Are you planning on getting married again?
If so, congratulations are in order – there’s little more exciting than being a happy bride in love. Unfortunately, not everything you will have to consider before your second wedding ceremony will be as romantic as walking down the aisle into your new spouse’s arms. One of the most crucial challenges to work through before you say “I do” for the second time is how you are going to protect your financials assets in your second marriage.
Admittedly, estate planning is not the most romantic and carefree way to spend your pre-wedding time. But as a wealthy woman with considerable assets to manage, knowing how to protect your estate in case you get divorced or if you die before your spouse is crucial. Not only does this protect your own interest, but it also helps protect the interests of your children in case something happens to you.
Of course, there are several things to consider before you make any arrangements. If both you and your partner have considerable estates, your interests won’t be difficult to align. If you are a lot wealthier than your future spouse, things can get a little tricky – after all, you will want to protect your financial assets while supporting your partner at the same time. Is your partner much younger than you are? This can be a challenging situation to find yourself in, especially if you have suspicious children worrying for your well-being – and their inheritance. All of these different factors you will have to take into account when planning how to handle your estate in your second marriage. There is no one size fits all solution, but there are many solutions that have been proven to work. Here are some of the most common ways to protect your financial assets if you are marrying for the second time.
1. Craft a prenuptial agreement
A prenuptial agreement should be set up by two independent lawyers to cover both your interest and the interests of your future spouse. It is the most basic way to protect your assets and should always be prepared before the marriage rather than set up as a postnuptial agreement after your vows.
Addressing financial issues before the marriage can be unpleasant but crafting a prenuptial agreement will allow you and your spouse to be on the same page – quite literally – before you start your new life together.
A prenuptial agreement usually defines how your assets will be distributed in the case of a divorce or death and what assets will be protected if the marriage does end in divorce.
A prenup can protect any investments and estates you are bringing into the marriage and allocate expenses during the marriage. Such an agreement will also define whether either of you will receive alimony in the case of a divorce. It goes without saying that a prenuptial agreement is the most important and basic step you should take to protect your estate during the marriage.
2. Include a waiver of rights to protect your agreement in court
Prenuptial agreements are essential, but they are not the only precaution you should take. It is, after all, possible to challenge prenuptials in court. Litigation can be mentally and financially draining; you can avoid this if you add a waiver of rights into your prenup. By signing a waiver of rights, both parties give up the right to any assets which the other owned before entering the marriage. A waiver of rights is often already part of a prenuptial agreement, but if it isn’t, ask your lawyer to draft an additional clause. Any future spouse with your best interests at heart will be happy to sign such an agreement; be weary of anyone expressing the slightest concern at a waiver of rights or even accusing you of not trusting them. This should be a warning sign. A waiver of rights is, just like any prenuptial agreement, nothing but a necessary precaution that will help you embark on this new journey feeling secure and protected – something no devoted spouse should want to deny you.
3. Keep your assets separate
Admittedly, prenuptial agreements should protect any assets that either of you owned before the marriage. But in order to make sure that there is a clear division between pre-marital assets and marital assets acquired during the marriage and that your estate is protected if the marriage should end in divorce, you can choose to keep your assets separate. This can be easily done if you maintain separate accounts for your different assets. Keep diligent records of your non-marital assets, before as well as during the marriage, and always keep them in your name – and your name only. During the marriage, only spend marital assets on common expenses you two will have and add any money you earn during that time to your marital account rather than your separate one. This way, in the event of a divorce, your marital assets, which might be evenly distributed in court, will be clearly separated from your non-marital assets. This is the safest way to protect your estate and ensure that your prenup is bulletproof.
4. Set up a trust to protect your assets
A trust can be a discrete alternative to a prenuptial agreement, if for some reason or another you would prefer not to fully disclose your financial net worth or don’t want to ask your partner to sign a prenup. Of course, trusts can also be used in addition to a prenuptial agreement, which adds an extra safety net to your estate in the event of divorce. You can, for example, set up a domestic asset protection trust and name yourself as the main beneficiary. Asset protection trusts can help you manage your estate and will also protect it from your future spouse and other creditors. Alternatively, you can set up a trust and name your children as the beneficiaries – in case of your death, your children will receive your assets. If you have included a waiver of rights in your prenuptial agreement, your future spouse won’t be able to challenge this arrangement in court.
5. Revise your will
A further important component of your pre-wedding financial planning is to update your will. Update your beneficiaries to include your spouse and your stepchildren, if you want to, and state clearly which assets you would like to pass on directly to your children. Decide who will make financial and medical decisions on your behalf if you are no longer able to. Updating your will to reflect your new marriage is important to ensure it represents your current wishes and cannot be attacked in court.
6. Be honest and disclose any past financial issues and challenges
Make sure to always be honest with your future spouse and expect the same from them in return. This is your second chance at marriage and there is no reason why financial baggage should get in the way of your remarriage.
Here are some discussion points to get the conversation going:
- Amount of credit card debt
- Amount of debt overall
- Prior bankruptcy filings, if any
- Amount of overall assets
- Amount of retirement assets
- Your wishes & concerns
This exercise is essential. Not only will it give you peace of mind knowing that you won’t be saddled with an unforeseen debt burden from your spouse-to-be, but it will also set the tone for the rest of your relationship.
Additionally, this is a good test for you to see if you feel comfortable bringing sensitive topics like this up with your future husband. If you both have no issues opening up, this is a great sign for a fulfilling future together, in bad times and great times alike.
7. Consider Retirement Plan Rights
Because of federal retirement plan law, which is known as the Employee Retirement Income Security Act (ERISA), special provisions must be made for you or your future spouse – or both – to waive rights to retirement plan assets.
Such a waiver must be first stated as a clause within a prenup, and then must be followed up by the signing of the actual waiver following the marriage.
Without such a two-step process, any other clauses or waivers are invalid, and the surviving spouse will inherit retirement plan benefits regardless of the intention of either spouse prior or during the marriage.
These provisions in ERISA are designed to fully protect both spouses’ rights to retirement plan benefits.
8. Revisit Your Divorce Agreement
Last not but least, consult an attorney if you find yourself remarrying after a previous divorce.
Depending on the conditions of the divorce settlement, and the law in your state a new marriage – or even cohabitation with your intended — could greatly affect alimony, child support and even the custody of the children. It’s best to plan for these contingencies well ahead of time.
You should now be familiar with some of the most important precautions you can take to protect your assets during your second marriage. If you are experienced at handling your estate, you might already know how you are going to protect your assets. But if you have any questions, would like to know more, feel unsure about any of this, or would like an expert opinion on the topic, please feel free to get in touch. Just like any marriage, every estate is different – as mentioned before, there is no one size fits all solution.
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