Depending on the state in which you live, a prenuptial agreement may be called a ”prenupial agreement” or simply a ”prenup.” There is also the term ”marriage contract”, which is basically the same, except that it takes place after the marriage of a couple. In the state of California, several types of trusts, including those initiated before marriage, are immune from divorce. Other types of trusts include domestic and foreign asset protection trusts. Both types are beneficial for entrepreneurs and effective estate planning tools not only against divorce, but also to preserve your assets by reducing the tax payable. In short, a marriage contract is a contract that was entered into before the marriage. It should clearly delineate what is a conjugal good and what is not. That is, what personal property is and is not subject to future divorce applications? If you are getting married or are already married and want to protect your separate property with a trust or prenuptial agreement, talk to a lawyer about the best option for you. Please contact us to find out how we can help you. You`ve probably been told that it`s a smart undertaking to sign a prenuptial agreement before you get married. Anyone who brings professional or personal property into a marriage benefits from prior planning.
Without proper planning, all of your assets can be divided by a divorce court without giving you a say. A divorce court can still find many reasons to declare a prenuptial agreement null and void. Reasons can range from paperwork that is not properly classified to spouses who are mentally unable to understand what they have signed. Prenuptial agreements are valid and enforceable in Michigan. We often advise our clients to sign a prenuptial agreement if they have children from a previous relationship or if this marriage will not be their first. Even if the parties have separately acquired significant property acquired prior to their marriage, they should consider a prenuptial agreement. When most people think of marriage contracts, they think of divorce agreements. But matrimonial contracts are also useful in estate planning by setting the terms of an inheritance in advance, you can make sure that your spouse follows your wishes in the event of death. A prenuptial agreement can be used to avoid painful legal and emotional disagreements in the future, both for yourself and for your loved ones. Michigan law specifically states that any property transferred to a DAPT at least thirty (30 days) before a trustee`s marriage is excluded from matrimonial property. Michigan law also provides that the parties to the marriage may agree (in a separate written form) that such transfers to the DAPT are to be treated as such.
This can serve as a form of marriage contract. Removing assets from your marital estate before marriage offers more protection than a prenuptial agreement. With a prenup, the assets are always in your name and an overzealous judge can invalidate the prenup partially or completely. Because of the possibility of a court rewriting the parties` intent based on principles of fairness, a better way to ensure the protection of separate assets from marriage is to use irrevocable trusts, including Michigan`s new Domestic Asset Protection Trust (”DAPT”), which can be used by both parties to provide better protection for separate assets. Some argue that the marriage contract in Michigan has suffered a blow and may not offer the assurances they once gave. Since the court ruled as it did in Allard, many practitioners now avoid marriage contracts. Only time will tell if this exercise tool offers the desired protection. As an alternative to a trust, separate assets can also be protected in a matrimonial or post-marital contract. These are used to help couples resolve financial problems that may arise during their marriage and in the event of divorce, separation or death, although with regard to death, a will must be made to fulfill the agreements set out in the prenup or post-nup in this regard. Prenups and post-nups are often used to protect separate assets.
One of the advantages of these documents is that they allow parties to indicate what income, assets and liabilities will be ”separate” without having to worry about restricting access to money in a trust fund. One strategy to consider is for clients to consider using a DAPT and prenuptial agreement. This ”belt and shoulder straps” approach puts two barriers instead of one between a client`s money and their potential spouse. The main difference between these two is that in a revocable trust, as a trust owner, you can make changes and additions to it, whereas an irrevocable trust does not allow the owner of the trust to do so. It should be noted that revocable trusts become irrevocable as soon as the trust owner dies or suffers from an incapacity for work that prevents him or her from making critical decisions. There are many good reasons to want a marriage contract. They avoid arguing at the end of the marriage and show that marriage is more than just about money. Our clients include those who have already experienced a failed marriage, who have important assets, who marry young, who marry on a whim or who choose younger partners or from abroad. In each of these cases, it is advisable to protect yourself. I would say that if a prenuptial agreement and a DAPT are similar tools, a DAPT is a superior and more powerful tool.
What for? Marriage contracts are contracts and, like any contract, can be misinterpreted or simply rewritten by a judge. One of the main problems with the use of trusts is to ensure that no marital assets enter the trust. If this is the case, the trust may be broken by the court to remove the matrimonial property, and the matrimonial property is subject to equitable distribution. A lawyer and a forensic accountant can track the source of funds in a trust if there is a possibility that this has happened. Michigan prefers marriage contracts and allows them by law. MCLA 557,28 While marriage contracts were originally intended to prohibit rights after the death of one of the spouses, the Michigan Supreme Court eventually ruled that they were enforceable even in the event of divorce. Prenuptial agreements can be used to avoid a 50/50 or other division of property during a divorce, or even to claim less than all matrimonial property. The ”pre-nup” may also include a waiver of spousal support in the event of divorce or limit the spousal support that can be granted.
In a recent Court of Appeal case, Allard v. Allard, the Court of Appeal ruled on a case in which the parties signed a marriage contract before the marriage and the wife challenged it in their subsequent divorce. During the marriage, the husband had used several LLCs to buy real estate. The marriage contract provided that the husband retained the property acquired during the marriage as his separate property in his individual name. The Court of Appeal ruled that an LLC is a separate entity under the law and that, therefore, the ownership of an LLC is not the property of the husband. Since the marriage contract did not exclude income earned during the marriage from marital succession, the court could consider property acquired with matrimonial income as matrimonial property. Why is this distinction so important? Because the Court of Appeal ruled that the court of first instance could take immovable property into account when determining the division of property in the context of the divorce […].