Should a Prenuptial Agreement Be Part of Your Estate Plan?
A prenuptial agreement can be used to avoid painful legal and emotional disagreements in the future, both for yourself and your loved ones.
July 2015
When most people think about prenuptial agreements, they think in terms of divorce settlements. But prenups are also useful in estate planning: For example, by determining in advance the terms of an inheritance, you can ensure that your spouse abides by your wishes in the event of your death. A prenup can be used to avoid painful legal and emotional disagreements in the future, both for yourself and your loved ones.
Related Article | Understanding Prenuptial Agreements
According to a Wall Street Journal article (“Is a Prenup a Must for Most Couples?” March 1, 2015), between 2010 and 2013 the number of prenuptial agreements in the U.S. increased by 63%. The majority were used to protect property rights and estate issues.
Children from a Prior Relationship
If you have children from a prior marriage, you can use a prenup to protect their inheritance by outlining how you want your estate divided. Having these agreements determined before you walk down the aisle helps ensure that you and your spouse enter the marriage with a clear understanding of expectations and that the children from the prior marriage will be provided for according to your wishes. A prenup also can provide a legal shield to protect the children's inheritance from future lawsuits filed against a surviving spouse.
Expected Inheritance
If you expect to gain assets from a trust or inheritance, a prenuptial agreement can ensure that the inheritance does not fall victim to a division of assets in a divorce settlement or fall victim to other life events. Again, prenups clearly outline the ownership and transfer of those assets so that both parties enter the marriage with an understanding of how an inheritance is supposed to be handled.
Property
With people marrying later in life than in past decades, many already own substantial property before entering into the marriage. A prenup can help determine ownership and inheritance of that property. For example, if you own a home purchased in a previous marriage and want to retain the property as rental income or as a future inheritance for the children from that marriage, a prenup takes care of that negotiation up front.
Family Business
If you stand to inherit partial ownership or control of a family business, a prenup can ensure that your interest is secure for both yourself and your loved ones. Determining those business interests before entering into the marriage can help you and your spouse avoid family disagreements and legal issues in the event of either divorce or death.
Life Insurance and Retirement Income
A prenup can be used to designate life insurance and retirement beneficiaries. Whether there is a certain portion to be set aside for previous spouses, children from a prior relationship, or for a new spouse, a prenup gets that amount in writing.
Spousal Maintenance and Child Support
If you have been married before, a prenup is an excellent way to ensure that the newest spouse agrees to abide by financial obligations you have made to a third party. It can also ensure that, in the event of death or divorce, both parties agree in advance to the terms of support for the surviving spouse (or ex-spouse) or for children.
Conclusion
Like many legal strategies, prenups are not just for wealthy persons. If you are planning to marry and have significant assets or children from a previous marriage, you would be wise to consider the benefits of a prenup to avoid costly and emotional legal problems for yourself and your family.
Adapted from the Daily Plan-It newsletter