Many people come to us asking how they will be able to predict their future life circumstances and create a prenup that accounts for all of life’s possibilities. Well, of course, no one has a crystal ball to know exactly what will happen, but there are legal mechanisms you can include in a prenup that can help you to incorporate unknown future changes into the agreement. Anything from protecting future assets to requiring a spouse to maintain life insurance can be helpful in making sure all your bases are covered for the future. Let’s dive into some of the ways you can incorporate future changes into your prenup.
Protect Future Assets
The most obvious one is protecting future assets. Yes, you can protect future assets in a prenup. In fact, it’s one of the most important aspects of most prenups. You can protect any of the following:
- Future assets (real estate, bank accounts, artwork, crypto, etc.)
- Future income (salary, bonuses, commission, royalties, etc.)
- Future businesses
- Future appreciation of assets
- Separate property assets sold and used to purchase future assets
- For example, you own House A, and it’s your separate property, but in the future, you end up selling it and purchasing House B with the proceeds. You can make sure House B is still YOUR property.
As you can see from the list above, there are many different ways you can protect future assets. For example, if you want to protect the future appreciation of assets, the prenup itself may say something along the lines of, “The appreciation in value of all separate property accumulated during the marriage shall remain the separate property of Spouse A.” (Of course this is not necessarily the EXACT language you will see in your prenup, but you get the gist).
This can be confusing for some people because the term “future assets” isn’t always explicitly used in all prenups. Any asset or income earned during the marriage is considered a “future asset,” so if you don’t see “future asset” but you do see “during the marriage,” that is usually referring to the same thing. In other words, a prenup is executed and written BEFORE the wedding; the second the wedding takes place, the “clock” starts ticking, and your prenup goes into effect, making anything accumulated “during the marriage” a “future asset.”
Protect Future Inheritance
You can accommodate for any future inheritances you may receive whilst married. How? Well, you need to speak with your Mom, Dad, Grandma, Grandpa, Aunt, Uncle, etc. Whoever you will receive an inheritance from, you will need to know an ESTIMATED amount of how much you will receive to the highest degree of accuracy as possible. Once you have that amount, you can include it in your financial schedule (and attach it to your prenup–HelloPrenup makes sure it’s attached for you), and make sure that your prenup includes language that protects all future inheritances.
For example, let’s say you *think* you’re getting an inheritance from Grandma Sue. You’re in the process of getting a prenup, and you want to make sure that’s protected. While Grandma Sue is only at the young age of 76 right now and has plenty of years left, you still will want to include the possibility of receiving an inheritance from her in your prenup. So, you need to speak with Grandma and ask her approximately how much this future inheritance might be. Of course, uncertainties still exist: she could live until she’s 110 and use up every last drop of her savings, or the market could skyrocket, and your inheritance quadruples at the time of her death. Whatever the case may be, you’ll still want to provide the most accurate estimate of your future inheritance as possible at the time of making the prenup.
Protect Against Future Debt
Marrying a serial entrepreneur who takes out lines of business credit like it’s candy? Or maybe you’re marrying an online shopping addict with loads of credit card debt. Or maybe you’re just marrying the average American who has about $20,000 to $25,000 in student debt. Whatever the case may be, you can make sure that you are protected against any and all future debt that your partner takes out. EVEN if you don’t know exactly what that debt is right now.
For example, let’s say you are getting a prenup, and you want to protect against any unknown future debt that your spouse takes on. Your prenup may say something along the lines of, “All debts and liabilities assumed during the marriage shall remain Spouse X’s separate liability.” (Disclaimer: this is just an example for your conceptualization, this may not be the exact contract language that is written in your prenup). This type of provision accounts for the unknown and unpredictable debt that your partner may take out during the marriage.
Again, you probably noticed that it doesn’t say “future debts,” and that’s okay– as long as it refers to “debts accrued during the marriage,” it basically means the same thing. Why? Well, your prenup is written and signed BEFORE the marriage, so it follows that any debt accrued DURING the marriage is “future debt.”
Waive Alimony UNLESS Children Are Had
Warning: waiving alimony can be “dangerous” for many reasons, so be careful here and consider consulting an attorney before waiving alimony. With that said, waiving alimony with certain future stipulations can be a great way to incorporate future changes into your prenup.
For example, let’s say you only want to allow for alimony if you have children (right now, you’re not sure if you want to have any). You can do this with a prenup. This is especially beneficial for people who will be stay-at-home parents and will need financial support for themselves in case of a divorce. But if you’re not even sure whether or not you’ll become parents one day, this is a great way to incorporate future changes regarding alimony in your prenup!
Keep Alimony In And Let A Court Decide
Another simple way to handle alimony in a prenup is by simply letting a court decide at the time of divorce. This allows you to deflect to the future circumstances and allow a court to apply state law when determining whether alimony is warranted or not. This is helpful in incorporating future changes into a prenup because a judge can look at your circumstances at the time of divorce (which may be very different from the time of the prenup) and make a decision then.
Pay Lump Sum Only If ____
A lump sum payment clause, also known as an equalization clause, is when one spouse pays the other spouse a set amount of money upon divorce (this is NOT alimony or property division, it’s a separate payment). Including a lump sum payment in your prenup (with stipulations) is another good way to account for unforeseen changes in circumstances.
For example, let’s say you add into your prenup a clause that says Spouse A will only pay a lump sum of $10,000 to Spouse B if they’ve been married for more than five years. This is a way to account for future changes by only requiring a lump sum payment if five years have passed. This may be because you plan to have children within five years (future change) or some other reason.
Add A Life Insurance Clause
A major unexpected life circumstance is death. Everyone’s going to die; no one knows when. So how do you accommodate for that in a prenup? Well, there are a few ways (see the death clause below), and one of those includes adding a life insurance requirement clause. A life insurance clause in a prenup typically mandates that one or both spouses maintain a life insurance policy for a certain amount with the beneficiary as their spouse. This helps protect the surviving spouse in the event of this extreme life change.
Add A Death Clause
Another way to address death (i.e., a major life change) in a prenup is through a death clause. A death clause essentially points to a will and can also eliminate inheritance rights of the surviving spouse. For example, a death clause can state that upon death, Spouse A’s stuff will pass through their estate (i.e., the beneficiary listed on their Will will get their “stuff”). It may also say that Spouse B does not have any right to claim Spouse A’s separate property. This basically makes sure that your stuff is dictated by your Will. Now, you can still make your spouse part of your Will in this scenario, but it gives you more control. For example, let’s say you want MOST of your stuff to go to your little brother, but you want to give, say, 10% to your spouse. You can do this through a prenup death clause and a will.
The Bottom Line
There are many ways to account for the unknown with your prenup. It’s impossible to know exactly what will happen in the future, but there are some ways that you can legally “cover” for many of the future changes that will happen.
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: [email protected]