Pennsylvania couples likely enter into marriage full of optimism and hope, but unfortunately, many marriages just don’t work out. Prenuptial agreements are a great way to protect most assets, especially for people who have already been married once before. However, premarital agreements require a full disclosure of all assets before they can be finalized and, in some circumstances, premarital property can become marital property during marriage and subject to division at divorce.
For people concerned about disclosure or the potential loss of premarital classification of assets, there may be other options available.
Understanding an irrevocable trust
Before marriage, a party could put their own assets into an irrevocable trust for the benefit of one or more third parties. Normally the transfer is permanent and the person cannot take their assets back. For example, the trustee (named to manage the trust assets for the benefit of the beneficiaries) could be directed by the terms of the trust to use the trust property to benefit children from a previous relationship, care for an incapacitated relative or use for certain charitable purposes. With narrow exceptions, an irrevocable trust, once the future spouse (called the settlor or grantor of the trust) creates it, is the owner of the assets the grantor transfers into it.
This means that the property in the trust no longer belongs to the settlor, so they would not normally have to disclose it to their future spouse before signing a prenuptial agreement.
A caveat is that the law surrounding trusts like this is complex and varies from state to state. A Pennsylvania grantor can choose the state that governs the trust and some states’ laws may be more in line with their goals.
Protecting assets in this way may sound like hiding them to some individuals. But it’s important to consider that self-made people are worried about people falling in love with their money, not with them. These individuals feel that they have a legitimate reason to worry about disclosing every asset they own. Divorce and dissolution are scary terms when half of their wealth is on the line, so they take precautions.
Protecting assets with the help of an attorney
Marriage is a big decision, and crafting a fair prenup can protect everyone’s interests if it’s done correctly. The key to doing that is hiring an experienced family lawyer who also understands the intricacies of trusts if the client is considering an irrevocable trust. A legal professional can provide advice about how to approach a prenup and about other actions before marriage that may impact the division of assets in the event of divorce.