A question we get all the time is: “Can my prenup protect my future assets?” And the answer is YES. You don’t need to have any assets to enter a prenup and still protect yourself. In fact, many of our customers do not have any assets (and they may only have debt). Why? Because they know that they will one day be making money and accumulating assets, and a prenup can protect future “stuff” as well! In this blog, we will explore this question in depth and hopefully provide some clarity on the topic!
What is a Prenup?
Before diving into the question of whether a prenup can include future assets, it’s important to understand what a prenup is and what it typically covers. A prenup is a contract that a couple signs before they get married. It outlines how assets and debts (both existing and future) will be divided in the event of a divorce, as well as any other legal issues related to the marriage.
What Can a Prenup Cover?
The question of the day is, can future assets be protected in a prenup? And the answer is yes; prenups can protect both existing and future assets. Prenups can cover a wide range of issues, from finances to marital obligations to the relationship itself. Some of the most common things covered in prenups include:
- Division of assets and debts in case of divorce (and sometimes death)
- Spousal support (a.k.a. alimony or maintenance)
- Ownership of inheritance or gifts
- The management of joint bank accounts and other financial assets
- How taxes will be filed during the marriage
- Confidentiality
- Social media image
- Pet custody
- And much more!
How Are Future Assets Addressed in a Prenup?
Sometimes it may be confusing because you will see the term “acquired during the marriage” quite often in case law, statutes, and in the prenuptial agreement language itself. “Acquired during the marriage” is equivalent to saying “future assets” because when you are writing up the prenup, you aren’t married YET. (Prenups are only valid if executed prior to the marriage).
With that in mind, let’s talk about how to address future assets in a prenup. There are a bunch of different ways to go about this, but here are a few different “future asset” categories to consider:
- Future business interests
- Future assets that you purchase with separate property
- Future income
- Future appreciation on separate property
- Future inheritances and gifts
Future business interests
No one has a crystal ball that says exactly what businesses someone will open in the future. Heck, you may have no idea that you’re the next Jeff Bezos with an idea like Amazon! Enter: the future business interests clause. Yes, you can ensure your future businesses (even if they don’t exist yet) are protected in a prenup!
Future assets purchased with separate property
Whether it’s pre-existing assets, future income, or appreciation of assets, anything you categorize as separate property may be exchanged for future property. Let’s say you have a car, and it’s considered your separate property. You sell the car in the future and use those proceeds to buy another car. Is the new car yours, or is it joint property? Well, you can make that choice in your prenup! (If you’re confused, check out example 4 in the section below).
Future income
It’s also important to consider future income, which refers to money that you haven’t earned yet and isn’t currently held in a bank account. Anything purchased with that future income should also be designated as separate property. Again, we lay this out in a realistic scenario in Example 3 in the section below.
Future appreciation
Many things in life gain value over time. Maybe it’s a house or an investment account. Whatever it is, money tends to grow as time passes (i.e., appreciation). What happens to those future gains? Well, they can be protected in a prenup by ensuring all appreciation on your separate property is protected in a divorce!
Inheritances and gifts
Don’t forget about those inheritances and gifts. For inheritances, while they are still future assets that you have yet to receive, you will need to make sure to outline the estimated value of the future asset. So, most future assets you aren’t able to estimate (how could you possibly know your exact amount of future income?). But with inheritances, it’s slightly different. Inheritances can be estimated because your living relative knows the general amount that they’re going to pass down to you.
As for gifts, they’re a little less predictable than inheritances. For example, you probably have no idea just exactly what wedding gifts you’re going to receive from your parents, aunts, grandparents, etc. But they are technically future assets that you may want to protect, which you can do with a prenup.
What Are the Benefits of Including Future Assets in a Prenup?
There are several benefits to including future assets in a prenup. First, it can provide clarity and certainty for both spouses. By outlining how future assets will be divided in the event of a divorce, both spouses can have peace of mind and be confident that their financial interests are protected.
Second, including future assets in a prenup can also help prevent disagreements and disputes down the line. By addressing potential sources of conflict in advance, couples can avoid the stress and expense of a contentious divorce.
Examples of how it might work in real life
Below we’ve laid out some examples for you to get a better comprehension of how including future assets might look in different prenups.
Example 1: Future investment gains
Rita and Rob are engaged and setting up their prenup. Rob has an investment account with $100,000 in it (that he owned before the marriage). He wants to make sure that any future gains he makes on this $100,000 are protected. So, he makes sure to include a clause that lists appreciation during the marriage as separate property. (Along with protecting the original $100,000 principle, as well). Let’s say Rita and Rob get divorced after ten years of marriage. That investment account has now grown to $500,000. The $400,000 in appreciation is safe and sound and deemed Rob’s separate property.
Example 2: Future businesses
George and Gianna are getting married in a few months and are getting their prenup in order. Gianna is a personal trainer at a gym but hopes to open her own gym one day. She has no idea if that business idea will ever come to fruition, but it’s definitely something she wants to do! So, can she protect this possible future business in her prenup? The answer is yes! She can make sure that her FUTURE business interests are protected (along with any existing businesses if she has any).
Example 3: Future income
William and Wendy are in love and ready to tie the knot, but first: prenup! Wendy is an up-and-coming software engineer at a big tech company. She’s only 25 years old now, making around $300,000, but she anticipates her future salary could reach up to $600,000! She wants to make sure that future income is protected (rightfully so!). A prenup can definitely help with this! She can delineate a section that states any future income is also her separate property (not subject to division).
Example 4: Property purchased with separate property
Henry and Helen are getting married and getting their prenup in order. Henry is concerned with his real estate portfolio and making sure it remains his separate property. With all the buying and selling of his real estate, his main question is, “What if I sell one of my properties and then purchase a new property with those proceeds? Is that still technically mine?” It can be if you put it in your prenup, Henry! Henry should include a prenup clause that states any property purchased with the proceeds of one person’s separate property should also remain separate. So, if Henry sells House A during the marriage and then purchases House B during the marriage, House B is still considered his!
Frequently Asked Questions (FAQs) about future assets in prenups
If you have lingering questions on this topic, we get it. Keep reading to learn the answers to some commonly asked Q’s.
Q: Is a prenup necessary if you don’t have any current assets?
A: While a prenup is often associated with protecting current assets, it can also protect future assets. So, the choice is up to you: do you want to protect future assets?
Q: How does a court know which future assets are protected if I don’t specifically list them?
A: Courts understand you don’t have a crystal ball to predict the future. The language in your prenup agreement should be all-encompassing and specific enough to cover any future assets you acquire.
Q: Can a prenup be changed after it is signed?
A: Yes, with stipulations. A prenup can be modified or revoked after the marriage has taken place, as long as both parties agree to the changes and they follow state laws.
Q: Are prenups only for wealthy couples?
A: No, not necessarily! Prenups can be useful for any couple who wants to protect their financial interests and avoid the stress and expense of a highly contested divorce.
Conclusion
To sum it up in one sentence: yes, you can protect your future assets that don’t exist yet with a prenup! By working with a lawyer or using a reputable platform like HelloPrenup, you can address potential future assets from business to inheritances to appreciation and avoid a messy divorce.
Ms. Taylor earned a Bachelor of Science degree in Justice Studies from Arizona State University in 1995. She obtained her Juris Doctor degree in 2014 from Arizona Summit Law School. In 2018, after more than 20 years managing multimillion dollar construction and real estate contracts, Ms. Taylor retired from the City of Phoenix. In 2022, she was licensed to practice law in the State of New Mexico, as well as federal law (Immigrations, Bankruptcy, and Securities) in all 50 states. Attorney Taylor is a zealous advocate with more than a decade of experience working in Immigration, Bankruptcy, Real Estate, Social Security Disability, Estate Planning, Business Formation, Debt Settlement & Collections, Contracts, and Family Law. She is also a certified Mediator.
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