Pre-Marital Planning
When contemplating marriage, remember that love may be blind, but it is wise to proceed with both eyes wide open. This wisdom is never truer than when that marriage will form a blended family. After all, both parties are blending their respective assets and, oftentimes, their respective children.
It is estimated that one in three remarriages end in divorce, especially when children are involved. So, how does a couple “unblend” their assets when things do not work out as planned? Further, if the remarriage stays intact when one spouse dies, what happens with the assets of the deceased spouse?
In light of these realities, the parties should consider negotiating and signing a premarital agreement before saying “I do” that addresses these issues. Once the premarital agreement is signed it takes affect when the marriage is legal. The agreement should clarify asset ownership during the marriage, asset disposition upon divorce, spousal support, and asset division upon death.
Once those details are covered, be mindful to ensure that the agreement will withstand future legal challenges. To help make the agreement bullet-proof ensure that both parties:
• Provide full written disclosure of their assets and liabilities;
• Provide adequate time for negotiation and reflection well in advance of the wedding day;
• Ensure that the agreement is voluntary and not unconscionable (i.e., unfair);
• Ensure that each party understands the consequences of the agreement; and
• Ensure that each party has independent legal representation.
While admittedly not very “romantic,” a premarital agreement can start the remarriage off on the right footing. Not only will both future spouses know what their future rights and responsibilities will be, but their children will know the rules of the road, too.
When it comes to assets, certain rights that attach only after the marriage is official need to be addressed. One common asset that requires careful attention is your retirement fund. If it is an ERISA retirement fund, then your surviving spouse is automatically the primary beneficiary, even if your own children have been designated as your primary beneficiaries. Accordingly, your premarital agreement should address this and provide that your new spouse agrees to “waive” these ERISA rights after the wedding.
Another area of concern involves gifts or an inheritance received after the wedding. For example, if you will inherit the family business from your parents, then this needs to be addressed in your premarital agreement so it will be your “separate property” when received.
Naturally, the estate plans of both parties will need to be created or revised after the wedding so they are consistent with the agreed disposition of assets upon the death of one spouse or after the deaths of both spouses. Thereafter, careful attention is required to ensure that all separate and marital assets are titled and designated to pass as planned.
If you are married already, consider a “post-nuptial agreement” to address all of these “premarital agreement” matters.
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