Thinking of getting hitched? Remember, a marriage is a social and financial commitment. In many societies, a dowry was paid for the young lady. She was an asset sold to the prospective groom's family. A pretty girl with a good background would command more. Women were thus contracted into their new lives as wives.
Savvy brides and grooms should write their own marriage contracts whether they are financially motivated or just want to make financial matters and ownership expectations clear. Attorneys advise courting couples to exchange financial statements and credit reports.Surprises may affect creditworthiness, assets and debt responsibilities in the future.
Prenuptial agreements are generally entered into by engaged couples to resolve support, distribution of wealth and division of property issues in the event of death, separation or divorce.
Prenuptial agreements work well to protect financial and business interests. Businessman Bernie had three previously failed marriages. To say the least, he was at risk in marriage. He picked a beautiful blond who appeared ideal, but five years later found somebody new. Bernie's prenuptial held and his fourth divorce was pre-negotiated, almost painless.
Emotionally, consider options for amendments.One couple had negotiated a tight prenuptial, but twenty years later, Rita is taking care of declining Marvin and has earned a better deal. Marvin is considering amending the agreement since he is dependent on her for his quality of life.
A prenuptial agreement simplifies a future divorce because it states clearly what each partner is bringing to the marriage and makes it easier to decide what each is taking from it. The couple is free to set the terms which usually include the promise to transfer wealth from one to the other with the receiving spouse foregoing any future claims against the transferring spouse for additional support. This clause is usually phrased as a substitute for alimony as few states recognize contracts that expressly limit or forbid alimony.
These agreements generally provide who will pay for what and for how long and generally stand up in court as long as both spouses were open and honest about their assets and liabilities and had access to separate legal advice. Beware of pressure to sign the agreement without appropriate advice or time. Last minute "Sign this, honey, on the way to the church" prenuptials are a probable candidate for being overturned.
These contracts are valuable where one spouse is much wealthier than the other or where there are children from previous marriages and can be effective to sort out tricky estate planning problems and ensure provisions are made for the children.
One client solved the problem by providing a portion of his estate into a Qualified Terminal Interest Property Trust (QTIP). QTIPs provide an income stream and allow access to the principal if necessary for the recipient spouse. This ensured security for his loving second wife and preserved the children's interests after her death.
Making the transfer irrevocable also removes the property from the donor###s estate. The estate was able to recognize her federal tax exemption, saving estate taxes for the husband's children, the ultimate beneficiaries.
Prenuptial agreements should also have provisions for who is responsible for paying various taxes. When contemplating dividing property, prenuptials should consider the cost basis of the particular asset and who might get left with a large capital gain upon eventual sale. Titling of property is always important to avoid ownership disputes if marital trouble arises.
Although these agreements are fairly straightforward, they should be negotiated with an attorney for each individual. Financial planners have knowledge and experience in these matters and can be valuable resources with an understanding of present and future cash flow and asset division.