The Dallas Morning News

Prenups protect for better, worse

- Women. The ABCs of Divorce for

People who aren’t rich or famous typically don’t have prenuptial agreements, which are legal documents detailing who gets what in a divorce. Even ordinary folks without prenups, though, should think about how to protect their money if something goes wrong.

Planning for divorce may be cynical, but it’s also smart, San Diego certified financial planner Ginita Wall says.

“It’s cynical to put on a seat belt when you pull out of your garage, because you’re planning for an accident,” says Wall, who is also a certified public accountant and the author of several books including

“You want to be safe if that happens, God forbid.”

Marital breakups aren’t the only concern. Creditors can come after joint accounts and property if a spouse has unpaid debts or gets sued, says Carl Soranno, a family law attorney in Roseland, N.J.

“Even if your marriage is strong, or you think it’s strong, there are events that can put pressure on it,” Soranno says.

Estate planning can also be easier when at least some assets are kept as separate property. You might trust your spouse to do right by the kids after you’re gone, for example, but can you trust your spouse’s next spouse? Separate property can allow you to better control who inherits after your death.

“Separate property,” by the way, is the legal term for assets such as cash, investment­s and real estate that you owned before you married. It also applies to any gifts or inheritanc­es you receive during marriage.

But there are plenty of ways separate property can become marital property if you’re not careful. Depositing an inheritanc­e into a joint account can do it. So can using money from a joint account to pay taxes on separately owned investment­s or property. State laws vary enormously, so it can be worth consulting an experience­d attorney or financial planner to find out the rules that apply in yours, says CFP Shelly-Ann Eweka, a wealth management director with TIAA in Denver.

“You want someone familiar with your state laws and your situation to give you advice,” Eweka says.

Here are some moves that typically help to protect what you own: Have “mine” and “ours” accounts. Some couples keep all their accounts separate, but many prefer the convenienc­e of joint accounts for joint expenses. If you decide to share accounts, open new ones together rather than adding a partner to existing accounts. If you’ve already commingled funds, open new accounts in your name alone if you receive a gift or inheritanc­e. Use separate accounts to pay expenses for any property that’s solely in your name. Be careful with real estate. A reader added her beloved husband to the titles of her home and rental properties. When he died, she ended up with his two children from a previous marriage as co-owners of the real estate — not an outcome she expected or wanted. Another way separate property can potentiall­y turn into marital property is using joint funds to pay the mortgage, maintain the building or remodel.

Keep good records. Ideally, you’ll know what your assets are worth the day you marry. Bank, brokerage and retirement account statements from the previous month or quarter can help establish their value. If you own a business or other hardto-value property, consider getting it appraised before the wedding. Hang on to copies of wills or trusts that show an inheritanc­e, along with account statements showing the deposits. If you receive a gift, keep a copy of the check or ask for a letter from the giver documentin­g the value. Consider a “postnup.” A postnuptia­l agreement is similar to a prenup, but it’s created after a couple marries. Postnups can be especially helpful when couples want to divide things up differentl­y — either in a divorce or in their estate plans — than their state laws would otherwise dictate. (Just one example: In most states, income from separate property is also considered separate. In Texas, it typically belongs to both spouses.) A written agreement is much better than an “understand­ing” or verbal promises about who owns what, Wall says.

“What happens in divorce is a scarcity mentality sets in,” Wall says. “People start going for every dime they can get because there’s not enough to go around.”

 ??  ?? LIZ WESTON

Newspapers in English

Newspapers from United States