Divorce Wisdom: Pre-Nups and Debts

You hear an awful lot about people obtaining prenuptial agreements before their wedding to protect their money, but what about a prenup to protect you from your spouse’s debt? Ever since the economy went down hill, people have been more pragmatic about the accumulation of debt, especially debt created by another, even if that debt is created by the person they love. As I stated in a prior Blog, a couple engaged to be married can include in their marriage contract (a/k/a “the prenuptial agreement”), basically anything that is legal. An agreement to travel the world or even jump out of an airplane is not out of bounds. Therefore, the way in which a debt should be handled, in the event of a divorce, can also be included in the prenup.

Student loans are a popular concern for marrying couples. I had a client once named Tom who was just finishing up medical school. Tom came to me to review a prenuptial agreement that had been drafted by his fiancée, Clarissa’s attorney. Given the stifling cost of medical school, Tom was entering the medical professional as well as his marriage, with student loans totaling approximately two hundred fifty thousand dollars ($250,000.00). Clarissa sought to protect herself from sharing in this significant debt if the marriage did not work out by entering into a prenuptial agreement.

So the question in this case, as in cases of divorce where debt is involved, is whether a prenuptial agreement, for the purpose of handling debt, is necessary. Here are some practical considerations:

– How will the student loan be paid off during the marriage? If you are the party with the student loan and the debt is paid off with marital funds, your spouse may have a claim for reimbursement in the event of divorce. Of course, you could argue that your spouse made a marital decision to use marital funds to pay off the debt during the marriage and therefore his/her claim for reimbursement is a poor one.

A prenuptial agreement could take the guess work out of the equation.

– If you have obtained a professional degree and your spouse helped put you through school by paying such things as living expenses, or he/she helped pay off the debt, the non-degreed spouse could attempt to place a value on your degree by claiming he/she assisted you in becoming a success, which in a divorce may have monetary value.

A prenuptial agreement could take the guess work out of the equation.

– If you obtain student loan debt during the marriage or still have college related debt when you get divorced, the debt usually goes with the person who accumulated it. An exception to this rule may be when the non-wage earning spouse returns to school in reliance on the wage earning husband or wife, who has agreed to pay the costs associated with a degree.

A prenuptial agreement could take the guess work out of the equation.

– You enter a marriage with a significant student loan, but you and your spouse agree that you will not work outside of the home.

A prenuptial agreement could take the guess work out of the equation.

– In order to ensure that you are not financially penalized for staying home instead of working, you may want to enter into a prenuptial agreement that makes your spouse responsible for your college debt.

A prenuptial agreement could take the guess work out of the equation.

Bottom line, the handling of any debt can be included in a prenuptial agreement prior to the marriage. The debts to be covered can include existing as well as future debts. In cases where the debt of your spouse-to-be is a huge concern, the best way to protect yourself against your spouse’s debts, in addition to considering a prenup, is to not become jointly obligated on his or her debts. If you have major concerns about your spouse’s solvency even before the wedding, you may want to carefully consider your options before you say “I do.”