Not Just A Prenup: How to Protect Your Estate Before You Get Married Again

Transcript of Podcast Episode 269

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, how to protect your estate before you get married for the second (or third) time.

The term “gray divorce” has been popularized in recent years by Susan L. Brown, co-director of the National Center for Family & Marriage Research at Bowling Green State University.[1] And it’s becoming more common. For Americans over age 55, the divorce rate has doubled since 1990.[2]

This will likely mean more second marriages for older Americans, and more concern over how to protect what may be a significant amount of assets they already have.

Whenever anyone asks about protecting their assets, before they get married, the answer always seems to be the same: Get a prenup, or prenuptial agreement. A prenup is a legal contract that seeks to anticipate and resolve potential issues between the couple and is something that can save a lot of time and money in the end, even though you need to hire an attorney to draft one.

A prenup is designed to lay out how assets will be distributed if the marriage comes to an end, and address other issues such as debt, custody or support of children, alimony, access to retirement funds, use of homes or other assets, and other important issues. One of the hardest parts about a  prenup is bringing up the subject.  It’s not exactly romantic conversation and to some might suggest a lack of trust or lack of faith in the longevity of the marriage.  But more individuals are accepting them as simply smart planning.

But is there anything else you can do? A recent article in Think Advisor Magazine, written by Elisabeth Salvadore & Salvatore A. Polidoro, provides some suggestions. In addition to the prenup, the authors recommend[3]:

1. Understand how things work in your state of residence. The authors point out one important way to protect any children from a previous marriage: Understand the rights your new spouse may have to make claims against your estate. These rights vary from state to state. They cite Florida as an example, where there are restrictions for “homestead property” that could override the provisions found in a will or trust.
2. Be aware that certain states may also have what’s called an “omitted or pretermitted spouse statute.” A pretermitted spouse is a surviving spouse that is not mentioned or accounted for in your will. If this is the case, in some states the surviving spouse can elect to receive a share of the estate equal to what he or she would have received, if you had died “intestate,” or without a will.
3. In addition, your state may have an “elective share statute.” An elective share statute will permit your surviving spouse to avoid the provisions in your will or trust and allow the survivor to take a designated percentage of the estate instead.
4. Also, lifetime gifts to your children can be used to minimize the effect of these legal provisions. The 2024 annual exclusion is $18,000 per recipient. This means that you can give each of your children and grandchildren up to $18,000 without any gift or estate tax implications. This can help assure that some of your assets go to your children rather than your spouse or ex-spouse, and it doesn’t cost anything tax-wise.

And don’t forget about life insurance. A properly structured insurance policy can go a long way in solving a potential future conflict. Many divorce decrees may require it, particularly if there are minor children involved. Your Security Mutual life insurance advisor can help. He or she can help you sort through your options and help get the process started. Your advisor will assemble your team and coordinate with your attorney and tax professional to review your situation to determine the plan and strategies that are appropriate for you and your family.

[1]  Shoichet, Catherine E.. “More Baby Boomers are living alone. One reason why: ‘gray divorce’.” cnn.com. https://www.cnn.com/2023/08/05/health/boomers-divorce-living-alone-wellness-cec/index.html  (accessed February 9, 2024)

[2] de Visé, Daniel. “’Gray divorce’ rates have doubled. But it’s a costly move, especially for women.” usatoday.com. https://www.usatoday.com/story/money/2024/01/28/gray-divorce-more-americans-split-after-50/72337078007/ (accessed February 9, 2024)

[3] Salvadore, Elisabeth and Polidoro, Salvatore A. “5 Ways to Protect Clients’ Estate Wishes Before They Get Married.” thinkadvisor.com. https://www.thinkadvisor.com/2024/01/19/5-ways-to-protect-clients-estate-wishes-before-they-get-married/?kw=5%20Ways%20to%20Protect%20Clients%27%20Estate%20Wishes%20Before%20They%20Get%20Married&utm_position=5&utm_source=email&utm_medium=enl&utm_campaign=lifehealthweekender&utm_content=20240121&utm_term=tadv&oly_enc_id=2571H9195045D5G (accessed February 8, 2024)

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