Prenuptial agreements can be important planning tools for any couple planning to get married. However, for people who have children from previous relationships, a prenuptial agreement can help ensure that their childrens’ inheritance is protected.
Without a prenuptial agreement, a spouse, either through divorce or the death of the other spouse, may legally seek and get assets and belongings that an individual had intended to pass along to his or her children. Even if the new spouse holds assets after the death of the other spouse in good faith and plans on passing those assets on to the children from the deceased spouse’s previous marriage, the children from previous relationships may have their inheritances significantly delayed if the new spouse is significantly younger.
There are some important good practices to consider before entering into any prenuptial agreement. First, negotiation of the prenuptial agreement should begin as soon as possible. A prenuptial agreement should absolutely not be foisted by one party upon the other mere days before the wedding. Both parties should fully disclose all assets and liabilities before entering into an agreement. Both parties should also be represented by their own attorneys who are experienced in the current law in the couple’s state of residence. Individuals encountering either a potential spouse who insists on a “take it or leave it” agreement just before a wedding, or a potential spouse who outright refuses to even consider a prenuptial agreement, should perhaps reconsider their relationship.
What makes a prenuptial agreement for second marriages different is that the agreement can specify what goes to an individual’s previous children and what can go to the spouse. It is important that the prenuptial agreement be as detailed as possible. While it may be obvious to predetermine what happens to larger assets such as real estate and financial holdings, smaller objects can also become points of contention if their fate is not specified. Children may value certain of their parent’s items highly for their sentimental value. Another factor to consider is whether or not the prenuptial agreement should act differently if the marriage ends due to death instead of divorce.
For individuals with significant financial holdings entering into a second marriage, a specific type of trust can play an important role in estate planning. A qualified terminal interest property trust, or QTIP trust, provides trust income to the surviving spouse while preserving trust principle for the individual’s beneficiaries once the surviving spouse dies. The prenuptial agreement can then reference the QTIP trust as the means by which the surviving spouse will be supported.
Two areas where a prenuptial agreement alone will not protect assets are medical expenses and long-term care coverage. Spouses have a duty to pay for each other’s medical expenses even if that would mean dipping into what would be considered separate assets in a prenuptial agreement. Similarly, if one spouse is applying for Medicaid nursing home coverage, the full assets of both spouses will count toward the Medicaid asset cap to determine eligibility. To protect assets from potential long-term care expenses individuals should meet with an experienced elder law attorney to discuss options such as an an asset preservation trust. An asset preservation trust, if implemented far enough in advance of applying for Medicaid, can protect assets and comply with a couple’s overall estate plan.