In this video series, Stephanie Burnham, a leading estate planning attorney licensed in New Hampshire and Massachusetts, breaks down the key estate planning concepts that every farmer should know to ensure their hard-earned assets stay within the family, avoid unnecessary taxes and legal hurdles and transition smoothly to the next generation. While this series will help you understand key concepts and take actionable steps, it’s essential to consult with an estate planning attorney who understands the specific needs of New Hampshire farmers. Your attorney can help tailor a plan that fits your farm's unique circumstances, ensuring that your assets are fully protected, and your wishes are honored.
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Hello, I'm Stephanie Burnham. I'm going to state planning and probate attorney licensed in New Hampshire and Massachusetts. Today I wanted to talk about prenuptial agreements and why and how we use them in estate planning and as an asset protection vehicle. A prenuptial agreement is a contract that's entered into before a couple gets married. And the idea behind this prenuptial agreement is that in there, you decide where your assets are going to go in the event of a divorce or a death during the marriage.
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Now, these documents can be incredibly valuable, but they get a bad rap. A lot of times, people think a prenuptial agreement is the death knell of a soon to be marriage, because why would anyone want to think about the end of that marriage before it has even begun? Well, that's why we plan. We plan because, quite frankly, 50% or more of the marriages that are entered into the US end in divorce.
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We plan because if we do a prenuptial agreement before you get married, you're deciding where the assets go. While you both still like each other. And that's a great time to plan, because now you still like each other and you want to work things out and you want to cooperate. You really don't want to be trying to figure out where assets go, when you don't want to talk to each other or be in the same room anymore.
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Prenuptial agreements also can be a great opportunity to start fostering trust, which seems kind of counterintuitive because we're entering into a contract. So things go badly. This is where our stuff is going to go. How does that build trust? Well, many times at the very first time couples have ever sat down and talked about what they own and what their debts are and how much they're worth.
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And it's a great opportunity for a couple to get together and have that discussion and talk about, well, oh, I didn't know you had investments in these different accounts. I didn't know that your net worth was this. I didn't know you were this far into debt. We should work on a plan to get out of debt. It's a great opportunity to start fostering that trust and to make sure you start having those financial conversations before you get married.
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Because, quite frankly, finances is one of the biggest reasons why couples get divorced. Now, prenuptial agreement are not just valuable to the people immediately in front of you. The couple getting married, they can also be incredibly valuable with respect to certain assets that you want to make sure do not get hurt, damaged, or transferred in the wrong direction.
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In the event that actual divorce were to happen. They can be very valuable for trying to keep family vacation homes in the family for future generations, especially long term. They can be hugely helpful to keep family farms in the family and keep that amongst the family members, and not have to worry that if one of the family members goes and gets a divorce, that the soon to be ex spouse is going to make the farm, take out a loan or force the sale of the farm to pay their fair share of that divorce settlement.
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It's important for family land, and it can be very important for other assets that you want to make sure stay in your family. For example, if you know that your you may be getting a future inheritance. Lucky you. If that future inheritance is something you want to make sure will be passed down to your children if something happens to you, a prenuptial agreement can assist in that process and make sure that if something happens to you, that your widow or widower doesn't accidentally redirect that future inheritance to their next spouse or their children, and not yours.
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So a prenuptial agreement can have a lot of great value and adds a lot of value to an estate plan. it also has to follow certain rules in order for it to be valid. One of the biggest rules that you have to think about is it has to be reasonable in time and division. You can't just say, I'm going into this relationship with $40 million, and my spouse has $500 and a used car on their last leg.
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And if we get divorced, they're going to get $500 and their old car. And I'm going to keep my $40 million. Court's not going to see that as reasonable, especially if you end up being married for 20 years down the road. And that spouse during that time frame raises the kids and helps build a household and really helps you with a lot of things going on in your life that allow you to get by and build even more wealth.
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They're not going to consider that to be a very reasonable division. So you have to think about what might be reasonable under the circumstances. Now, reasonable also doesn't necessarily mean a 5050 split, but again, it's reasonableness. The hardest one, the toughest one that you really have to think about though, is time really a prenuptial agreement should be signed, preferably 90 days before you get married.
00:05:33:22 - 00:05:58:06
Now you can sign one closer to the end. Time to the marriage. You can sign one up to 30 days, even the night before. But when it's the night before or when, then 30 days of the actual marriage. A lot of times that gives the spouse who is unhappy with the prenuptial agreement later an opportunity to challenge, because now they can say they were under duress.
00:05:58:08 - 00:06:28:08
They had family that were already here and traveled for that wedding. They couldn't just cancel everything because they wouldn't have gotten their deposits back. So they felt under pressure to sign this document. Otherwise they never would have signed it the way it was written. And that undermines the security of that document and the strength of that document. So one of these things that you really need to think about in advance, and you want to start at least six months before the actual marriage is going to occur, is to start working on this prenuptial agreement.
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It means to disclose all of your assets and all of your debts. And so sometimes that can take a while to pull all of this together. Plus, you and your spouse should have the opportunity to sit down with an attorney and review what the terms are and how it may impact you right now. After you're married and what would happen in the event of a divorce?
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Because these are things that are all built into this contract and can all be impactful in your life. And you should understand before you sign it. So it's very important to make sure you give yourself plenty of time to do this. Now, if you are interested in something like this, but you're getting married a little bit sooner then 90 days, or it's coming up rather fast.
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Some states honor what's called a post natural agreement, which is a document you sign after you get married. But as you can imagine, it's a little bit harder sometimes to get people to sign post natural agreements because they're already married. They already have all the rights. Why would they sign off on giving up some of their rights in the event there was a future divorce?
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So they're harder sometimes to get signed by both parties, and they're not as standard across the entire country. Some states allow them. Some states don't. So if you want a prenuptial agreement and your fiancé doesn't want to sign or refuses to sign. Is there still a way you can protect your assets? Yes, you can still protect your assets by how you own them and buy certain types of vehicles that you might use.
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You can use revocable or irrevocable or limited liability companies. Revocable trusts. Irrevocable trust are opportunities for you to have your assets held and owned in trust, which can provide protection in the event of a divorce later on. A limited liability company is something that you can use to hold business assets real estate and investments as well. And again, treat it as something different than you owning it personally, which again gets treated differently in that divorce.
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So some very careful estate planning can help in the event that your fiancé is just not willing to go forward with a prenuptial agreement. I hope you found this information useful, but it should not substitute for good legal advice. You should speak to your own attorney about your own particular circumstances to ensure you get the best advice possible for your situation.
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Thank you very much and have a great day.
