why parental gifts are at risk in a divorce
The financial support you receive from your parents could become part of the marital estate in a divorce, especially if the money is not specifically protected with a prenup. Without a prenup, the money your parents give you during your marriage could end up being split in a divorce. In most states, whether they follow community property or equitable distribution laws, any money that’s gifted and then mixed with marital funds could be considered part of the marital estate, which means it’s up for grabs in a divorce settlement.
For example, imagine your parents give you $200,000 to help with the down payment on your first home. Without a prenup, that money could be treated as marital property and divided between you and your spouse if you divorce. But, with a prenup, you can make sure that contribution stays separate and doesn’t get mixed in with the rest of the property that could be divided up.
A prenup is like a financial safety net for your family’s gifts, ensuring they stay exactly where they belong: with you.
How to protect parental contributions in a prenup
So, what should you include in your prenup to make sure your parents’ gifts are protected? Here are some key things to think about:
Gifts as separate property
The most important thing you can do is have your prenup clearly state that any financial gifts from your parents are separate property. That way, there’s no question about whether that monetary gift is yours or ‘ours.’ Be specific about the amounts and purpose of the gifts. You can get as detailed as you want in a prenup—so think through any potential scenario where you might receive money, whether it’s for a wedding, a house, or anything else. Please note, all of this is subject to the below consideration (keeping gifts in separate accounts).
Keep gifts in separate accounts or separate title (!!!)
One of the most important rules when it comes to keeping gifts separate is to avoid mixing them with joint, marital accounts. In addition, avoid adding anyone to the name of a deed if it was a parental gift. If you deposit that gift money into a shared account, it will likely be considered commingled and lose its separate property status. To ensure the gift stays protected, keep it in a separate account in your name. Simple, but crucial.
Consider a loan structure for larger gifts
In some cases, your parents might want to lend you money instead of giving it as a gift. If that’s the case, you can outline a loan structure in your prenup. For example, the gift could be set up as a loan that gets repaid if the house is sold or in the event of a divorce. This way, your parents’ money is protected, and there’s a clear plan for repayment if things don’t work out.
How to start the conversation about a prenup
Now, here’s the part that might feel a little tricky: talking to your partner about getting a prenup. This conversation can be sensitive, but it doesn’t have to be uncomfortable. Start by explaining that it’s not about distrusting your partner—it’s about protecting the financial help your parents have given you. Also, feel free to blame your parents. It is their money, and it should remain protected as they see fit.
You can also frame the discussion as a way to provide security for both of you. A prenup isn’t just about protecting your money but about making sure that both partners in the marriage are on the same page when it comes to finances. And if you’re on the receiving end of parental support, explaining this to your partner will show them that you value the wealth your family has provided, which will inevitably help support your shared lifestyle, and want to protect it.
This advice is underpinned by the fact that you *must* listen to your partner’s concerns, too. A good conversation should be a two way street. The goal is to have a practical, transparent discussion about how to keep your family’s financial gifts safe while also building trust and security in your relationship.
The bottom line on protecting parental support
As you can see, the most important thing to understand is that (1) your parents’ gifts to you are not automatically protected, (2) you should consider a prenup to ensure that any gifts from your parents are kept separate, and (3) you should always keep parental gifts in a separate account or in separate title. With the Great Wealth Transfer upon us, and nearly two-thirds of adults under 43 receiving help from their ‘rents, it’s imperative to consider that financial support from parents could be lost in a divorce without these protections in place.
Julia Rodgers is HelloPrenup’s CEO and Co-Founder. She is a Massachusetts family law attorney and true believer in the value of prenuptial agreements. HelloPrenup was created with the goal of automating the prenup process, making it more collaborative, time efficient and cost effective. Julia believes that a healthy marriage is one in which couples can openly communicate about finances and life goals. You can read more about us here Questions? Reach out to Julia directly at Hello@Helloprenup.com.
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