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A Boomer’s Guide to Divorce, Remarriage, and Prenuptial Agreements

You may have property, children, retirement savings and other assets. A prenup can help avoid a lot of problems down the road.

If you’re among the many older adults who are divorced but seriously contemplating remarriage, you might also contemplate a prenuptial agreement.

So says Harry Margolis, author of "Get Your Ducks in a Row: The Baby Boomers Guide to Estate Planning."

“When people get or move in together when they’re young, they probably don’t need a prenuptial agreement or anything in writing about how they will share expenses and what will happen if they go their separate ways,” said Margolis.

But when they get together at a later age, the situation is "very different," he said. “They come into the relationship with some baggage or – since ‘baggage’ can seem a bit pejorative – with some history.”

In fact, they’re more likely to have property and children. “They may have spent decades working and saving to accumulate whatever they own and they may have done so with a partner who, if deceased, in effect has a claim on that property,” said Margolis. “They may roll over in their grave if it goes to a new paramour and his or her children rather than to her own children.”

What’s more, the children may have expectations. “Not only would they be unhappy if their anticipated inheritance went to this new person in their parent’s life, but if that new person is much younger than their parent, they might not be so happy about waiting many more years or decades,” he said.

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Of course, in the U.S., ownership is king, said Margolis. “You can do what you want with your stuff, even give it to your new partner rather than your children,” he said. “The problem is that this often happens unintentionally rather than intentionally. Without a plan, assets often end up owned by the survivor of a couple and passing to his or her family.”

In addition to the issue of inheritance, there’s the one of incapacity and care, said Margolis. “People in their 70s, 80s and 90s have a good chance of suffering physical or cognitive incapacity,” he said. “When that happens, what’s already complicated can get even more complicated.”

Did the new partner sign on for better or worse or just for better? Is he or she ready to take on the care and expense of care for the ill spouse or partner? How will care be coordinated with that person’s children?

“Often in these situations communication becomes difficult, leading to misunderstandings and conflict,” said Margolis. “At least some of this can be avoided if partners plan ahead and discuss what they would want to happen in the event of incapacity.”

In short, when older people get together it can be complicated, he said. “A prenuptial agreement in the event of marriage or a cohabitation agreement when there’s no marriage can help avoid later difficulties,” said Margolis.

Others agree. “With the divorce rate being so high, prenuptial agreements should be the norm for people with substantial assets getting married,” said Sarah Carlson, a certified financial planner with Fulcrum Financial Group. “Too many times, it is not.”

For her part, Lili Vasileff, the president of the Association of Divorce Financial Planners and certified financial planner with Wealth Protection Management said the prenup conversation — given changes in laws, and the risk of divorce, as well estate considerations — should focus on how to make prenups a tool for strengthening a relationship throughout the marriage.

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And Kelly Pedersen, the founder of Caissa Wealth Strategies, noted that prenups don’t have to be scary or threatening. “They are as much about protecting you as they are about protecting your assets,” she said.

What’s more, she said there can be benefits for both partners based on how a prenup is written. “For example, if you find yourself in a situation where your future spouse has significant assets in his or her name, a prenup can help you understand what it would look like upon you exiting the marriage,” she said. “It can spell out what you would walk away with so that you can live in solace knowing you wouldn’t be left with little to nothing.”

Pedersen also noted that she typically recommends using prenups to solidify assets, income and especially for blended families.

Remember, too, the prenup will supersede most other documents and there is no revoking it without going through a lot of hoops, said Pedersen.

Pedersen also said those getting remarried should be protected not only in divorce but in death. “It's easy to get wrapped up in what happens in divorce and forget death issues,” she said.

Here’s some of what a prenup can accomplish according to Margolis:

  1. It forces a discussion about financial and care issues. Without the necessity of putting plans in writing, people and relationships often drift. The act of putting an agreement in writing forces a conversation and discussion of these important issues.
  2. It brings out new issues. Putting pen to paper often makes people think of issues and details they would not consider otherwise.
  3. It's a memory aid. No one’s memory is perfect, and there’s more and more evidence that our memories are modified by subsequent events and influences. Looking at what’s in writing from years before may surprise the parties and clarify differing memories.
  4. It's evidence of intent. Children often have a different idea of what’s right for a parent or what the parent may have intended than the parents themselves. Written evidence of what the parent had in mind may quiet down a child who is objecting to a plan when it can be shown the plan is consistent with the parent’s wishes.

“Anyone entering into a prenuptial or cohabitation agreement should understand that it can always be modified,” said Margolis. “If it’s put in place when two people are moving in together, but they stay together for a long time, what was appropriate at the beginning may no longer make sense 15 years later. They should review their agreement periodically and adjust it as appropriate.”

Other financial planners offered additional points to consider.

For instance, Sallie Mullins Thompson, a certified financial planner and principal with a firm bearing her name, noted the following:

  1. Each state has specific laws regarding child/spousal support, division of property, and taxes. An agreement is not needed if it's only to put in place what the state already legislates. Thus, knowing what the state laws do/do not cover is essential.
  2. Using mediation first to make decisions regarding the agreement's conditions before actually drafting the document is usually more beneficial and successful than negotiating an already drafted document.
  3. Transparency on the part of both parties regarding all assets, income, and debts is important and key to creating an enforceable prenuptial agreement that both parties can live with.
  4. Cohabitation agreements are crucial, especially if the parties are planning to own property together and have children. The agreement can protect the rights of everyone involved.
  5. Putting certain estate planning documents, such as POAs, in place is wise. If children are involved, guardianship specifications are very much needed.

And Carlson offered these six points worth keeping in mind:

  1. Death is different from divorce; a couple can have different intentions expressed through a will than they would in divorce. With a prenuptial, separate asset agreement can take that into account. Your will can reflect a different division of assets, and you can name your partner beneficiary of life insurance, annuities and retirement assets outside of your estate.
  2. Clear communication is key. Couples need to talk about what they want to keep separate and why, before hiring an attorney. Determine which assets are meant to be in this agreement.
  3. Revisit the documents annually, situations do change, and it is possible to update agreements to keep up with your current needs.
  4. Prenuptials usually cover assets coming into a marriage, but what about income earned during a marriage? Some couples want to treat income separately as well. If so, talk about it and have language in your documents to deal with it.
  5. It is possible to have joint assets that you choose to commingle such as a house or perhaps gifts given as a couple. These joint assets can be excluded from those other agreements.
  6. Make sure the assets are listed in a way that supports your prenuptial document. If an asset is separate but put into joint ownership with the trustee, it will be commingled. Ensure assets are either in a trust or listed in the sole owner to keep titling clean and avoid litigation later.

And Jeff Farrar, certified financial planner with Procyon Private Wealth Partners, said prenuptial agreements are a good idea in many circumstances. But each person will need a lawyer and a full and complete disclosure of assets and liabilities. He also recommended drafting the agreement “far ahead of the wedding as possible—months and months.”

He cautioned too that maintaining separate assets of what was brought to the marriage — inheritances, debt, ownership of individual businesses, and the like – could become problematic and offered this advice: “Think in terms of three time buckets--before the marriage, during the marriage and after the marriage.”