Today I want to talk to you about the issue that many families face when combining families as the result of a remarriage. Many of my clients speak to me about this issue and specifically the issue of whether they should execute a prenuptial agreement.
Combining households later in life can be tricky. Whether it is remarriage after the death of spouse, or whether it is remarriage after a divorce, there are issues that must be handled delicately. First, you want to make sure that your children are happy with your decision. Second, you want to protect yourself in the event of a divorce or separation. Finally, you want to protect your family in the event of your death so that the assets you spent a lifetime to create end up with your children and not the family from an earlier marriage of your spouse.
Many times, families believe that rushing to put in place a prenuptial agreement is the correct way to go. However, in some circumstances, this may not always be the correct way, and it may be even a disfavored way to proceed. The most important reason, is that prenuptial agreements can be challenged in court. In fact, the following is a list from a 2014 Huffington Post article on the top ten reasons prenuptial agreements are challenged and set aside in a divorce proceeding:
- No Independent Legal Representation
- Signed Too Soon Before the Wedding
- No Full Disclosure of Assets, Properties, and Debts
- Includes Child Support Provisions
- Contains Unconscionable Terms
- Contain Unenforceable Provisions
- Not Contained in Writing
- Contains Ambiguous Terms
- Making Promises, But Not Keeping Them Resulting in Fraud
As you can tell, there could be several landmines when it comes to prenuptial agreements. Therefore, before you consider establishing a prenuptial agreement, make sure that you have reviewed the matter with a knowledgeable and experienced attorney.
If a prenuptial agreement appears to be the wrong choice for you when combining families through a second marriage, what is the right way to proceed. A second option to consider would be a Domestic Asset Protection Trust, or a Tennessee Investment Services Trust (TIST) as they are referred to in Tennessee.
A TIST allows a person to establish an irrevocable trust, name a third-party to be trustee, that is nearly impenetrable to creditors. The following are the requirements of a valid TIST:
- Third-Party Trustee
- Contribute Unencumbered Assets to the Trust
- Name Beneficiaries
- Set Out the Terms of the Trust
- Execute an Affidavit Stating that the Creation of the Trust and Transfer of Assets to the Trust Will Not Render You Insolvent
However, a few additional points, the affidavit that you execute will further state that it is not your intent to defraud any creditor, there are no pending or threatened legal actions against you, and you do not anticipate filing bankruptcy.
When these trusts are created properly, subject to certain time restrictions for certain creditors, the assets of the trust can be safe from creditors, lawsuits, predators, and even spousal claims in divorce.
However, for most creditors, there is a four-year waiting period before the assets in trust are completely protected. What this means is that if you create a TIST in 2017, the assets in trust may not be fully protected until 2021.
Although, before you decide that a TIST is for you, it is best to speak with a knowledgeable and experienced estate and asset protection attorney to determine your options. As this type of strategy is complex, it is important to speak with an attorney who has experience in this type of area of law.
Make it a gift to your family by providing them with the protection that they deserve. Plan your estate today, so you can leave a lasting legacy tomorrow. Call us today at (615) 490-0477 to schedule your Legacy and Asset Protection Strategy Session.
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