According to Gemma B. Allen,a prenuptial agreement can alleviate a lot of confusion during a divorce.
Allen, a family law attorney and coauthor of “The New Love Deal: Everything You Must Know Before Marrying, Moving In, Or Moving On!,” explains that a prenup can provide an overall comprehensive approach to how assets and liabilities will be treated, protect a specific asset or family interest, and even protect against social media exposure.
“A prenuptial agreement is an amazingly flexible tool that can accomplish whatever goals the couple wants in terms of their financial futures,” Allen says. “It gives couples a level of control over their future and takes them out of the ‘discretionary’ power of the court system.”
If you don’t have a prenup, however, the fate of your assets in the event of a divorce is mostly in two figurative hands: your state and your court.
“Where you live matters more than you know when and if it comes to divorce,” says Allen, “because states have some very serious and some only subtle differences in their laws and how the factors interplay, but the differences all can affect your future.”
On a broad scale, states may divide your assets in two different ways.
The first method of division, used by most states, is called “equitable property,” or “dissolution.” In this case, Allen says, “only the marital assets are divided on an equitable basis, and the non-marital assets, like a gift or an inheritance, or which you had before you were married and kept separate, are yours alone.”
The other is called “community property,” and it gets a lot of press because although it only applies in eight states, one of them is California, land of high-profile celebrity divorces.
“In those states, the judges have no discretion regarding the joint assets and simply divide them in half, but there too the inherited and premarital assets generally remain the separate property of the one who has them,” explains Allen.
LegalZoom.com lists the process for each state.
Allen explains that assets may include just about everything you own, “including houses, businesses, timeshares, bank accounts, stocks, insurance policies, options, patents, copyrights, trademarks, cars, boats, and planes, along with all retirement and deferred assets, and even your Aunt Millie’s favourite lamp.”
Classifying assets can get particularly tricky when it comes to things other than retirement accounts or lamps. “If all of the assets are real estate, who sells what, when is it sold, and at what price? If the asset is a business interest, how can the spouse who is the owner afford to ‘buy out’ the other spouse, and what kind of terms should be set?” Allen asks. “Stock interests can present problems of market conditions and capital gains, and of course the former marital home is a hot topic for reasons of money and memories.”
If the process sounds a little murky, that’s because it is. “Equity, like beauty, is in the eyes of the beholder,” Allen says, “and the judges have wide-ranging discretion as to whether the division of marital assets should be 50/50, or if one spouse or the other should receive more or less than an absolutely equal division of property for reasons of health, age, earning power, and several other factors. “
Plus, says Allen, no matter what the state’s proceedings, “the courts retain discretion over what used to be called alimony but is now called either spousal support or maintenance, and over child support.” And along with all of these assets, the court will also be dividing a couple’s debts.
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