PreNups from a Financial Planning Point of View

WINCHESTER, Mass. - June 12, 2013 - PRLog -- A Prenuptial agreement (PreNup) is a contract between two parties prior to marriage that specifies how property, debt, and assets are to be allocated in the event of divorce, death, or separation.  Premarital agreements can be drafted to be as simple or complex as the parties deem necessary depending on their financial and personal situation.

Benefits of a PreNuptial Agreement

A prenup has numerous benefits. Some of these benefits include:

  1. The certainty it provides as to what happens in the event of a divorce or the death of either spouse.
  2. Protecting children from a prior marriage.
  3. It is prepared, in theory, when there is harmony instead of at a point when the relationship is very contentious.
  4. The parties can negotiate the terms of the agreement; instead of having a third party (a judge) and state and provincial laws decide how to divide the couple’s assets.

Case Studies involving PreNuptial Agreements

Case Study 1:Marital Property

Joe has an IRA worth $200,000 at the time he marries Barb. When they divorce, six years later, the IRA is worth $500,000. In some states, $200,000 would be considered Joe’s separate property and $300,0J00 would be considered a marital asset to be divided between Joe and Barb.

Barb has a home worth $250,000. Joe moves in after they marry, and they use the home as their marital home. When they divorce, the home is worth $400,000. The court is very likely to decide that Barb made a gift to the family, classify Barb’s home as a marital asset, and split the entire asset. If Joe and Barb created a prenuptial agreement, they could have agreed that Joe’s IRA – including any appreciation during the marriage – would have remained his separate property and that Barb’s home – including any appreciation – would have remained her separate property.

Although there are limitations in many areas, prenuptial agreements may also cover issues of spousal and child support. The spouses can agree not to contest any estate-planning documents prepared by the other spouse and to give up certain statutory rights upon the death of one spouse. They can also agree to file joint or individual tax returns during the marriage.

Case Study 2: Protecting Assets Intended for Your Children

Mike and Carol are going to be married. Mike is a widower and has three sons. Carol is a widow with three daughters. Both of them have assets that they are bringing to the marriage, including the death benefits they received upon the death of their first spouses. Mike and Carol are contemplating hiring attorneys to prepare a prenuptial agreement to ensure that the assets they received from their deceased spouses will go to their respective children.

In summary, about who needs to consider and implement a prenuptial agreement – Any person getting married in Massachusetts who wants to protect their premarital assets, home, retirement account, potential inheritance, business, (well everything!) should consider talking to an attorney about a prenuptial agreement.

We look forward to the opportunity to serve you.  Please contact our firm to discuss your particular situation to see what the best course of action is best for you at Shepherd Financial Services.

To discuss the best course of action for your particular situation, contact us (http://www.shepherdfinancialpartners.com/bostoncom-contac...).

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies may be appropriate for you, consult your financial advisor.  This information is not intended to be a substitute for specific individualized legal advice.  We suggest that you discuss your specific situation with a qualified legal advisor.