When people get remarried later in life, there are generally more assets involved. First marriages often involve young couples who may struggle to pay basic bills. Second or third marriages often involve at least one person who has significant assets, such as stocks, real estate, pensions or even just a large amount of cash.
One financial planner says that the use of a prenuptial agreement in subsequent marriages is very important, particularly when spouses have children from previous marriages. He gives an example showing why that is.
A couple got married when the husband was in his 60s and the wife was in her 50s. Their assets were combined, although the man had substantially more assets. Neither spouse tried to take advantage of the other, so it worked out just fine. The man died first and his wife got all of his assets. When she died a decade or so later, all of the assets went to her children. The man’s children were left with nothing.
A prenuptial agreement can help prevent scenarios such as this one. It is a good legal document to have in place, and it often works well with a couple’s estate planning documents. A prenuptial agreement can be used to create a trust that pays one spouse interest income when the other spouse dies. After the other spouse passes on, the money is then distributed to the children of the first spouse who died.
Using a prenuptial agreement to create such a trust is better than using a will to do so. A will means that one spouse must pass away before it goes into effect. A prenuptial agreement becomes effective if a divorce occurs.
If you are remarrying, you may want to consider a prenuptial agreement to protect your assets. Each party should have their own attorney review the document to ensure that their interests are protected and that the document is enforceable if it’s challenged in court.
Source: Pittsburgh Post-Gazette, “Financial planners: Prenuptial agreements shouldn’t be a deal breaker in remarriages,” Tim Grantt, accessed Jan. 13, 2017