How to Use a Prenuptial Agreement as an Estate Planning

Estate Planning Advice
for Every Stage of Life.

How to Use a Prenuptial Agreement as an Estate Planning

Prenuptial agreements and domestic law vary from one state to another but nearly every state has laws that prevent one spouse from entirely disinheriting the other. However, with a prenuptial agreement, one spouse can waive his or her right to the other’s estate.

Let’s say you are getting married and have children from a previous marriage. Your spouse-to-be also has children and is financially secure. You may want to change your will to leave the bulk of your estate to your children and perhaps a small amount to your new spouse.

However, the change in your will may not completely disinherit your spouse because of most states’ laws.

A properly drafted prenuptial agreement, along with a change in your will, may help to fulfill your wishes.

Without proper planning, it is possible that say, a family home or family business, could pass to your new spouse and eventually to his or her children, rather than your own.

Prenuptial agreements and domestic law vary from one state to another but nearly every state has laws that prevent one spouse from entirely disinheriting the other. However, with a prenuptial agreement, one spouse can waive his or her right to the other’s estate.

In some cases, agreements segregate property owned before the marriage from property acquired during the marriage.

Here are some factors necessary to ensure that a prenuptial agreement is valid and enforceable:

1. It must be in writing and signed by both parties.

2. There should be no pressure. The prenuptial agreement should be given to the other party well in advance of the wedding.

3. There must be full disclosure. A pre-nup should generally list both parties’ assets, as of the date of the marriage. If one party doesn’t make an adequate disclosure, the agreement is likely to be disregarded.

4. Both parties should be represented by their own attorneys.

So in the case of a second or third marriage, you can ensure your children will receive the assets you desire by having a valid prenuptial agreement, as well as having a properly drafted will — and keeping the will current as you acquire assets during the marriage. You may also want to set up a trust.

Important: Just because you have a prenuptial agreement doesn’t mean you can’t name your spouse in your will. You may want to leave your spouse some money or assets to ensure his or her future security.

Consult with your attorney. The requirements of prenuptial agreements and estate planning are complex and vary from state to state.

What if you are already re-married and didn’t sign a prenuptial agreement? You may be able to sign a post-nuptial agreement to accomplish the same goals. Consult with your attorney.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

7 Estate Planning Questions to Ask When Marrying Late in Life

Estate Planning Advice
for Every Stage of Life.

7 Estate Planning Questions to Ask When Marrying Late in Life

Although senior citizens are aging, their hearts remain young. Marrying later in life to establish companionship is a route that many people take. For many older people, there is nothing stopping them from continuing their adventures and at the same time enjoying their extended families.

However, if older people marry late in life, how should they handle estate planning? Most people in their seventies or even eighties still have their mental capacity to make proper estate planning decisions. However, as people reach their late eighties and nineties, there is more likelihood they may have diminished capacity.

Therefore, prior to marrying or re-marrying, older people should consider putting their estate plans together so they cover their intentions.

People marrying in their later years confront a variety of issues that younger couples do not face. For example, they may have accumulated considerable assets separately and may both have children from earlier relationships.

Getting married has a range of financial implications when it comes to Social Security, receiving alimony from a former spouse, Medicaid, retirement benefits, taxes and health insurance. For these reasons, many people decide to live together, rather than marry.

But if you are considering tying the knot later in life, here are seven questions to consider:

 

    1. Where Are You Going to Live?

When you marry, you will have to choose a place to live. If you own, do you give it up to live with your partner? Or should you have your partner move in with you? Or do you find a new place to live? What happens if you move and then your partner dies? What happens if your partner lives with you and you pass? Who inherits the real estate and property?

Some of these issues can be handled with a revocable trust or maintaining a life estate. So, if you move into your partner’s home, you can have a life estate set up or put the house in a trust so you can live there. A trust or a life estate protects you from uncertainties when one of you passes. Also, it allows for you to pass your inheritance to other family member while allowing you or your partner to be taken care of in your lifetime.

    1. How Are You Going to Pay for Your Expenses?

You may need to look into Medicaid planning in case one of you has to go into a nursing home. Forming a supplemental needs trust may help you avoid paying your assets for nursing home expenses — and yet still obtain Medicaid to help pay the bill.

    1. Who Will Make Financial Decisions if You Need Help?

It is important to have a Power of Attorney in place in case you need someone to help with your banking and finance needs. Your new spouse could be your attorney-in-fact, in other words, the person who has a right to handle your finances when you cannot do so. Or perhaps you have another family member or friend who can be the attorney-in-fact. If you marry later in life, your spouse may eventually have diminished capacity too, so it is important to pick someone who can be there for you over the long term to make financial decisions.

    1. Who Will Make Your Health Care Decisions if You Become Incapacitated?

This decision is very important. So many times, family members dispute who should make health care decisions — especially if you have children and have remarried. If the children do not agree with your new spouse, this can cause complications. Be very careful to draft a health care proxy so people know who can make decisions for you.

    1. If You Have Assets for Distribution, Who Will Receive Them?

If you marry later in life, you may not want all of your assets to go to your new spouse. You may have children from a previous marriage, grandchildren, nieces, nephews or friends that you have known for years that you would like to designate as beneficiaries. Testamentary trusts that become active when you pass could be a way to help you distribute your assets to your family and friends while at the same time providing for your spouse during his or her lifetime. Also, you should also consider drafting a written prenuptial agreement that outlines who gets what upon death.

    1. Who Is Going to Run Your Estate?

You need to pick a person to be the personal representative or executor of your estate. You may also need to pick a trustee. If you choose your new spouse, you should also select a successor representative so if your spouse is incapacitated or unable to handle the estate, you have someone else that you trust to handle it.

    1. If You Have Children, How Are they Going to React?

If you have children and you remarry late in life, the children may feel threatened by your new spouse. They may have concerns in regard to inheritance, finances and health care decisions that will be made for you. Addressing these issues with your children can go a long way toward promoting family harmony and helping your family members accept your new spouse. Talk with your children before you get married so they know that you will protect their interests while at the same time allowing yourself the happiness you deserve.

There are likely many decisions to make and documents to sign if you tie the knot later in life. Both parties should consider drafting new wills and a prenup. Consult with your estate planning attorney about these matters prior to the ceremony.

This article only discusses some of the estate planning issues involved with getting married.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group. 

When Divorced Empty Nesters Remarry

Estate Planning Advice
for Every Stage of Life.

When Divorced Empty Nesters Remarry

Later-life remarriages differ from earlier-life remarriages — especially when adult children factor into the equation. If you or your parents plan to tie the knot again, here are some roadblocks that might stand in the way of your family’s happily-ever-after.

Emotional Issues

Marriage is a life-altering commitment. You’re not just merging lives with your spouse — but also his or her entire family. Older folks tend to bring more “baggage” to relationships than younger people. Examples of potential stumbling blocks include ex-spouses, complicated estate plans, legal obligations, long-standing traditions that have to change, friends that don’t embrace a new relationship and, of course, grown children.

To illustrate the potential complexities, consider this hypothetical remarriage scenario, retold from three different perspectives:

“How dare that gold digger steal our dad — and his nest egg!” When Dad (Mike) invites his “lady friend” to meet the family, his adult daughters are naturally skeptical. Then, the couple announces they are getting married. The daughters worry that Dad’s new fiancée is a “gold digger” who will deplete his savings and leave the daughters to pay for his long-term care.

They are also concerned about his recent adventures, which include hiking, flying to Paris and relocating to Palm Springs. They wonder if Dad could be experiencing the early stages of dementia or being taken advantage of by his fiancée

“Who do those spoiled brats think they’re kidding?” The fiancée (Brenda) is a former physical rehab nurse who helped Mike recover from two strokes. Mike’s daughters live more than 2,000 miles away.

Brenda expected to receive the cold shoulder but for awhile, her fiancée’s adult children seem to warm up to her. So she is shocked when they suggest over Thanksgiving dinner that Mike sign a prenuptial agreement. All his daughters seem to care about is Mike’s money, not his happiness. After all, Brenda promised to love Mike in sickness and in health, taking the burden of Mike’s long-term care off the daughters’ shoulders.

“It’s my life — and my money!” Mike is ashamed of how his adult daughters reacted to the news of his engagement. They treated his fiancée like a money-grubbing outsider, even though she’s been living with — and taking care of — him for three years. Mike believes Brenda deserves a portion of his assets when he dies. She breathed new life into his tired routine, introducing him to new hobbies and interests.

At last, Mike found his soul mate, but his kids are questioning his judgment and spending habits. Mike worked hard all his life. He feels that if he wants to spend his retirement, or share it with Brenda, rather than leave it to the girls, it is his right.

These three reactions may be stereotypical, but they represent the full range of emotions people experience when they — or their parents — remarry later in life. Adult children may experience happiness, jealousy, abandonment, fear, disapproval, entitlement or relief. If a parent remarries after the death of a spouse, adult children also may experience feelings of disloyalty and guilt.

Working through these issues requires openness and an ongoing line of communication between family members. Too often, adult children fade into the background and spend less time when their parents remarry. When the parties acknowledge and discuss their fears rationally — and attempt to understand one another’s points-of-view — post-nuptial life can be easier and more rewarding.

However, the wedding toast or reception line may not be the opportune time to express your concerns. Proactive attention to these concerns before the spouses say, “I do,” can mitigate problems down the road, when the parent dies or if he or she becomes incapacitated.

Financial and Legal Concerns

Remarriages also have financial and legal implications. One of the top issues couples fight about is money. So, engaged couples can take these steps so they’re on the same page from the get-go:

Inventory personal finances. Write down a list of personal assets, liabilities, income and expenses that each spouse will bring to the marriage. Include an estimate of each asset’s fair market value. Unless you have a prenuptial agreement, many of these items will become joint property (or obligations) over time.

Also consider how a change in marital status affects existing or prospective financial arrangements. For example, a former spouse may no longer provide alimony or health insurance coverage once you remarry or cohabitate. Or your new spouse’s college-age children might be disqualified from receiving financial aid, because the financial aid forms require disclosure of the parents’ combined net worth after marriage. Remarriage also affects whether you are eligible to receive Social Security from a previous marriage.

Establish your priorities and guidelines. Look at the inventory listing and decide who gets what now (and later). Some later-life couples refrain from co-mingling balance sheets to pass their separate property to their biological children after death. They might also maintain separate bank and investment accounts and take turns paying monthly bills.

To minimize post-nuptial surprises, consider establishing short and long-term budgets that include anticipated timelines for major purchases, such as new vehicles, vacations and loans to family members. Consult with your attorney if you are interested in drafting a pre- or post-nuptial agreement to protect certain assets from a spouse’s lavish spending habits — or from opportunistic family members.

Revise (or create) an estate plan. Before a parent remarries, he or she might not feel compelled to create an estate plan, especially if the estate falls below the amounts affected by federal or state estate tax. But estate planning is imperative when blending families. In many states, surviving spouses may be entitled to a sizable share of the marital estate, unless the parties have signed an explicit waiver, even if others are listed beneficiaries in a will or other legal document.

Various types of trusts can be created to provide for the lifetime needs of the surviving spouse. When the survivor dies, the trust’s assets revert to the spouses’ respective adult children. But beware: Certain setups may limit the family’s right to sell property if the surviving spouse remarries — or require a spouse to rent the property and use the proceeds to pay for the surviving step-parent’s nursing home expenses, for example. An attorney can help avoid these pitfalls.

Revise beneficiaries and assign legal directives. Divorcees sometimes forget about beneficiary designations for their retirement accounts, investment accounts and life insurance policies — providing their ex-spouses with windfalls when they die. So check your beneficiary designations and check with your divorce attorney about any related provisions in your divorce decree.

Also, decide who you want to name as durable power of attorney and healthcare proxy, as well as the executor of your will. These can be tough decisions, especially if you’re opting to take rights away from an adult child and give them to your new spouse. But the rights to make healthcare decisions and to be informed about the partner’s health conditions are major reasons older people choose to tie the knot, rather than simply live together. Also discuss your preferences about life support, resuscitation and hospice to minimize strife among family members if you should become incapacitated.

Consider long-term care insurance. Sure, long-term care insurance products can be expensive. But it can allow older married couples to receive the care they need without impoverishing the healthier spouse.

Before walking down the aisle, many soon-to-be-blended families visit their financial and legal advisers to ensure all the bases are covered. Objective outsiders also keep everyone focused on financial and legal matters, rather than emotional ones.

Increasingly, adult children participate in these discussions to protect their parent’s financial interests and to help splintered families bridge their differences. Blended families can be a blessing in disguise — if the parties work together to resolve their emotional, financial and legal concerns.

If All Else Fails … Some Adult Children Go Further

Without an explicit waiver, a remarried person’s health care, financial and legal decisions typically default to their spouse, if he or she becomes incapacitated. Adult children may feel out-of-the-loop or disagree with the decisions their parents make. In some cases, the adult children turn to guardianships. If successful, adult children can regain control over a parent’s healthcare, financial and legal matters with a guardianship. But process can be costly and time-consuming — and spouses often prevail over adult children, especially if power of attorney has been assigned to the step-parent.

The requirements for applying for guardianship vary from state to state. But generally, a family member petitions the court for authority over some or all of the personal or financial affairs of an incapacitated person. This can be humiliating because the family must prove that the individual cannot handle his or her own affairs anymore. If an adult child is trying to take control away from a spouse, he or she also needs to prove that the step-parent is abusing the incapacitated person physically, mentally and/or financially — or abusing his or her power of attorney authority. Or the adult child might allege that the step-parent has also become incapacitated.

Proving these allegations requires evidence gleaned from intimate details of the couple’s personal life. The process generally involves an evaluation from one or more physicians or other medical professionals, as well as sworn statements from witnesses and other written documentation. Also, a hearing is necessary. The parent and step-parent must receive notice and have the right to appear and challenge the petition. A parent may be angry that adult children are usurping a step-parent’s authority or may be resentful about the loss of independence.

If an adult child successfully proves these allegations, the court will appoint the individual as guardian. A guardian can either handle an individual’s healthcare or finances (or both). Consult with an attorney for more information on guardianships.

PERKINS & ZAYED, P.C.
1745 South Naperville Road, Suite 100
Wheaton, IL 60189
Phone: 630-665-2300 | Toll Free: 877-TRUST-50
Fax: 630-665-4343
Email: admin@trust-lawgroup.com
The information contained on this website is for informational and educational purposes only and is not legal, tax or financial advice. Always consult a qualified licensed attorney and/or appropriate professional to provide advice for your individual needs and circumstances. Use of this website does not create or constitute an attorney-client relationship. This website may include advertising material for Perkins & Zayed, P.C., The Estate and Trust Law Group.