Your Second Marriage Prenuptial Contract
In your 20s or 30s, when your assets may not be as large and your life is pretty simple, things seem deceptively simple. You don’t see anything but good coming your way and decide that you do not need a prenuptial agreement. Fair enough. What if one party has a lottery winning, a stroke, or malignant cancer….what happens?
On the other hand, if you’ll be entering a second marriage in your 40s or 50s, you will have a better comprehension of life and the road bumps you may encounter, therefore a prenuptial contract is something you may very well want to get.
Many people who are marrying when completely adult or remarrying have significant assets, retirement funds, homes, and sometimes business ownership and children from their prior marriage. Understandably, the financial consequences could be enormous if their second marriage, sadly, doesn’t last.
Financial concerns before a second marriage
When people remarry later in life, typical concerns are:
- Supporting the new spousal unit through retirement and old age
- Payment of expenses and accumulation of marital property if the spouses have retired
- Leaving assets to children if the new marriage is ongoing at the time of death
- Balancing the needs of the new spouse with the desire to assist their own children
- The financial results if the marriage fails
- Ensuring a peaceful divorce process if the marriage fails
All of these concerns can be addressed in a second-marriage prenup.
What a prenuptial contract can do for a second marriage
A premarital contract will help a couple decide how they will support themselves during the marriage. They can make a plan for using their retirement assets, based on their personal wealth. For instance, a couple can make a mutual decision to rely more on the larger plan of one spouse and just withdraw the required minimum distributions from the smaller one. The couple can commit to spending household expenses either equally or in proportion to their income or assets. Having some discussions about these issues (and sometimes a written commitment in a prenuptial contract) can be useful for the couple who will face the discussion in a more relaxed way and will spare themselves surprise after the marriage.
A typical issue with second marriages prenups arises from the strict distinction between “separate property” and “marital property.” Separate property is usually defined as all property owned by one spouse before the marriage and gifts and inherited property gained during the marriage. Marital property is built up through the efforts of the spouses, usually by lifetime earnings in the workplace.
But what if the couple is retired, there is no chance to accumulate marital property and one of the spouses doesn’t have adequate separate property to provide for his or her retirement? That spouse may then feel totally unprotected in the case of divorce, which can create bad feelings that fester throughout a marriage. A prenup can change this dynamic, reducing the stress and worries that may involuntarily poison the relationship and provide a fair result as well as a soft landing should the marriage fail or if a wealthier spouse predeceases a less-moneyed spouse.
Children, prenups, and second marriages
In a second marriage after a certain age, people often wish to leave money to their children when they die and provide for their new spouse. A premarital agreement is an effective instrument in that sense. It can specify that an estate plan is put into place after the couple marries, to deliver the result they desire. Eventually, assets of the deceased spouse can be divided between the surviving spouse and the deceased spouse’s children, or, as in the case of a recent complex prenuptial agreement we created for two wealthy people, nothing went to the other spouse and both of them left everything to their own children.
A prenuptial agreement is not solely an instrument for the worst. In a second-marriage prenuptial contract, a couple can plan how they might help their children financially during the couple’s lifetime.
One attractive aspect of a prenuptial contract for a second marriage: it can define the legal process to use if the relationship ends in divorce. Most people understandably would like to avoid litigation, which is generally costly, protracted, and disturbing.
A prenup can require an alternative dispute resolution method in case of divorce or in case of arguments and conflicts over the inheritance from a deceased spouse. These methods include mediation, collaborative law, and arbitration.