P is Prenups as an Estate Planning Tool

P is Prenups as an Estate Planning Tool


As your wedding day approaches the last thing on your mind is estate planning. However, if you have agreed to sign a “Prenup” it may be wise to devise this agreement along with your estate plan.

Today Prenups are not only used to protect assets in case of a divorce, they are also being used as an estate-planning tool by many individuals. It may be in part due to a shift toward marrying later in life and having already built significant assets that you wish to keep separate, or because you are getting married for a second time and want to preserve assets for your children from a prior marriage(s).

It is important to coordinate a prenuptial agreement with your will and trust as prenups and trusts are contacts that can override a will. Your prenuptial agreement should work in harmony with your estate plan, not against it. When creating your prenup and estate plan you may wish to consider the following:

  • Estate Tax Exemption – avoid unnecessary estate taxes in the surviving spouse’s estate. When setting up a prenuptial agreement make sure it has the flexibility to accommodate future changes that can help with the exemption amount.
  • Premarital Transfers – transfers of property between spouses generally are exempt from both income and gift taxes, so it would be best if the transfers take place after the marriage.
  • Family Home – include strategies that allow for execution of home-related estate planning, such as transferring the home to a qualified personal residence trust.
  • Protecting Children – a prenup can prevent your spouse from acquiring certain interest and preserve them for your children.
  • Rights of Surviving Spouse – surviving spouse estate rights vary from state to state, a prenup can waive the terms of a will and allow you to specify a certain percentage of the estate to be inherited by your spouse.
  • Liability Protection – you may include your spouse’s debts as separate from your own in a prenup.

In order to utilize the significant financial and estate planning benefits available in a prenuptial agreement, work with your advisor and attorney to create a prenup that works in conjunction with your estate plan.

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About Ann Zuraw

Ann Zuraw, the voice behind "Chicks, Chat and Change", is a Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA®), and Certified Divorce Financial Analyst (CDFA™). If you have comments on this post contact Ann Zuraw

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