5 Ways to Protect Your Money Without a Prenup

Prenuptial agreements can be a great tool for protecting assets for married couples who ultimately end up divorcing. But what happens when you don’t have a prenup? Or if you wanted one but your spouse refused to sign and you decided it wasn’t worth the aggravation? Can you still protect your assets? The answer, as is so often the case in law, is that it depends. Certain assets can absolutely be protected. Others not so much. Here is the list of ways you can protect (at least some of) your money and assets without a prenup.

1. Keep your own funds separate.

The word “commingling” is often synonymous with “lottery winnings” to one spouse; and “gambling losses” to the other. If you have an account that has funds in it that you either 1) owned prior to the marriage; or 2) received during the marriage as inheritance or a non-marital gift; and then mixed in your earnings from your pay, or joint funds from another bank account – then poof! The entire account becomes marital. Why? Because the courts consider money to be “fungible” meaning that once that marital dollar goes in, you can’t tell which dollar is coming back out. So Rule #1 – Keep your separate funds separate!

2. Keep your own real estate separate.

Many people own a home prior to getting married. Oftentimes, especially if that home becomes the home for the married couple, the homeowner decides to throw the other person’s name onto the deed. What harm could that be? Right? I mean what happens if the owner died – wouldn’t you want your spouse to have it? The answer is that once the non-owning spouse’s name is on that deed, even if it is removed again down the road, the result is that the court will presume that you have given half the value to that spouse as a gift. And yes, you can sit on the stand and testify that it was only done for “estate planning” purposes, but most times that kind of testimony just comes off as self-serving and falls flat. So, you can always create a will or trust that leaves your property to your spouse. Rule #2 – do not put your spouse’s name on the deed unless you are prepared to hand over half the value of it in a divorce.

3. Use non–marital funds to maintain non-marital property.

Here’s where the waters get murkier. It is easy enough to decide to keep your own property in your own name. The rub comes when it comes to maintaining that property. This is where the couple is using their paychecks to pay the mortgage on that property, or to make renovations or improvements to that property. Now the court is going to be faced with trying to carve out which part of the value of the property might be marital and which part of the value has remained non-marital – a tedious and tortuous task. To keep it all clean, just use your funds from your premarital or inherited account to maintain your non-marital property, too.

4. Keep bank statements for retirement accounts issued at the date of marriage.

Unlike other accounts that are commingled, if you have retirement account assets at the date of marriage, and at the time of divorce, you can produce a statement that shows what you had in that account, then the court may let you carve off that amount and divide the rest. The challenge is finding those statements sometimes. Make sure you keep statements that show if the custodian changes.

5. Get a valuation of your business around the date of the marriage.

Also unlike bank accounts that are commingled, the court has the ability to potentially carve off the appreciated value of a non-marital business. So for example, if your business was worth $1 million on the date of your marriage and worth $2 million on the date of your divorce, your spouse would be entitled to the one half of the difference or $500,000. (Or you could have just had the spouse sign a prenuptial agreement that waived any and all appreciation — but assuming you didn’t, this is the next best option).

While a prenuptial agreement is the ideal way for specifying how assets are to be divided should there be a dissolution of marriage, all is not lost if there isn’t one. By following these five steps, you can still protect some, if not all, of your premarital or non-marital assets.

The financial effects of divorce can also have an impact on your credit. So both during and after your divorce, it’s important to keep an eye on your credit reports and credit scores to watch for inaccuracies or any other problems that need your attention. You’re entitled to a free annual credit report from each of the three major credit reporting agencies through AnnualCreditReport.com. You can also get your credit scores for free from many sources, including Credit.com.