Did you know the average millennial has about $36k in student loan debt? Unfortunately, debt is a necessary evil for modern-day life, especially for those of us without a gigantic trust fund. But there are ways to protect yourself. Whether you or your partner has student loans, car loans, or credit card debt, a prenup’s got your back. You can ensure you and your future spouse don't take on any debt that you each weren't directly involved with. Or not. The choice is up to you in a prenup. Keep reading to learn how to address debt in your prenup.

How does a prenup work?

A prenuptial agreement is a contract, and like any contract, it has requirements. There are validity requirements that must be followed in order to have an enforceable prenup. These requirements vary from state to state. What is considered a valid prenup in Arkansas may not be a valid prenup in California. Once you have the validity requirements squared away, you can start working on the contents of the prenup. For starters, you should make sure that the prenup is overall fair. It doesn’t need to be 50/50, but it shouldn’t be leaving one person destitute. If the time ever comes for you to get a divorce, and you want to invoke your prenup, you may do so between you and your spouse privately, with the help of your divorce attorneys, or you might need to ask the court to enforce the prenup. You hope it never gets to that point, but if it does, a validly executed prenup will be there to support you.

What do people usually put in a prenup?

The “meat and potatoes” of a prenup is property division. By property, we mean anything you own. This could be bank accounts, real estate, investments, jewelry, or basically anything else with value. Along the same vein of property division is debt allocation. First, you decide who gets the house, the car, and the bank account, and then you decide who gets the student loans, the credit card debt, and the car loans. There are many other issues handled in a prenup, such as alimony (i.e., spousal support), pet ownership, joint bank accounts, lump sum payments, confidentiality, infidelity, and more. What you put in the prenup really depends on your goals, expectations of one another, and what roles you both want to take on. This is something you should discuss with your partner and make sure you two are aligned. There may be some debating and negotiating going on, and that’s totally okay! It’s expected, and it’s actually beneficial to creating a fair and balanced prenup.

How to address debt in a prenup

Now, let’s get into the topic you’ve all been waiting for: debt. Dealing with debt in your prenup isn't as scary as it sounds. Let's discuss how to address debt in your prenup:

• Step 1: Decide whose debt is whose. You both need to agree on who should be responsible for which debts. Typically, couples want to be responsible for the debt they bring into the marriage or take on in the future. And remember, there is pre-marital debt (debt you bring into the marriage) and potential future debt (marital debt).
• Step 2: Put it in writing. Your prenup can specify the following:
  • That each person keeps their existing debt.
  • That future debt is also separate (owned by the person who takes it out in their name).
  • OR, you'll split certain debts if you divorce.
• Why a prenup helps: Without a prenup, a judge might make you responsible for your spouse's debt, even if you didn't benefit from it. And, yes, even if your name isn't on it.

Example: Mindy and Matt

Let's look at an example of a couple who want to address debt in their prenup:

• The background: Mindy has $200k in law school debt; Matt has no debt. Matt wants to eventually start a business and will need to take out $400k in business debt.
• The questions to ask:
  • 1) How do they want to treat debt incurred before the marriage (premarital debt) and
  • 2) How do they want to treat debt incurred during the marriage (marital debt)?
• The outcome: In this case, Mindy’s law school debt is premarital debt, and Matt’s future business loan is marital debt. Mindy and Matt decide that both the premarital and marital debt should be kept separate.

Real-life examples of debt

Okay, okay, you understand the basics about prenups and debt, but what really happens in the courtroom when it comes to debt? Sometimes, it’s just easier to understand how things work by seeing real-life examples (a.k.a., case law).

Can you get away with hiding debt in a marriage?

Imagine you've been separated from your spouse for years but are still legally married. You think you're safe from their financial messes. Then comes the divorce... This is a real-life Tennesee case!

• Shocking real-life case:
  • A husband provided financial support to his wife and kids even though they were separated (but still married).
  • Secretly, the wife racked up huge credit card bills in his name and even took out another mortgage, all without his knowledge. But while still technically married.
  • He eventually finalized their separation and divorced her for 'financial deception' once he found out about the hidden loans.
• Question: Should the husband be responsible for some of the debt that his wife took out while they were technically separated and that he had no idea about?
• The court's bombshell: The husband may still be liable for some of those debts. Why? They were incurred while the couple was technically married. The court explained that marital debts are incurred by either spouse during the marriage up until the final divorce hearing.

Key takeaway: Even if you didn't know about the loans that your spouse took out... you can still be on the hook for them in a divorce.

Bonus lesson: And even if you are separated (but not legally divorced yet), you can still be responsible for a portion of your partner's debt. Yikes!

Student loans taken out during the marriage

Here’s a cautionary tale about student loans taken out during the marriage without a prenup. Let's see what happens:

• Erik and Adrienne's story:
  • Erik supports Adrienne while she pays off her old student loans from becoming a nurse practitioner. He helped her pay off some of her loans even though they were taken on before the marriage.
  • Eventually, Erik then goes back to school, taking on new debt.
  • They split, and the question becomes: Should Adrienne take on some of Erik's debt?
• The Court's Decision: The court says Adrienne has to pay HALF of Erik's student loans that he took out while married.
• Ouch! Even though she didn't benefit from his degree, Adrienne gets stuck with part of the bill.

Key takeaway: If you don't want to share your spouse's future debt, a prenup is CRUCIAL. It can clearly state who's responsible for what.

Bonus lesson: Erik requested he be reimbursed for his payments towards HER loans. The court's response? Nope! That was a gift since it was pre-marital debt and paid pre-maritally.

The bottom line on addressing debt in prenups

At the end of the day, how you address debt in a prenup is really up to you. Maybe you want to keep premarital debt separate but all marital debt joint. Or vice versa. You can even avoid it altogether and just let the court decide for you if you ever get a divorce! Whatever you do, just understand the implications of your choices, and remember that you very well could end up paying your ex’s student loans off, even if they cheated on you and threw darts at an image of you in their office.