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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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