Oct 22 2013
October 22, 2013

The Case for a Prenuptial Agreement

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Most folks think of a prenuptial agreement as a great way to end a romantic relationship. “If you love me, why would you want me to sign a document that means I get nothing if we divorce?” Potential recipients often see a prenuptial agreement as indication that their proposed future spouse is more worried about keeping their money than the relationship.  Clients that believe they need a prenuptial agreement would rather be beaten by a stranger than face the object of their affection with a document in hand.  A prenup is typically associated with divorce and most couples usually save discussions on money and divorce for after they are married.  That’s a great plan until you are married and suddenly discover that it’s too late to protect your assets.  And that need for wealth protection might not be because of a divorce but because of a death.   A prenuptial agreement is an important estate planning tool.

Not everyone getting married needs a prenuptial agreement.  Young couples getting married for the first time where neither has substantial assets to protect might not find it necessary to have a premarital agreement.  But many marriages today are not first time experiences and involve assets that one or both parties to the marriage have already accumulated.  A divorce should not be a financial windfall experience for either partner.  But let’s move past the discussion of divorce.  A prenuptial agreement should also be written in anticipation of death.

My mother was raised by an aunt who had no children of her own.  The aunt and her husband had a will which stated that at their deaths their property would be inherited by my mother.  The aunt died and her husband remarried without the benefit of a prenuptial agreement.  Then he died.  His widow then became sole owner of the previously mentioned property.

More and more Americans are remarrying in their 60’s, 70’s and even in their 80’s.  A prenuptial agreement is a great way to make sure that assets are protected for their own children or heirs and not the children of their most recent spouse.  Estate planning is extremely important for anyone who has accumulated assets.  But estate planning by a couple usually occurs after the couple is already married and possibly too late to protect assets accumulated prior to the marriage.  Without a prenuptial agreement or estate plan the assets of the deceased are controlled by the laws of the state of residence.  Once a couple is married the ability to control premarital assets can be greatly diminished.

If you are considering a prenuptial agreement then keep in mind that the agreement should typically be signed by both parties at least 30 days before the wedding.  That means the sooner you start the process the better.  After a potential document is drafted by one party, there will be discussion and negotiation with the other party.  While it might not always be pleasant, it is a conversation better to be had before the wedding than after it is too late.

Please feel free to call us at Oak Springs Wealth Management if we can be of assistance.

-Fred Lee