P is Prenups as an Estate Planning Tool

prenuptial agreement with two red hearts

 

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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