Prenuptial agreements have long been the norm for the soon-to-wed rich and famous, but they are now becoming de rigueur for baby boomers about to tie the knot. “They’re more common now with second marriages,” says Jack Cornelius, a certified public accountant with Cornelius and Co. “Somebody felt they got hurt in the first divorce, so they’re overly cautious.”
According to attorney Drummond T. McCunn of McCunn Law, this safeguard can act in two ways. Prenups can detail what assets each party brings to the marriage so they remain separate in case of divorce. Prenups can also detail how assets would be split in a divorce, thus redefining community property and overriding California law, which calls for marital assets to be split 50/50.
Cornelius is tasked with splitting those assets — an undertaking generally simplified by the presence of a prenup. And simple means savings. “The idea (behind a prenup) is your costs drop down into the thousands of dollars instead of the hundreds of thousands of dollars,” he says.
Though this asset insurance can save time and money at the end of a marriage, an obvious hurdle presents itself before the marriage even begins. If suitors were a bag of nerves before proposing marriage, what about proposing a prenup?
McCunn says an alternative to prenuptial unpleasantries — or what he refers to as “divorce planning” — is a separate property trust: a no communication solution to protecting assets. This document is set up independently, without involvement from the soon-to-be spouse, and funded with the bulk of the personal estate. Portions of the trust can be signed over as community property during the course of the marriage, and if divorce occurs, any assets titled under the trust are protected.
“A separate property trust is a fantastic way to create a firewall between a baby boomer and a second marriage,” says McCunn. “You can do it unilaterally without the other person involved, so there is no yucky negotiation over what happens in the case of divorce.”
In addition to avoiding a “nasty prenup discussion,” McCunn also advocates for separate property trusts as a cost-savings maneuver. Fees for a separate property trust typically cap at about $1,000, while prenups can venture into the $3,000 or even $5,000 range. The trust can also provide more potent protection for children’s inheritance.
“Whenever I talk to clients in the prenup situation, 99 percent of the time they’ll wind up with a separate property trust,” McCunn says. “It’s definitely a message that needs to get out to the boomer generation.”
If the individual is still in the workforce, McCunn recommends a prenuptial agreement to protect the accumulating funds. If already retired, opt for the separate property trust, he says, to keep the account in your name.
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