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Discussions relating to prenuptial and postnuptial planning for families can be challenging to navigate. Although often overlooked, avoided or deemed unnecessary, these agreements are a helpful component of ensuring that the family legacy is passed down to children, grandchildren or other family members. Pre and postnuptial agreements outline what each spouse will end up with in the event of divorce and/or death, thus potentially impacting the disposition of family wealth. To ensure that assets are distributed as intended and to protect interested parties and their families, pre and postnuptial agreements are often a key component of an estate plan.
Estate plan development
Conversations regarding prenuptial and postnuptial agreements can be tense, often fraught with unexpressed expectations. When a couple commits to "forever," having a conversation about who gets what in the event of a divorce may seem contradictory. But if you, your parent or grandparent are in the process of developing or revisiting an estate plan, these conversations can be instructive, insightful, helpful and necessary.
Crafting a plan to distribute your wealth can be a complicated and confusing process, but your trusted advisor can help you navigate through it. They'll conduct the appropriate analysis and educate you on all of the available options and strategies. Premarital agreements play a critical role in estate planning for individuals and their families. Requiring premarital, and for those already married, postnuptial, agreements is part of a comprehensive, impactful strategy that ensures your estate goes to your heirs and not to unintended recipients.
Children or grandchildren may be concerned about the impact of such discussions on impending wedding plans or their existing relationship. However, by incorporating these discussions into estate planning, you focus on the objective of taking care of and preserving your family legacy such as maintaining family ownership of a business through generational transitions. This can help overcome objections and open up a pathway for clear communication.
Complexities regarding subsequent marriages and blended families
Many have the misconception that prenups are for couples where one person has significantly more wealth than the other. Yet, a prenup is often used by couples who either have family wealth or considerable wealth of their own and are considering a subsequent marriage. If you're contemplating re-marrying, a prenuptial agreement will ensure that your assets will be protected and preserved for your children, grandchildren or other beneficiaries regardless of what happens to you or your marriage.
Working through a prenup can also provide you and your spouse-to-be with the framework to address your respective marital financial expectations. For example, if you intend to share bank or wealth accounts, be aware that commingling funds can muddy the waters. Courts may deem that commingled funds are martial property and therefore, not subject to any existing agreements. Clearly outlining in advance where your money goes and where you intend it to go will prevent conflict and misunderstanding in the future.
Individuals about to marry for the first time
Younger folks who have received, or are soon to receive, a sizable inheritance, or who have amassed money on their own can also benefit from a prenup. It can provide a strong foundation for communication regarding finances and related subjects that many never discuss, even with friends. Hence, if approached correctly, such discussions can strengthen a relationship and provide a clear road map for what happens in the event of divorce or death. In addition to sheltering wealth, a prenup can also help protect and preserve the rights of a spouse who has much less.
Factors critical to any agreement
Prenups and postnups must be factual, specific and transparent. The primary difference between a prenup and a postnup is that the former occurs before a wedding and the latter occurs after. Contrary to popular belief, prenups are challenged often and are not as ironclad as many think. When circumstances change, such as when you move to another state and jurisdiction, these agreements may require modification to reflect those changes and their impact.
Furthermore, a prenup may initially have seemed unnecessary, but the discovery of previously undisclosed large debts or assets, or being named an heir can necessitate a postnup.
These types of agreements are often challenged for the following reasons:
- Broad language is used.
- Both parties are represented by the same lawyer.
- Insufficient consideration is provided.
- Inadequate disclosure.
- There's insufficient time to consider all options.
- There's undue influence to sign.
Therefore, to be sure your agreement is strong enough to withstand a legal challenge it is important to:
- Provide an addendum in which both parties adequately and explicitly disclose all of their assets and potential inheritances.
- Clearly illustrate how gifts, distributions of business interests, and inheritances are to be dealt with and accounted for during and after the marriage.
- Retain separate, highly qualified, knowledgeable counsel.
- Include language regarding what happens in the future in the event of a significant change of circumstance.
Partnering with an advisor
People don't like to discuss estate planning because of the images it conjures, yet the outcome without proper planning in place can be far more challenging than an estate planning discussion. Prenups and postnups work the same way. Initially they may be uncomfortable, but ultimately they provide a framework for the fair and equitable distribution of assets and the assurance that family wealth remains in the bloodline.
Your trusted advisor can provide talking points to facilitate discussions between generations and take part in family meetings. Our advisors pride themselves on knowing when clients need assistance and on offering the right support level. If you are about to marry, have a child about to marry, or are about to embark on a subsequent marriage, talk to us about what options to consider, and we can partner with your attorney to craft a solution that is right for you and your family.