Prenups Can Help the Millennial Generation Too
It seems like everyone is talking about Generation Y, or Millennials, and how they will be impacting the workforce and society in general in the next few years. Demographers estimate this generation to be the largest population cohort the U.S. has ever seen. Generation Y is defined as people born between 1983-2000, although opinions do differ by a few years.
Millennials have come of age and are moving up the career ladder, getting married and starting families. The ‘getting married’ part is what interests me most as I am not only a member of this generation, I am also a family law attorney. I have friends who are married, getting married, and some who are already getting divorced.
One thing that many young couples planning to marry do not think about is a prenuptial agreement. Most people think of prenuptial agreements as something for rich people and many millennial couples are often in the midst of growing their career and have not had the opportunity to accumulate much wealth. But something most people do not realize is that prenuptial agreements deal with both assets AND debts.
It’s true that for many millennial couples going through divorce, there aren’t giant 401(K)s, there are little to no investments, and the savings account is tapped into more often than it’s saved. There is a house without equity, credit card debt, car loans, and the ever-present student loan debt. This doesn’t mean that a millennial couple planning to marry can’t benefit from having a prenuptial agreement.
Indiana law requires that all assets and liabilities are included in the “marital pot” for division and distribution in a divorce. Both assets and liabilities are subject to the presumption of equal division of property. This is true whether or not you brought the asset or debt into the marriage, and similarly true whether or not the asset or debt is titled solely in your name. So even though your spouse may have a credit card in their name only, the balance owed on that card is considered part of the marital debt regardless of whether that debt was accumulated before or during the marriage. For this reason, a well-drafted prenuptial agreement can help protect you from your spouse’s prior debts in the event of a divorce. The court has discretion to give each party their respective debts, but is not required to do so particularly if it will result in an unequal division of the marital estate.
When I represent millennial couples we are often times dealing with a negative marital balance, meaning the couple owes more than they have. This can result in a very messy divorce: no one wants to pay for their ex’s bad credit card habits or be responsible for student loans when they will never reap the benefit of that degree.
The worst case scenario is to remain financially tied to your ex-spouse for years because you are ordered to pay his or her debts. How do you protect yourself from the presumption of equal division of debts? The same way you would if you were protecting your assets: a prenuptial agreement. A prenuptial agreement is the only way to exclude debts and assets from the marital pot. If you and/or your fiancé are coming into the marriage with significant debt, including student loan debt, a prenuptial agreement is a smart way to protect each other from an obligation to pay on debts in the event of divorce. Particularly as a millennial, this choice could make a huge difference in allowing you to accumulate wealth following the divorce without the hurdle of extra debt.
