Why a Prenup Needs to Include Debt

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Why a Prenup Needs to Include Debt

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Is This From You? Looks Like You Got HACKED!!!

November 10, 2014

My team is extremely fortunate to get to work with so many successful Generation Xers.  Many of them have done phenomenally well in their careers, and then begin considering marriage at a much later stage in life toward their late 30s to early 40s. This often brings up the question when we do financial planning with them about whether or not it is a good idea to get a prenuptial agreement. There are pros and cons to getting this type of agreement, but the one important item many couples do not remember to put in these agreements when they execute them is what will happen with the debt.

Most couples remember to talk about the bank accounts, the retirement accounts, the family inheritances, the real estate, and the closely held businesses.  However, most people assume that all prenuptial agreements are only dealing with people who have significant wealth.  What happens when a couple gets married and you still have outstanding items such as student debt, auto-loan debt, and credit-card debt?  Even worse, what happens when more and more debt gets accumulated during a marriage from a couple who mismanages their finances and piles up a ton of debt?

The plain cold truth is that debt can be extremely crippling during a divorce, but is often forgotten at the time a prenuptial agreement is executed. Creating a smart debt clause in your prenuptial agreement that you are not liable for any additional debt created by your spouse or partner during the marriage can potentially help protect each of you from future obligations from creditors down the road.  Remember, that your FICO credit score is incredibly important for many reasons today from future loans to job employment.  Don’t overlook a debt clause when you do your prenup!

Written by: Ted Jenkin
Request a FREE consultation: www.oxygenfinancial.net

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