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Should Your Clients Have a Prenup as Part of Their Estate Plan?
When most of your clients think about prenuptial agreements, they think in terms of divorce settlements, but prenups are also useful in estate planning. By determining in advance the terms of an inheritance, your clients can ensure their spouses abide by their wishes in the event of their death. A prenup can be used to avoid painful legal and emotional disagreements in the future, both for themselves and their loved ones.
Between 2010 and 2013, the number of prenuptial agreements increased 63 percent, according to a recent article in the Wall Street Journal. The majority of these were used to protect property rights and estate issues.
Children from a prior relationship
Clients with children from a prior relationship can use a prenup to protect their children’s inheritance by outlining how they want their estate divided. Having these agreements determined before they walk down the aisle ensures both parties enter the marriage with a clear understanding of expectations and that the children from the prior relationship will be provided for according to the client’s 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 or trusts
For clients who expect to gain assets from a trust or inheritance, a prenup can ensure that the inheritance does not fall victim to division of assets in a divorce settlement or go into probate in the event of their death. Prenups clearly outline the ownership and transfer of those assets so both parties enter the marriage with an understanding. A client may anticipate an inheritance with understood familial expectations but those are verbal, not written, understandings. By getting those expectations in writing in a prenup, your client can make certain he or she is abiding by the understood wishes of his or her loved ones.
People are marrying later in life than in past decades, and many already own property before entering into the marriage. A prenup can help determine ownership and inheritance of that property. For example, if a client owns a home purchased in a previous marriage and wants to retain the property as rental income or as a future inheritance for children, a prenup takes care of that negotiation up front so there are no questions down the line.
If clients stand to inherit partial ownership or control of a family business, a prenup can ensure that their interest is secure for both themselves and for their loved ones. Determining those business interests before entering into the marriage can help clients 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, as well. 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.
Alimony and child support
For clients who’ve been married before, a prenup is an excellent way to ensure the newest spouse agrees to abide by previous financial obligations carried by your client. It can also ensure that, in the event of death or divorce, both parties agree in advance the terms of support for their spouse or for children.
Prenups are not just a good idea for your wealthier clients. If you have any clients planning to marry, we recommend you encourage them to consider the benefits of a prenup to avoid costly and emotional legal problems for themselves and their families.
We hope this information was useful to you and helps your clients and their families. If you have a specific case or a question, don’t hesitate to call our office.