Prenuptial agreements aren’t just something you should consider in the context of what will happen to your assets in the event you should divorce. Prenups are also really handy when it comes to estate planning.
What does a prenup have to do with estate planning? Keep reading to find out…
When are prenuptial agreements helpful?
A prenuptial, or premarital agreement, outlines how a married couple will handle their assets. It covers more than what happens in a divorce. It can actually be a smart move if you’re in a relationship where:
- Both parties are financially secure before getting married,
- You’re entering a remarriage,
- You want the bulk of your assets or estate to go to children from a previous marriage, or
- One party has significant debt.
Prenuptial agreements may seem like a controversial subject, but in the end, they really make sense for both parties in a lot of different scenarios.
A real life example
As an estate planning attorney, we continue working on more and more prenups. Here is an example of a specific situation in which a prenup helped a couple who both had some life experience under their belt:
Rick and Jen are both in their 50’s and planning to get married. One is a widow, the other is divorced. Both have accumulated some assets and are having success in their careers. Each of them has a couple of kids. How important is it that their assets end up with their kids, rather than the step-kids?
Without planning ahead, it will be very easy for the assets to go to the wrong people.
Let’s suppose they buy a house or hold bank accounts in joint ownership. The family of whomever dies first will lose those assets, unless the survivor voluntarily shares them with the kids. Without proper planning, protecting your assets can lead to a legal challenge in the courts.
In order to save time, money, and heartache, Rick and Jen could protect BOTH their wealth and their kids by:
- Signing a prenuptial agreement,
- Having an up-to-date will or trust, and
- Paying close attention to asset titling or what we call the “funding” of an estate plan. (This is so important, we have multiple people in our office who work on proper asset titling.)
In this scenario, a prenup is little more than an agreement that helps secure both parties and their assets and wealth. Once signed, they can then move on to their happily ever after with a little more peace of mind.
Prenuptial agreements are great for second marriages and blended families
If you’re thinking that a prenup is little more than a romance killer, I get it. I don’t remember that part of Cinderella where both parties drew up documents with their attorneys present. However, we don’t live in a fairy tale. There are many practical reasons any engaged couple should consider a prenuptial agreement, especially if this isn’t their first time down the aisle.
Among other things, a prenup can:
- Protect one debt-free party from being burdened by another’s significant debt
- Commits both parties to being fully transparent when it comes to their finances
- Protect valuable assets you want to stay in your family.
Whether it’s just the two of you or you’re creating a blended family, a prenup is a great way to start your journey to financial success and bypass a lot of stress and heartache down the road.
Download our free resource to get started
To find out more about how you can make this happen in your life, you can immediately download my FREE resource from BlendedFamilyFinances.com called “10 Tips to Get Started: Avoid Money Drama and Plan for Your Future.” On that site you can also check out my book, The Smart Stepfamily Guide to Financial Planning. Both of these resources will help you start your journey on the right foot. As always, if we can be of any assistance to you, please give us a call at 217-726-9200. We’ll be happy to help you!