Revocable Trust vs. Prenuptial

Before you get married, you may find it necessary to separate your assets from the marital property so that they never go to your spouse if a divorce occurs. When you want to protect your assets, you could use a prenuptial agreement or a revocable living trust. Both options can work for this purpose, but one may be more attractive than the other for your situation.

A prenuptial agreement is a type of financial agreement that you enter into before marriage. With this kind of agreement, you specify what types of property you want to separate from the marital property. Any property that you want to keep in the event of a divorce can be included in the prenuptial agreement. Both you and your spouse have to sign the document and agree upon the terms. Then if you get a divorce, you can keep the property that you designated.

A revocable trust is an estate planning tool that can also be used to help protect your assets from a spouse in the event of a divorce. When you set up a revocable trust, you can change the terms of at any point while you are alive. You can set up the trust and then put any assets that you do not want to lose into it. You can make yourself a beneficiary of the trust, which still allows you to access the assets. If you get a divorce, your spouse cannot touch the assets in the trust.

Although the prenuptial agreement is commonly used to help protect assets that were acquired before marriage, the revocable living trust is often more effective. This is because lawyers can sometimes find loopholes in a prenuptial agreement if it was not crafted correctly. If the intent was not correct when creating the document, the spouse may still be able to get some of the assets. With the revocable trust, the spouse cannot get into the assets in most situations.

One of the difference between these two setups is that the prenuptial agreement must be created and signed by both parties. This means that you and your future spouse have to come up with the agreement and specify which property will not enter the marriage estate. By comparison, you can set up a living revocable trust on your own without the permission or approval of your future spouse. Since it is your property, you can put the property into it and no one else can touch it.