Protecting Your Assets Before Marriage
Marriage is both an emotional and financial partnership. While no one enters marriage anticipating divorce, smart financial planning can protect both spouses and prevent conflict down the road. In Tennessee, one of the most effective tools for protecting assets before marriage is a prenuptial agreement.
When it comes to marital property, Tennessee follows an equitable distribution system. Equitable distribution means if a couple divorces, marital property is divided fairly — but not necessarily equally. Marital property includes assets acquired during the marriage. Separate property includes assets owned prior to the marriage, inheritances earner prior to or during the marriage, and gifts to one spouse. However, separate property can unintentionally become marital property through commingling (mixing separate funds with marital funds) or transmutation (treating separate property like marital property). For example, depositing premarital funds into a joint account, using marital income to improve a premarital home, or adding a spouse’s name to a deed can cause separate property to become marital property. Without proper planning, assets you intended to keep separate may become subject to division.
A prenuptial agreement is a contract entered into before marriage that outlines how property, debts, and sometimes alimony will be handled if the marriage ends. A prenup is an effective tool to help plan and protect your assets in the event of divorce. In Tennessee, prenuptial agreements are generally enforceable if they are entered into voluntarily, knowledgeably, in good faith, and without the exertion of duress or undue influence. A properly drafted prenup can protect business interests, shield premarital assets, clarify responsibility for debts, address future appreciation of assets, define or limit alimony obligations, and make property division much simpler upon divorce.
Prenuptial agreements can be for anyone, but they are particularly useful if you own a business, have significant premarital savings or investments, expect a substantial inheritance, own real estate before marriage, or if one spouse has substantially more income or assets. Even couples with modest estates may benefit from clearly defining financial expectations.
To maximize the likelihood of your prenuptial agreement being enforced upon divorce, it is important to start planning early to avoid pressure and last-minute signing. If you are planning on entering into a prenuptial agreement, start discussions with your spouse well before the wedding date. It is best to ensure that both parties have independent legal counsel and provide complete financial disclosure. Finally, make sure the final agreement is in writing and has been executed properly.
If you are unsure about a prenuptial agreement, there are a few other ways to protect your premarital property, such as postnuptial agreements, trust planning for inherited assets, and clear documentation if premarital assets and ownership. However, these tools may not provide the same clarity and enforceability as a well-drafted prenup.
A prenuptial agreement is not about planning for divorce — it is about financial clarity and risk management. By addressing property division and financial expectations upfront, couples can reduce uncertainty and protect both parties’ interests. If you are considering marriage and want to protect your assets, reach out an attorney to discuss your options.
