By Ann-Margaret Carrozza, Esq.
By most accounts, approximately 50 percent of marriages end in divorce. Hammering out the financial issues in advance can prevent much costly legal wrangling later. If you feel it is unromantic to establish end-game parameters ahead of time, guess what — they already exist in the form of divorce law.
If you are the prospective spouse with more property, the divorce law in your state may cause you to give up more than you feel is fair. This is of particular concern to high-net-worth individuals in brief but unsuccessful marriages, such as Paul McCartney’s and Katy Perry’s.
Even if you are willing to throw caution to the wind for the sake of love, other people such as business partners or adult children may be negatively impacted by the decision. This is especially true in a second-marriage situation. It is estimated that the divorce rate for second marriages exceeds 60 percent.
Even if a couple beats the odds and enjoys a wonderful marriage, it will end at death. Adult children from a prior marriage then stand to lose a significant amount of assets that would likely have been bequeathed to them. In the absence of a prenuptial agreement, the laws of every state grant the surviving spouse generous rights to estate property. With no will, the surviving spouse is usually entitled to at least one half of the estate through state intestate law. A will can reduce that interest, but not below one third by virtue of right of election laws in every state. A prenuptial agreement can reduce or even eliminate the surviving spouse’s interest at death. Many individuals in second marriages wish to provide for the surviving spouse during his or her life but understandably would like their own children to receive those assets back upon the survivor’s death. A prenuptial agreement and properly drafted estate planning documents can usually accomplish these objectives. For example, your will can leave some or all of your estate to a marital trust for the lifetime benefit of your surviving spouse. Upon his or her later death, those assets will automatically revert to your estate. Your children will then not have to rely on the “generosity” of any existing stepchildren.
Most people over 50 do not have prenuptial agreements. This is, in part, because prenups were extremely uncommon years ago. People also married earlier and were less likely to have any assets to protect.
If you are among the majority of married individuals without a prenup, there are good reasons to consider a postnuptial agreement. Even those in solid “first” marriages would be well advised to have them. For one thing, it can prevent the surviving spouse from later changing his or her will in favor of a second spouse. Never happen, you say? What if the surviving spouse develops a cognitive impairment such as a dementia-related illness? A properly drafted postnuptial agreement can prevent the survivor from abandoning the existing estate plan.
Every situation is different and every family dynamic has its own nuances. An in-depth conversation with a competent estate planning attorney can help you achieve peace of mind.
Ann-Margaret Carrozza is a practicing Elder Law and Estate Planning Attorney who also served as a New York state assemblywoman for 14 years. Website: www.myelderlawattorney.com