Prenuptial Agreements
Although prenuptial agreements used to be the province of high wealth individuals, they are now commonplace along a broader spectrum of clients. This is especially true with clients marrying later in life or entering into second marriages. Younger clients with inherited wealth should also strongly consider them. A prenup preserves separate property and limits the creation of community property. It also addresses what happens should the marriage end in divorce. Similarly, rights to assets upon the death of a spouse are defined, although this doesn’t prevent more generous provisions under a Will. They cannot dictate child support obligations. It’s important to initiate them early in the process. If negotiated too close to the wedding date, they may not be enforceable. Another key to the enforceability of a prenup is for each party to disclose assets, liabilities, and income fully. In all cases, it’s critical that separate counsel represents each party. While they are sometimes challenged in court, overall, they can be a valuable part of your estate plan.
Insights
How can I protect my assets in case of divorce?
Couples can best protect their separate property assets (such as property a spouse owned before the marriage or inherited during the marriage) with a prenup or postnup. Without an agreement, there are other ways you can work to keep separate property separate. That includes keeping separate property in a separately-named account, maintaining separate property assets such as real estate with separate funds, and keeping scrupulous records documenting the separate nature of the property. In the absence of a binding agreement, a court can still award your separate property to your spouse. But maintaining the separate status of your property increases your odds of preserving them. These methods can be complicated to accomplish, so you should consult an attorney for advice that fits your situation.
How can I protect my gift or bequest to my children?
Parents often are hesitant to leave assets to a child if they are worried the child may someday lose half those assets in a divorce. A good solution is for parents to give those gifts in a trust that is clearly the separate property of the child. The child can even be trustee of the trust, if the parents believe that he or she understands the importance of keeping separate property separate.
