Wealthy widow, 63, wants to combine finances with her long-distance fiance, but he has $180K in medical debt — what The Ramsey Show says to do ASAP

Her hesitation? Her fiancé is $180,000 in medical debt from what he says is a botched surgery. And while she already has significantly more money than her fiancé, she’s also set to inherit between $4 to $5 million from her parents when they pass.

So she called into The Ramsey Show to ask for advice [1].

“This is one of the rare moments when I’m going to strongly recommend you walk in with a prenup,” said co-host Dr. John Delony. Here’s why.

When to consider a prenup

A prenuptial agreement is a legal contract between two people about to marry that addresses how they’ll divide their assets if the marriage ends in divorce or death [2].

If, for example, you divorce without a prenup, you “may be legally required to divide property you brought to the marriage and consider solely yours,” according to Fidelity [3]. “You may also have to pay alimony if you’re the higher earner, or you could find yourself responsible for your former partner’s debts.”

Even if Erin’s fiancé is “totally on the up-and-up,” Delony said he might have a kid or a cousin who thinks they just won the lottery. And, if he’s not on the up-and-up and disappears after she inherits this money, “he’s going to take half of it.”

Half of U.S. adults support the use of prenups, according to a Harris Poll survey conducted for Axios [4], and about one in five married couples actually have one.

While prenups used to be associated with the ultra-wealthy, there are a few reasons why they might be more commonplace these days. First off, people are getting married later in life and, at that point, they may have built up more assets — and more debt.

Plus, as the Axios survey points out, 40% of marriages in the U.S. end in divorce.

Before getting married, particularly if one person has significantly more assets than the other, it’s well worth a conversation with your financial advisor and a family law attorney about how to combine finances. For example, if you want to leave an inheritance to your children, that should be clear in your estate plan and your prenup [5].

Providing protection from creditors

A prenup can protect your assets during a divorce or after death, and it can also potentially provide protection from creditors. If you move to another state before or after getting married, it’s important to understand the property laws in that state and if (and how) they could impact you.

In the U.S., states generally fall into one of three categories:

• Community property states (9): Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, most assets and debts acquired during marriage are considered jointly owned, regardless of whose name is on the title.
• Opt-in community property states (5): Alaska, Florida, Kentucky, South Dakota and Tennessee. Couples can choose to classify their assets as community property if they want.
• Separate property states (the rest): In all other states, property is generally treated as belonging to the spouse who acquired it.

For example, in separate property states, if the wife owns the home, her husband “may have certain rights to that property — or at least to the value it represents — in a divorce or upon her death,” according to JPMorgan [6]. (That is, unless there’s a prenup or if the spouse was gifted or inherited the home.)

By contrast, in community property states, assets are treated as shared regardless of who holds title. In other words, they’re considered a “marital community.”

“By extension, the marital community is generally responsible for debts incurred by either spouse, and creditors of either spouse can satisfy a valid claim from any community property,” according to JPMorgan.

That’s where a prenup can make a difference. Kelly Chang Rickert, a family law attorney who provides advice on prenups, said in a blog post [7] that she had drafted a prenup for a client whose husband has since passed away. Prior to his death, he had racked up “astronomical hospital bills.”

“Luckily, she had a prenup, and thus, the debt was not community debt, and the creditors couldn’t come after community property, as the prenup waived community property,” she said.

Do your due diligence

Delony told Erin she needs to do her due diligence, such as pulling their credit reports and walking through them together.

While it’s unclear if Erin is moving to a community property state, her fiancé’s debt would still impact her life. For example, she plans to buy a new house that he will then move into, so she could end up footing the bill for everything [8].

It could also impact her down the road. While your credit report remains separate from your partner even after marriage, if you open a joint account, any late or missed payments could impact your credit score as well as your partner’s.

Chang Rickert recommends getting a prenup at least three months before your wedding.

Prenups are governed by state law, so different states have different laws. For example, in California, there’s a minimum seven-day waiting period before the final draft.

While some people may feel awkward approaching the subject with their fiancé, Chang Rickert has some sage advice: “Like online dating, there is no longer a stigma surrounding a prenup. Get over it!”

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