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Note: Nothing in this publication is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same. [See IRS Circular 230.]

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Premarital Planning

    Are you or someone you know planning to get married? If so, you should consider some of the important financial and legal consequences of exchanging vows before the big day.

Premarital Agreements

    Whether you are single, widowed or divorced, you might want to consider executing a Premarital Agreement with your intended before you say I do. Legally speaking, a Premarital Agreement is a two-party contract made in contemplation of marriage and is effective upon solemnization of the marriage. Practically speaking, it allows prospective spouses to agree in advance to such things as:

• Asset ownership during the marriage;
• Asset disposition upon death;
• Asset division upon divorce; and
• Spousal support.

To help ensure that your Premarital Agreement withstands future legal challenges to its terms, here are some points to remember:

• Provide full, written disclosure of all assets by both parties;
• Provide adequate time for negotiation and reflection (i.e., well in advance of the wedding day);
• Make sure the Agreement is entered into voluntarily and the provisions are not unconscionable (e.g., unfair);
• Make sure each party understands the provisions; and
• Make sure each party has independent legal representation.

    While perhaps not very romantic, a properly drafted Premarital Agreement can protect family wealth and the interests of other family members in such wealth (e.g., family business ownership). In some circumstances, it also can help determine whether money is a primary motivating factor in the relationship before it is too late. Love may be blind, but you should approach marriage with both eyes wide open!

Blended Families

    If your marriage would create a Blended Family, then careful estate planning is required to reach often-competing goals. For example, how will you provide for the financial needs of your surviving spouse during their lifetime and for your own children?
    Careful coordination between your financial planning and your estate plan can help. One possible strategy could be called the Triple Play. Here’s how it works:
    First, you and your spouse-to-be execute a Premarital Agreement identifying and separating your respective assets. This will allow each of you to retain control over their eventual post-mortem disposition.
    Second, you create a QTIP Trust as part of your estate plan. Upon your death, this Trust will provide income for your surviving spouse. Upon their death, the assets are held and administered for your own children.
    Finally, a Life Insurance policy on your life will provide the funds needed to fuel the QTIP Trust and/or Trusts for your own children upon your death. Why Life Insurance? Because it provides a known sum of cash when it is needed at an unknown time in the future.

Summary

    Enjoy all of the romance and excitement of your upcoming wedding day. As part of your preparations, be sure to evaluate the financial, tax and family challenges with qualified counsel.