HOW DO YOU ASK For an Agreement to Protect Assets from your Spouse or Partner?
How to avoid awkwardness in asking your loved one for a prenuptial agreement? Blame it on someone else.
Blame your Mom. Maybe Mom’s Will is written such that it requires you to provide her Executor with an agreement protecting your inheritance from your spouse or partner. Perhaps in the absence of such an agreement, the inheritance will be placed in a trust to be controlled by a trustee, rather than controlled directly by you.
Blame your business partners. A prenuptial agreement can be a mandatory prerequisite for ownership in a business, essentially forcing all owners to enter either prenuptial or postnuptial agreements to protect the business from divorce. The blame for needing a postnuptial agreement can be shifted to the attorney for the business.
Second Marriages, Blended Families 𑁋 What Can A Prenuptial Agreement Do for Me?
A prenuptial agreement can set forth the financial parameters of the marriage from the day of the wedding up through and including how your Estate is handled after you die. It can state whether your spouse has a right to an interest in your retirement benefits and your business. It can state whether or not your spouse waives the right to claim spousal support or alimony. Some couples do not agree on a straightforward waiver of rights, but instead agree on a sliding scale—the longer the marriage lasts, the greater a dependent spouse’s entitlement to a portion of a specified marital property. Other couples agree to limit the scope of their prenuptial agreement to certain assets or rights.
Most people have heard about prenuptial agreements, but may not understand how a prenuptial agreement can help them avoid a long and costly divorce and protect an inheritance for children of a prior marriage. An agreement can protect your estate plan, your business, your salary, your pension and your retirement account from claims related to a divorce. It can state how a marital home is to be handled in the event of divorce, and what property is your separate property. The significance of protecting your business from equitable distribution during a divorce, and your salary from years of alimony cannot be understated.
IS MY RETIREMENT PLAN MARITAL PROPERTY? How ABOUT THE HOME IN MY WIFE’S NAME ALONE?
What if your prenuptial agreement defines salary as marital property, but your spouse contributes $10,000 a year into her 401K that she has beneficiary designated to her children from a prior marriage? This means that when she dies, the 401K and those annual marital contributions of $10,000 go to her children from a prior marriage. Good luck asking them to “refund” you the marital money contributed to the 401K.
Once you finalize and sign an agreement with your spouse or partner, you must effectuate it by ensuring that your estate planning and your day-to-day finances match up with what your agreement says. This means, check your Will and Trust, and update them if necessary. Check your beneficiary designations, deeds and the titling of bank and investments accounts to ensure they match with the terms and intentions of the prenuptial agreement, your Will and your Trust.
These issues are not limited to a marital home and your retirement accounts, they can arise with other types of assets as well. Please be in touch if you would like to discuss planning to secure your assets for your intended beneficiaries.
Second Marriage Finances 𑁋 Do You Want Your Money to Be Left to Your Children?
A well-written prenuptial agreement and Will plus careful attention to your beneficiary designations is a solid method to prevent your Estate from unintentionally ending up in the hands of someone else’s children, while also setting the financial parameters of your marital relationship.
Let’s consider Mom, who at 65 looks great. Last year, she married Bob. Mom has a son and a daughter, but Mom did not get around to planning…so what happens when Mom dies with $200,000 brokerage account in her name and owns the $400,000 home in which she and Bob reside. Mom has a Will leaving Bob her wedding band and nothing more. She has no transfer on death (“TOD”) designation pertaining to the brokerage account. Thus, Mom has a $600,000 probate estate.
If Mom is a resident of Pennsylvania, we need to consider Bob’s statutory right of election. This legal right allows Bob to ignore Mom’s Will and “elect” to take ⅓ of Mom’s probate estate. That’s right. Even if Mom’s Will leaves Bob only her wedding band, Bob can demand ⅓ of Mom’s estate. Mom could cancel the right of election by agreement between Mom and Bob, such as a pre or postnuptial agreement. Or, she could plan to ensure no probate assets remain when she dies.
The Will leaves Bob a wedding band, but Bob realizes he can “do better” by electing against the Will. So, Bob chooses to elect against Mom’s Will. This means he will receive ⅓ of Mom’s assets that pass through her Will. The $600,000 brokerage account will be divided--Bob inherits $200,000, Mom’s son inherits $200,000, and Mom’s daughter inherits $200,000. Did Mom want Bob to receive $200,00 from her brokerage account? Didn’t Mom always say she would leave everything to her children 50/50? Depending on other circumstances and concerns, simple solutions might include placing the brokerage account in a Trust, or Mom gifting money to son and daughter before her demise. Or Mom and Bob at any point before or after marriage could enter an agreement mutually waiving their rights to each other’s Estates, including a waiver of their statutory right to claim an Elective Share.
In the event Mom does not want to leave Bob without anything, Mom and Bob can explore options that express loyalty and respect for both her children and for Bob. For example, Mom may wish to grant Bob a life estate in her home, so long as he pays upkeeps and taxes. Or, she may want to fund a testamentary trust from which Bob can obtain income and support after her death.
Second Marriage 𑁋 Mom’s Remains: Who Decides Burial/Cremation, New Husband or Children?
After Dad died, Mom married Bob. Mom’s children know that Mom and Dad wanted to be buried in the family plot in Pennsylvania. However, if Mom does not make her intentions as to her remains firmly known, then Pennsylvania law allows Bob as the surviving spouse the right to decide on disposition of her remains. Bob might want her to be buried in Florida near his winter condo. To resolve this issue, Mom can state her intentions as to her remains in her Will.
MarRiage: Dealing with Creditors and BillS
What if you use salary earned during the marriage to pay down your spouse’s premarital school loans, and he later files for divorce? Perhaps you agree to allow each spouse to use a certain amount of money earned during the marriage either to pay down a school loan or for separate (meaning non-marital) savings?
Can you avoid your spouse’s debt, and, if yes, how?
It depends. For example, if your intended spouse has separate assets such as an investment account, but is also paying off a school loan, a prenuptial agreement can prevent salary earned during the marriage from being used to pay down your spouse’s premarital school loans.
Second Marriage with Young ChildreN
In the case of couples who remarry with children from a prior marriage, planning might address thorny issues of how income, obligations and assets will be allocated among children and stepchildren for things ranging from medical expenses to college tuition to child support.
Family Law Negotiation and LitigatioN
We encourage a Step-by-Step Approach:
Step One. Collect information; discuss rights, obligations, & claims.
Step Two. Explore out-of-court opportunity for resolution.
Step Three. Proceed to court if and to the extent necessary.
Step Four. Remain open to resolution along the way.
And, if a marriage or partnership goes awry, you may need to confront the possibility of mediation, collaborative resolution, or litigation.
Please be in touch for a common sense evaluation of your situation.
The information posted on this website is for general information and is not to be used as or considered legal advice. For more information, please contact Emory A. Wyant, Jr., Esquire at firstname.lastname@example.org.