How Prenups Can Protect You From Your Spouse’s Debts
Can a prenup protect me from my spouse’s debts?
So the answer is yes — a prenup can protect you from your spouse's debts. There’s more to it, including a couple of “buts” so stay tuned.
First, the good news. It’s very common in prenuptial agreements for couples to decide that certain debts are the responsibility of one spouse and other debts are the responsibility of the other spouse. In the same way that we categorize assets as belonging to either one spouse, the other spouse, or joint, we categorize debts in the same way — you can decide that debts belong to one spouse, the other spouse, or are joint responsibilities. You can also decide that debts are a certain percentage of responsibility — for example, you can decide that debt is 70% the responsibility of one spouse and 30% the responsibility of the other spouse.
You can even determine the responsibility for certain debts based on other factors. For example, if a married couple is filing their taxes jointly, and there are taxes owed, you can decide that those taxes will be the responsibility of whichever spouse’s income caused the tax liability as determined by the accountant. Sometimes the accountant can see what the tax liability would have been in the couple filed separately and assign responsibility based on those figures. Or Sometimes couples will decide that they’ll pay tax liability or another debt pro rata with their incomes. For example, if one spouse makes $100K a year and the other spouse earns $200K a year, the spouse making $200K pays 2/3 of the debt and the spouse making $100K pays 1/3 of the debt.
That said, it is important to remember that this agreement is between spouses and doesn’t apply to third parties. What this means is that a creditor doesn’t necessarily care what’s in your prenup. If you don’t pay your tax debt from a previous tax return and the IRS garnishes your tax refund for the following year, they’re not going to take into account that you wrote in your prenup that the debt is owed by your spouse and give you your share of your refund and hold your spouse responsible. No, you’ll have to get reimbursed directly by your spouse according to the terms of your agreement. Most of the time it doesn’t get that far between a married couple — once the couple decides who pays which debts, they just follow the plan — that’s part of the beauty of determining these issues ahead of time in a prenup — you avoid the argument later because both spouses have accepted which assets and debts belong to which spouse.
If the couple does get divorced, the court can enforce these agreements regarding who is responsible for which debts as well. The judge will absolutely honor the division of debts that you’ve included in your prenup or postnup.
You can also determine responsibility for certain payments during the marriage itself in your prenuptial agreement — so beyond debts that are owed, you can decide which spouse pays which bills, for example, you pay the mortgage and your spouse pays the utilities, or maybe you agree that you’ll each pay your own credit cards and car loans while splitting other expenses. All of these things are customizable in your prenup or postnup. People often ask about child support that is owed to children from a previous relationship, yes, the court can’t force you as the new spouse to pay your spouse’s past due child support. And you can include a provision in your prenup that if a joint account is ever garnished for one spouse’s separate debt, that spouse has to pay back that money to the joint account.
