Prenuptial Planning –Or, The Wedding Plan
by Timothy P. Peabody, Esq., The Wedding Attorney
What is a Wedding (Prenuptial) Plan and Do You Need One?
Let’s face it, the marital world is a tough place to be in if you are considering a marriage with plenty of assets that were acquired prior to your contemplated marriage. For one, did you consider the “community property time clock” begins ticking the moment you say “I do”?
How about the contemplated second home or vacation property that you intend to purchase with the new spouse using your money? You probably have not thought about the consequences of using your personal net worth to finance the purchase of that new home or vacation rental if something happens to your marriage.
The financial details of a marriage are messy—much worse than the emotional tie that was supposed to bind you to that coveted spouse after the nuptials take place. The concept of what is mine is mine and what is yours is yours is completely blurred if not eviscerated by the magical moment.
However, with a Wedding Plan you can incorporate the best of all worlds: A Wedding (Prenuptial) Agreement; a Revocable Intervivos (“Living”) Trust; and a nice fat life insurance plan that will protect the survivor spouse from the new relationship in case of early death. Without any one of these three elements, you begin that first marriage or second (or third, etc) on shaky ground.
With the Wedding Plan you can avoid many of the pitfalls associated with a bad match. Unfortunately, like some many issues in life, love and optimism replace level headedness and clear thinking. Do you want your new husband or wife to share in your current economic glory? Of course. Do you want to control your assets while sharing them with your loved one? Even better. Do you want to share your assets with that spouse after dissolution of your marriage? Hell no.
A prenuptial agreement is a written agreement that is created by a husband and wife prior to marriage. A post nuptial agreement (possible equally as effective) is an agreement entered into between husband and wife after marriage takes place. Both agreements require that both parties share the disclosure of their assets and debts in order to arrange a fully disclosed and transparent agreement regarding the disposition of assets or income post separation or divorce.
Who Needs a Wedding Agreement?
Everyone. Rich or poor, you should have contract with your spouse to be that outlines the financial expectations and guidelines that will allow your marriage to be managed (at least financially) with clear financial goals. How are we going to purchase our first house? How are we going to take title to our vacation home? How are we going to pay for the children’s tuition? All of these issues are better discussed now rather later.
Design a Plan for the Children of Prior Marriages or Relationships. You know the story: mom is marrying a new guy who is going to take all of our (dead/divorced) father’s assets that mom now controls. What is the most effective tool to avoid this catastrophe? The Wedding Agreement. A marrying couple with children from prior marriages may use a Wedding Agreement to spell out what will happen to their property when they die, so that they can pass on separate property to their children and still provide for each other, if necessary. Without a Wedding Agreement, a surviving spouse might have the right to claim a large portion of the other spouse's property, leaving much less for the kids.
Use a Revocable Trust as Part of Your Plan. Another valuable that often accompanies the Wedding Agreement is a well versed Revocable Intervivos (“Living”) Trust. The Living Trust provide further estate planning and often further delineates the post death plan for marriages with a Wedding Agreement. The kids will like their new dad or mom much better if they know that their inheritance is protected.
Avoid the Unsuspecting Spouse Rule. Prenuptial or Wedding Agreements do have some limitations: these documents typically only speak to the issue of assets. However, with most relationship failures being attributed to financial debts, make sure debt issues are also covered in your Wedding Plan. Make sure you know what debts your soon be bride or groom are bringing to the party. Especially in these times, good credit and a small debt load may be crucial to your economic survival.
So You Don’t Think You Need One…
Okay. You are truly in love and this is the one that is going to last. Hopefully, you are right. However, wouldn’t you feel better knowing that you have planned for all contingencies? The Wedding Plan provides you with the financial assurances that go beyond ironing out community property issues. You can also identify beneficiaries to your joint estate, figure out the most appropriate tax treatment of your assets. And, use a life insurance policy to enhance the value of the assets you are leaving (no I am not a life insurance agent—nor do I benefit from any life insurance you purchase because of this advice) to your loved ones.
Timothy P. Peabody, Esq. has been practicing law in Southern California for twenty years and specializes in family law and litigation/tax matters. If you need a divorce attorney in Orange County or in surrounding counties, he can advise you regarding proper steps to protect your assets before during or after marriage.