All About Prenups for Second Marriages
The pros and cons of this document the second time around
When you marry in your 20s or 30s, you might not be thinking about getting a prenup since your assets aren’t large and your life is pretty simple. But if you’ll be entering a second marriage in your 50s or 60s, a prenup is something you may very well want to get.
Many people who are 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 Prenup Can Do for a Second Marriage
In this prenup, the couple can decide how they will support themselves during the marriage. They can also make a cohesive plan for withdrawing retirement assets, depending on their relative wealth. For instance, if one of the spouses has a large retirement plan and the other doesn’t, the couple can make a mutual decision to rely more on the larger plan and just withdraw required minimum distributions (RMDs) 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 prenup) can be useful for couples.
One problem with prenups for second marriages stems from the strict distinction between “separate property” and “marital property.” Separate property is usually defined as all property brought into the marriage, as well as all past, and future, inherited property. 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 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 50, people often wish to leave money to their children when they die and provide for their new spouse. A prenup can specify that an estate plan be put into place after the couple marries, to end up with the result they desire. Eventually, assets of the deceased spouse can be divided between the surviving spouse and the deceased spouse’s children.
Some assets can be placed in a QTIP trust or credit shelter trust to benefit the surviving spouse during his or her lifetime. The remainder can go back to the children of the first spouse after the death of the surviving spouse.
In a second-marriage prenup, a couple can also plan how they might help their children financially during the couple’s lifetime.
One attractive aspect of a prenup 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 if there is a divorce or if there is a clash between the heirs of a spouse and the surviving spouse. These methods include mediation, collaborative law, and arbitration.
Drawbacks of a Prenup for a Second Marriage
A prenup for a second marriage is not a silver bullet that can solve everything, though.
Sometimes, these prenups can even cause problems. The process of negotiating one can put a damper on the love between the new couple. Some couples even break off their engagements as a result. This situation is not helped by attorneys who view prenups purely as a business transaction.
Marriage relies on mutual consideration and trust. Planning for a thoughtful and equitable prenup gives your intended spouse “consideration” in the broadest sense of the word.
© 2018. Laurie Israel. All rights reserved.