If you are contemplating marriage, you probably have heard of a pre-nuptial agreement but may not be sure if such an agreement is right for you. Since many of my clients are older and have acquired valuable assets, a pre-nuptial agreement is a means of clarifying marital expectations such as how expenses are to be paid, how assets are to be distributed after someone dies, and whether the new spouse will receive an inheritance. In this scenario a pre-nuptial agreement can be a significant estate planning legal tool.
When entering into a pre-nuptial agreement, you will have to fully disclose all of your assets and income to the other party. The agreement must be in writing and each party must have an opportunity to have legal representation.
There are many issues to address in a pre-nuptial agreement, but let me list a few of the common ones: What happens if the newly married couple purchases a home together? How will it be titled? What happens to the home when one of the spouses dies? If one party sells their home and moves in with the other party, what protection does the spouse have if the spouse who owns the home dies?
As you go forward in your life together, tangible personal property such as furniture, artwork and electronics must be considered and their ownership documented. It is important to catalogue family heirlooms so those items can be returned to the family from which they originated.
401(k)s and other retirement plans must be handled separately. In fact, you cannot establish your right to a 401(k) in a pre-nuptial agreement. It must be addressed when you are a spouse. Often when I prepare a pre-nuptial agreement, I will also prepare a post-nuptial agreement to deal with the retirement plans.
A word of caution: If your spouse goes into a nursing home, a pre-nuptial agreement will not protect your assets. If you are married you must use your assets to care for your spouse even if you have a pre-nuptial agreement in place. It is important to determine how long-term care expenses will be paid. Does your future spouse have enough assets to pay for their care? Do they own long-term care insurance? These questions must be answered to ensure your long term financial security.
As you can see, a pre-nuptial agreement takes time and consideration, but can give both spouses peace of mind for their future together.