Consider a Prenuptial Agreement
Today, with half of all marriages ending in divorce and remarriage the rule rather than the exception, prenuptial agreements are being used by an increasing number of couples. Such agreements are intended to make the marriage work more smoothly and to keep a potential divorce, with its financial complications, as painless as possible.
While many couples marrying for the first time consider such agreements to be unromantic at best and pessimistic at worst, those marrying for a second or third time (or more) find it easier to combine business with romance in order to settle potential problems before the wedding.
The conventional prenuptial agreement typically involves a transfer of assets, now or in the future, in exchange for a release of claims against the richer one's property. Today's prenuptial agreement might include not only who gets what in case of divorce, but also who's responsible for what during the marriage. For example, some agreements specify the household duties of each spouse, the financial obligations of each, whether there will be children and how they will be brought up, and what religion the couple will practice.
Wide-ranging prenuptial agreements are relatively new, and the issues they bring up have not been sufficiently litigated to provide adequate guidance for what will hold up in court. Therefore, while couples enter into prenuptial agreements in the hopes that they have solved all disputes before they even arise, that is not necessarily the case. Prenuptial agreements can also be set aside for a number of reasons including such things as one party's failure to disclose all assets.
Anyone considering a prenuptial agreement should realize that personal relationships and the tax law seem to be two of the ever-changing aspects of life. The agreement that made sense under one set of rules may be unfair to one or both parties under revised tax law. Perhaps the wisest approach is a prenuptial agreement that runs for a specific time, at which point it either can be modified or allowed to lapse entirely.
Prenuptial agreements are not a do-it-yourself project; contact your lawyer for assistance if you think one is appropriate in your situation. Prenuptial agreements are financial contracts - insist that your attorney work with a qualified CPA.
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© Copyright 2001 Raymond S. Kulzick. All rights reserved. 010601.
This publication provides business, financial planning, and/or tax information to our clients. All material is for general information only and should not be acted upon without seeking appropriate professional assistance.