Getting Married? 5 Rules for a Midlife Prenup
If you're about to tie the knot in your 50s or 60s, you'll probably want to protect your assets — and children — with a prenuptial agreement
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If you're planning to get married in midlife, whether it'll be your first marriage or your fourth, there's a good chance you'll want to have a prenuptial agreement. You’ve likely accumulated some wealth in a 401(k) retirement plan and IRAs, probably own a home and might even run a business. And you may have children from a previous marriage. All of these factors make a prenup extremely helpful.
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Simply put, a prenup spells out how your financial assets — including real estate, cars, savings and investments — will be doled out when the marriage ends, either in divorce or with the death of a spouse. A prenup can indicate who'll be responsible for outstanding debts. It can even determine who'll get custody of your Labrador retriever.
What Can Happen Without a Prenup
Without a prenup, if you divorce, you can be legally required to divide the property you brought into the marriage in a manner that doesn’t suit you. You might have to pay alimony, even if you're a woman — more and more women do these days. And your new life partner may have debts that you could be responsible for paying. If you die without a prenup, your spouse might be able to legally claim up to half of your assets.
If you don't have a prenup and can't come to an agreement during divorce proceedings, your state laws will dictate division of the assets. That means that in community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin — you'll probably get half of everything. But in other states, assets will be split by the court depending on factors such as how long you were married and what you accumulated together.
Drawing up a pre-nuptial agreement isn’t just for the likes of Tom and Katie anymore. (Incidentally, rumor has it that their 2006 prenup may leave Holmes with next to nothing from her marriage to Cruise.) More and more boomers preparing to tie the knot are heading to lawyers, who often charge a few thousand dollars to draw up a prenup. Some couples even use the agreement as a blueprint for managing finances during their marriage.
“Over the years, the knee-jerk negative reaction to asking for a prenup has dissipated,” Dubin says. “Prenups are now part of our culture.”
If you’re contemplating marriage, I strongly recommend you consider a prenup if you fall into one or more of these categories:
- You're bringing $100,000 or more in assets to the partnership.
- You have children from a prior relationship.
- You own or co-own a business.
- You earn a hefty salary (or are likely to do so in the future).
Prenups Are Not Romantic
Though more common than ever, asking a potential spouse to sign a prenup can still be dicey.
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“Whoever brings it up is considered to be extremely unromantic," says Olivia Mellan, a psychotherapist and money coach. The whole prenup process can be polluted by resentments, anger and the fallout of painful former relationships.
But as I wrote in Suddenly Single: Money Skills for Divorcees and Widows, marriage is in many respects a business deal, especially for boomers. And a prenup is just one of the legal documents that seal the deal.
Here are five rules I recommend for an iron-clad agreement:
1. You and your partner should each hire a lawyer. This will ensure that you each have an advocate in your corner. Thousands of attorneys who specialize in matrimonial law handle prenups. If you don't know one, ask for recommendations from friends, family members or the attorney who drew up your will.
2. Full disclosure is vital. Both you and your future spouse must come clean about all your finances, including assets, income and debts.
3. Be sure you're both willing to sign the document. You usually need two witnesses and must sign the prenup well in advance of the marriage so neither partner can say it was done under duress. Two or three months before the wedding date is ideal.
4. Agree on any waivers in advance. If you want your kids to receive your 401(k) or pension when you die, your spouse will need to turn over his or her rights to the money by filing a waiver with the plan trustee after your wedding. Be sure your prenup includes an agreement to file the waiver. (IRA proceeds always go to your named beneficiary, regardless of what's in a prenup or will.)
5. If you have adult children, talk with them about the prenup before you sign it. “Kids have a funny way of thinking that their parents’ money is already theirs and can’t help feeling suspicious about a new spouse horning in,” personal finance columnist Jane Bryant Quinn wrote in an article about her own recent prenup.
There's another benefit to upfront disclosure: Your children just might bring up an issue that didn't occur to you. “In my case," Quinn noted, "my kids raised a good question that I hadn’t considered.”
If Jane Bryant Quinn doesn't think of everything, there's a pretty good chance you won't either.