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InvestorGuide University > Subject: Family Finances > Sign and be Mine

Marriage and Divorce
Sign and be Mine
by Dwight Wanken (Write for us!)
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Throughout man's time on earth, marriage was long entered into for financial reasons as well as social. While these financial motivations are no longer as widespread, the decision to marry still involves many financial planning issues which must be addressed. Prenuptial agreements are generally entered into by betrothed individuals in an attempt to resolve issues of support, distribution of wealth and division of property in the event of death or the failure of the proposed marriage resulting in either separation or divorce.

A prenuptial agreement can make a subsequent divorce a much simpler and cheaper process because it states clearly what each partner is bringing to the marriage, thus making it easier to decide what each partner is taking from it. The couple is free to set whatever terms they wish. The terms usually include the promise to transfer wealth from one spouse to the other with the receiving spouse foregoing any future claims against the tranferring spouse for additional support. This clause is usually phrased as a substitute for alimony as few states recognize contracts that expressly limit or forbid alimony.

Prenuptial agreements generally provide who will pay for what and for how long. These contracts generally stand up in court as long as both spouses were open and honest about their assets and liabilities and had access to separate legal advice. One area of trouble suggesting duress is the pressure of time. Last minute "Sign this, honey, on the way to the church" prenuptials are a probable candidate for being overturned.

These contracts are especially valuable where one spouse is much wealthier than the other or where there are children from previous marriages. Prenuptials can be effective to sort out tricky estate planning problems and ensure provisions are made for the children. Future spouses might want to consider using some form of trust arrangement when structuring these agreements. Making the transfer irrevocable also removes the property from the donor's estate. Qualified terminal interest property trusts (QTIPs) are often useful in many of these situations by providing an income stream and access to the principal if necessary for the recipient spouse.

These are merely some of the considerations to keep in mind when contemplating these arrangements. These agreements should also have some provision for who is responsible for paying various taxes. When contemplating dividing property, prenuptials should consider the cost basis of the particular asset and who might get left with a large capital gain upon eventual sale. Titling of property is always important to avoid ownership disputes when marital trouble arises.

Postmarital agreements are also possible and may work where the spouses are amicable. Although these agreements, both pre- and post-nuptial, are fairly common and can be straightforward, they should be negotiated with the counsel of an attorney for each side. A consultation with a financial planner, in addition to the florist and caterer, may be a wise move for many who have marriage in their future.