Tuesday , 16 April 2024

Getting Married? Then Seriously Consider a Prenup

Divorce is emotionally charged and often involves many issues beyond just the financial settlement…[so] establishing boundaries for divorce may help prevent greater financial and emotional pain later…[and] a confidentiality agreement in conjunction with a premarital agreement may help prevent ongoing public arguments, accusations or bickering….Should you think about getting one?

This version of the original article by John Goralka (goralkalawfirm.com) has been edited [ ] and abridged (…) to provide you with a faster and easier read. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

…Prenuptial agreements and confidentiality agreements are particularly important for the following people getting married:

  • Those with children from a prior relationship.
  • Older couples.
  • People getting married with significant assets prior to marriage.
  • People or public figures seeking to keep such matters private.
  • People seeking to protect their partner from his or her debts or liabilities (or those seeking to protect themselves from their partner’s debts).

If you fall into one or more of these categories, then you should…consider entering into a prenuptial agreement before marriage. Here are six other protections to consider, too:

  1. Pair the prenuptial agreement with a confidentiality agreement for greater privacy.
  2. Identify separate assets that are acquired prior to the marriage. Consider whether income from those separate assets will be community or separate property.
  3. Consider whether the wages or earnings from work or efforts during marriage are community or separate property. Are debts to be considered community or separate? An often-overlooked alternative for a prenuptial agreement is to insulate one spouse from the debts and liabilities of his or her partner.
  4. If one spouse has substantially greater assets or income (which is frequently the case), consider designating certain assets to go to the less wealthy spouse over time so that a divorce after a long-term marriage does not otherwise leave one spouse with insufficient assets. Such a provision in some cases substantially enhances the effectiveness of the prenuptial agreement.
  5. Consider pairing the prenuptial agreement with an asset protection trust, which provides a second, considerable layer of protection from lawsuits, divorce and other claims. This trust, which should be created and funded before the prenuptial agreement, is a trust specifically designed to provide greater creditor and asset protection for the creator or grantor of the trust. An asset protection trust can be domestic and, currently, 17 states, including Nevada, South Dakota and Wyoming, have laws that permit these trusts. Additionally, foreign asset protection trusts, or hybrid bridge trusts, can be used, such as trusts settled under the laws of the Cook Islands. A hybrid bridge trust begins life as a domestic asset protection trust but converts to a foreign offshore trust in the event of a crisis.
  6. Consider including an estate planning provision to permit portability of the deceased spouse’s unused estate tax exemption (the “DSUE”) to a surviving spouse. Even a carefully crafted estate plan can be derailed with an unplanned death particularly if coupled with a change in marital status.