A Wall Street Journal article last week examined the growing popularity of prenuptial agreements as estate planning tools, especially by baby boomers who are remarrying later and using prenups to secure assets accumulated prior to the marriage.
The American Academy of Matrimonial Lawyers says that about 80% of prenups deal with the protection of separate property, the division of property and inheritance rights. For boomers seeking to protect accumulated wealth and provide for children from a prior marriage, prenups help separate and protect these assets for those purposes.
However, it is important to note that since a prenuptial agreement is a contract, it can take precedence over a will, so it is important to ensure that each spouse’s will aligns with the intentions set forth in the prenup.
Trusts can also be used as part of a prenuptial agreement. As the article notes, primary or vacation homes can become a bone of contention between children from a prior marriage and a new spouse. Creating a qualified personal residence trust (QPRT) enables a surviving spouse to stay in the home for a pre-established period of time (or lifetime), then passes the home on to the children after that time has expired.
As an alternative to a prenuptial agreement, those with assets to protect may want to consider using a domestic or foreign asset protection trust, which does not require the consent of a future spouse to be put into effect. Transferring property or a small business to this kind of irrevocable trust enables those assets to remain separate property.
If you need advice on asset protection strategies, contact our Newport Beach law firm.