Getting married is always a significant life event, and especially during COVID-19 times. Where will the venue be? How many people will be allowed to attend? Will you have to wear a mask at the altar? With all of the uncertainty, the last thing you need is to worry about is how to protect your assets.
For most romantics, the term “prenuptial agreement” has a pretty bad stigma – it feels like a promise that you are planning to get a divorce, or a signal that you don’t want to share your assets with your spouse-to-be. For others, it’s a safety net – a promise that, if things get too rocky, at least you both will be able to separate what was yours before you were married.
The majority of people do not need a prenuptial agreement; but for those who do, they are very important. There are generally two groups of people whose financial situations call for prenuptial agreements. The first group are those who have inherited money or have quickly grown their financial nest egg. A “financial nest egg” means an accumulation of assets by a couple for financial security. They may be getting married young, have trusts they would like to protect, or other family assets they would like to protect in case of death or divorce. The second group are those with an acquired financial nest egg, usually with their first spouse, and have children. Generally older, they may be getting married for a second (or third or more) time, have children, or just have worked their whole life and want to protect their wealth. The latter group is the most common, but both are in need of protection of their personal assets.
It is important to note that prenuptial agreements are applicable to divorce or death. In the event of divorce, both spouses walk away with their assets from before they were married if so designated in the prenuptial agreement, and they split the assets that they acquired and commingled during their marriage. In the case of death, each spouse has the power to designate in their estate plan their own assets that they have designated in the prenuptial agreement to whomever they choose, usually their children, but their joint commingled assets become a part of their estate relative to their spouse.
Individual assets should not be commingled with joint assets unless you want them to “gravitate” over to a joint marital asset clarification. According to Tom Houston, Partner at Berkshire and Burmeister, commingling is a big deal when it comes to prenuptial agreements. This is because of beneficiary designations and how you have things titled or deeded. For example, if you jointly title an asset from one of the spouse’s pre-marital assets, then it’s going to move over to become part of their joint marital assets and could override the terms of the prenuptial agreement. That is why it is important to designate beneficiaries and title and deed your assets correctly in accord with your prenuptial agreement and listed assets.
It is also important that both parties retain their own counsel to avoid any conflict of interest issues when developing a prenuptial agreement. This is important for estate and prenuptial agreement planning. Both spouses need to be able to divide their designated assets the way they see fit, without worrying about the influence of their partner. For example, if a woman is getting married for a second time and wants most of her money to go to her kids instead of her new spouse, she should be able to make that determination without any conflict of interest.
Tom Houston says he encourages couples who want to get married right now “to stop and think about what you’re doing – do you fall into one of these categories for the need for a prenuptial agreement? Do you have accumulated assets that you want to designate in accord with a prenuptial agreement?” Even if it’s only a small amount of assets, it’s still an important consideration. “Be clear before you get married,” Tom says, “because after the fact, the law applies, and you are subject to legal determination on your assets.”
So, before you say, “I do,” ask, “Do I want to keep my assets separate?” If so, hire an attorney to help you draft a prenuptial agreement. The attorneys at Berkshire and Burmeister can assist with prenuptial agreements and related estate planning needs.