Estate planning involves confronting some sensitive matters. For many people considering marriage, one such issue is the decision to ask your spouse-to-be to enter into a premarital agreement. Those who are entering into a first marriage without a lot of assets and no children may not need a premarital agreement. However, if you're getting remarried after you have enjoyed financial success throughout your life, the decision becomes more complex. This is amplified if you have children from a previous marriage or marriages.
If you are married and live in a community property state like Nevada or California, all earnings and efforts that produce something of value after the marriage are community property. Many people believe that so long as they don't commingle funds and assets remain titled in their sole name that they are protected. This is not the case. While the assets with which you enter a marriage are your sole and separate property, all post-marriage earnings, regardless of where they are deposited or invested, are community property. Our office has handled the administration of several estates where a surviving spouse, or the children of a deceased spouse, brought claims to establish assets titled in the name of the other spouse or his or her estate as community property. In many of these cases assets were diverted to a surviving spouse and/or a deceased spouse's children in contradiction to the intent of the other spouse's estate plan. In addition, many states laws, including Nevada's and California's, allow a spouse to make a number of different claims against the will or trust of a deceased spouse, potentially further frustrating the deceased spouse's estate plan.
To address these problems it is possible to enter into a premarital agreement. Every state has its own requirements for a premarital agreement to be enforceable. In Nevada, it is important that both parties provide a reasonable disclosure of their property and debt. In addition, it is important that both parties are represented by independent legal counsel. The agreement should also be executed as well before the wedding and, and the terms of the agreement should not be unconscionable (i.e., too one-sided). These are just a few of the factors the courts look at to determine the validity of a premarital agreement.
Aside from claims upon the death of a spouse, there is the matter of possible divorce. There is a post on the Psychology Today blog that looks at the high rate of divorce among people who get remarried after having been married previously. This piece states that 67% of second marriages do not last. Third marriages are even more precarious with a 73% divorce rate. When you understand the fact that a significant majority of second and third marriages fail, you may conclude that premarital agreements may not be in poor taste after all. Perhaps they are simply a pragmatic response to a stark reality.