Remarrying? Always consider a prenup

Proposal- Prenuptial argumentPeople who are remarrying after a death or divorce should almost always strongly consider having a prenuptial agreement.

When prenup agreements first became popular a generation ago, most people thought of them as a way for wealthy people to protect themselves in case they were marrying a gold digger. Today, however, prenups don’t have the same connotation. They’re often used as a straightforward financial and estate planning tool, especially by mature couples who are entering into a second marriage.

The number one reason that people enter into prenups when they begin a second marriage is that they have children from their first marriage, and they want to make sure the children will be well provided for in case they get divorced or in case they die before their new spouse.

While blended families can be great, and you might feel sure your new spouse will treat your children like his or her own, things can change over time, and it’s wise to protect your children both legally and financially.

For instance, even if you say in your will that all your assets will go to your children when you die, that might not happen. In almost every state, your spouse can claim a significant share of your assets – typically 30 to 50 percent – even if your will says that they should go to someone else.

However, if your spouse signs a prenup saying that he or she won’t make such a claim, you generally won’t have to worry about your children receiving the inheritance you intend for them.

Another issue is that, if you have assets in a 401(k) account, those assets will go to your spouse if you pass away… even if your beneficiary designation form says they should go to your children or other family members.

This provision can’t be waived in a prenup – it has to be waived in a notarized document after the marriage – but a prenup may be able to impose consequences on a spouse who refuses to sign a waiver after the wedding.

There are other ways to protect children, too, including the use of trusts. But a prenup is often a critical piece of your financial plan for protecting the next generation.

If you don’t have children yourself, but your new spouse does, you might want to consider whether you want all your wealth to eventually go to your stepchildren. You might want to use a prenup to make sure that certain assets will go to other relatives, such as siblings or nephews and nieces.

Even if neither spouse has children from a prior marriage, a prenup can still make sense. Many people who enter into second or third marriages have worked for a long time and bring significant assets to the table. Often, both spouses will have accumulated some degree of wealth. A prenup that says what will happen in the event of a divorce can make matters far easier if things don’t work out.

Many second-marriage prenups say that if there’s a split, both people will keep the assets they brought to the marriage. This makes things simple, and can provide a certain amount of comfort and security to everyone.

Here’s another consideration: If one spouse comes to the marriage owning a share of a family business, it can be very smart planning to say in a prenup what will happen to that spouse’s share in the event of a death or divorce. That way, the business can keep running without any uncertainty about the terms of ownership.

Also, if one spouse is a partner in a business, the business might have a buyout agreement saying that the other partners can buy out the spouse’s interest if he or she retires or passes away, or in certain other circumstances. A prenup can work in tandem with this agreement to make things easier for everyone.

In general, if you’re thinking of remarrying, it’s a good idea to talk to a lawyer first about ways to further your financial and family goals.