Marriage is a contract that has more potential financial consequences than anything else most people experience in a lifetime. You do not have to accept the standard default provisions the law offers for inheritances, contracts, medical decisions, property and divorce. Through the savvy use of post-marital estate planning, you can craft a different roadmap for yourself and your family.
Many people think you can only enter into a marital agreement before marriage, a pre-nuptial agreement. In reality, you and your spouse can create a post-nuptial agreement, regardless of whether you have a pre-nuptial agreement. Some of the reasons people decide to get a post-nuptial agreement include:
- Birth of a baby. After you have a child together, you might want to sit down and talk about how you will raise the child, if the marriage breaks down. The stakes are obviously higher when you have a child, and it is usually better to talk about these issues when you are not yet facing the specter of divorce.
- Marital misconduct. What if one spouse commits marital misconduct, like infidelity or abuse? You might decide to continue living together but under agreed-upon conditions, or stay married but live separately, or divorce. You should cover all the essential terms for any arrangement you choose. Sometimes people choose one of the first two options, but eventually divorce, so your agreement should anticipate that possibility.
- Financial changes. If either of you experiences significant financial changes for the better or worse, you might want to enter into a post-nuptial agreement. If you discover after the wedding that your spouse has financial skeletons in the closet, you should also consider a post-nuptial agreement to protect your financial future. In this situation, you should both pull your respective credit reports and review them together before agreeing on terms.
- Taxes and business ownership. These are additional reasons to consider a post-nuptial agreement. What if you enter your family’s business after getting married? You and your family members want your interest in the company to pass to your children, not to your spouse. Put this provision in a post-nuptial agreement. You can also handle things like filing status for taxes in these agreements.
The Divorce Process
If you are anticipating or going through a divorce, you need to get your ducks in a row for the future. Try to visualize the long-term future without your spouse and what that will mean for the inheritance of your loved ones. Realize that in many states a divorce automatically nullifies existing wills and living trusts, so you should immediately review and update your current estate plan and beneficiary designations. Note: Regardless of what the laws of your state say, if your ex-spouse remains the designated beneficiary of your ERISA retirement plan at your death, then your ex-spouse will inherit your retirement plan.
Wills and Trusts
Independent of the stability of your marriage, you and your spouse should have wills or living trusts to control the distribution of your assets when you die. If you do not have a valid will or living trust at death, then you could die “intestate” and the laws of your state would decide who inherits your assets. Not only does that delay any inheritance transferring to your loved ones, but you may be leaving an “unintended inheritance” to attorneys and the probate court system.
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