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Sign and Be Mine
(BNN) Throughout man’s time on earth, marriage was long entered
into for financial reasons as well as social. While these financial
motivations are no longer as widespread, the decision to marry still
involves many financial planning issues which must be addressed. Prenuptial
agreements are generally entered into by betrothed individuals in an
attempt to resolve issues of support, distribution of wealth and division
of property in the event of death or the failure of the proposed marriage
resulting in either separation or divorce.
A prenuptial agreement can make a subsequent divorce a much simpler
and cheaper process because it states clearly what each partner is bringing
to the marriage, thus making it easier to decide what each partner is
taking from it. The couple is free to set whatever terms they wish.
The terms usually include the promise to transfer wealth from one spouse
to the other with the receiving spouse foregoing any future claims against
the transferring spouse for additional support. This clause is usually
phrased as a substitute for alimony as few states recognize contracts
that expressly limit or forbid alimony.
Prenuptial agreements generally provide who will pay for what and for
how long. These contracts generally stand up in court as long as both
spouses were open and honest about their assets and liabilities and
had access to separate legal advice. One area of trouble suggesting
duress is the pressure of time. Last minute "Sign this, honey,
on the way to the church" prenuptials are a probable candidate
for being overturned.
These contracts are especially valuable where one spouse is much wealthier
than the other or where there are children from previous marriages.
Prenuptials can be effective to sort out tricky estate planning problems
and ensure provisions are made for the children. Future spouses might
want to consider using some form of trust arrangement when structuring
these agreements. Making the transfer irrevocable also removes the property
from the donor's estate. Qualified terminal interest property trusts
(QTIPs) are often useful in many of these situations by providing an
income stream and access to the principal if necessary for the recipient
spouse.
These are merely some of the considerations to keep in mind when contemplating
these arrangements. These agreements should also have some provision
for who is responsible for paying various taxes. When contemplating
dividing property, prenuptials should consider the cost basis of the
particular asset and who might get left with a large capital gain upon
eventual sale. Titling of property is always important to avoid ownership
disputes when marital trouble arises.
Post-marital agreements are also possible and may work where the spouses
are amicable. Although these agreements, both pre- and post-nuptial,
are fairly common and can be straightforward, they should be negotiated
with the counsel of an attorney for each side. A consultation with a
financial planner, in addition to the florist and caterer, may be a
wise move for many who have marriage in their future.
This article was contributed by Matthew D.
Gensler, a financial advisor at Raymond James Financial Services, Inc.,
New York. (212) 557-5005 Matthew.Gensler@RaymondJames.com.
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