Understanding Prenuptial Agreements
May 2009
The time and effort of pre- or postnuptial agreements can save money, pain and
time if the marriage fails or when one spouse dies
To prenup or not to prenup? That is the question. Unmarried men and women who
are widowed or who are financially successful often hesitate to give their hands
in marriage for fear that, if something goes wrong, they may lose a substantial
portion of their assets in a divorce. In such cases, it is helpful to have a
basic understanding of the two key types of "nuptial" agreements is key to any
advisor.
Protective Duos: Pre- and Postnuptial
There are two types of nuptial agreements:
Postnuptial agreements are usually created and signed by couples who are in
second and third marriages and are concerned about estate planning issues.
Prenuptial agreements are probably more popular in first and second marriages,
and they usually focus on what happens if the marriage ends in divorce. They
generally are created and signed by younger couples who are either without
children or are in blended family situations.
However, prenups often fail to address what may occur upon the death of either
party, and it's a huge blind spot in many prenuptial agreements. The parties are
so concerned about focusing on what happens in case of divorce that they fail to
address key estate planning issues. In many states, for example, the surviving
spouse is automatically entitled to one-third of the deceased spouse's estate,
the right to live in the home for life, and all jointly owned assets.
Tips. If you're contemplating a prenuptial agreement, make sure that it
addresses the common issues – child support, alimony and division of property –
as well as key estate planning issues in case of death. (Many death-related
issues can be resolved with the purchase of life insurance.)
Obviously, the value of these types of marital agreements is in reducing the
risk of heated arguments later. The time and effort put into addressing pre- or
postnuptial agreements will save a tremendous amount of money, pain and time if
the marriage fails or when either of the parties passes away. It may be awkward
on the front end, but the reduction of stress and fighting in case of divorce or
death is well worth it.
Adapted from the Daily Plan-It newsletter. Hoopes,
Adams & Alexander, PLC, is a Chandler, Arizona, law firm offering services to
Phoenix-area clients in the areas of estate planning, entity formation,
commercial and real estate transactions, and civil litigation. |
