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Family Wealth Transfer Part II: Planning For Marriage


One of the universal traits of youth is the ability to fall deeply in love. Another enduring trait of theirs is a resolute passion that drives them to reach their goals. So when your adult child falls in love and is ready to get married, of course there’s no stopping them. Whether they’ve made a good choice or not is a matter that’s out of your hands. And for financial planning matters, it’s totally irrelevant.

Regardless of the appropriateness of your child’s choice in marriage, there is one thing you’ll want to get across to them: the importance of a premarital agreement.

Planning for Marriage

Planning a wedding means entering a whirlwind of activity that can last months as your family enjoys planning one of the largest celebrations of your lives.

Planning a marriage, however, is something entirely different. This type of planning looks beyond the wedding day and long into the future. It asks participants to imagine unpleasant scenarios and to put protections in place against negative outcomes.

You see, planning for marriage takes on an additional dimension when a person has assets they wish to protect from a potential equal division in divorce. The issue also exists when a person getting married is expecting to receive a future inheritance they would like to protect from a potential equal division in divorce.

The first method of protection, to be implemented by the adult child who may inherit assets, would be a premarital agreement. The second method of protection, to be implemented by the parents leaving assets to the adult child to be married, will be discussed in Article III: Planning for Controlled Distributions.

Here’s what you need to know about inheritances and the premarital agreement.

Focusing on the Inheritance in the Premarital Agreement

For families with high net worth, divorce is one of the top five risks to family wealth[1]. It’s not a pretty fact, nor is it an easy topic to bring up with the bride- or groom-to-be whom you’re trying to protect.

For purposes of this article, our only concern in the premarital agreement is allowing our client’s adult child to avoid the potential equal division of their inheritance with their spouse in a divorce. With inheritance matters and estate planning, we’re not concerned with the following segments of a premarital agreement:

  • the division of their assets or income
  • the provision of temporary maintenance or alimony from one spouse to the other
  • the determination of child custody
  • tax elections

These issues should be referred to legal counsel who needs to advise the family as to the implication of their residence in a common law or community property law state.

The Challenge Before You: Willing Participation

The first challenge to having an adult child execute a premarital agreement is that the adult child, and their future spouse, need to be the ones who execute the agreement.

Unlike most things we do for our children when they are minors, the adult child actually has to know about it, and in this case, actually willingly participate in the execution of the agreement. This can seem like an insurmountable obstacle to many parents, especially considering the emotions of the adult child, but it is not necessarily as difficult as it seems.

It all starts with a conversation. Unfortunately, there’s never an ideal time to bring up the subject of pre-marital contracts. A good suggestion may be to have the parent’s attorney, with or without the parents present, make the suggestion to the child. The success of this discussion will depend on the degree to which the issue is emotionally charged, and the sensitivity and persuasiveness of the Attorney.

The Next Challenge: Deciding How Much You Want to Disclose

The second challenge the parents face is what disclosures will be made to the child to convince them that the premarital agreement is both necessary and in their best interest. Such disclosures may put the issue in better context for the adult child, who will see a responsibility to protect their inheritance for themselves and their children.

The good news is the parents’ assets do not need to be disclosed in the agreement. It merely needs to state that “any inheritance” will be considered separate property at all times before, during and after the marriage.

The Final Challenge: Timing

There may be no ideal time to talk to your adult child about the premarital agreement, but there’s no arguing that the absolute worst time is during the rushed moments before the ceremony is about to begin!

Therefore, the third challenge is timing. It makes no sense to confront such an issue, and not have the document be valid if challenged after the fact.  A premarital agreement should not be signed at the back of the church. It needs to be negotiated, with both parties having separate legal counsel, and be signed and notarized well before the marriage (or a last minute eloping ) takes place.

A Final Word (and a Warning) About Premarital Agreements

Please be advised that pre-marital agreements are disfavored or disallowed by some faiths. The client should investigate this issue before it is even raised with an adult child to make sure it is not in conflict with their religion.  If for any reason a premarital agreement is not an option, Article III will discuss other options at the parents’ disposal.

Scannell Wealth Management is a team of investment professionals registered with HighTower Securities, LLC, member FINRA, MSRB and SIPC & HighTower Advisors, LLC a registered investment advisor with the SEC. All securities are offered through HighTower Securities, LLC and advisory services are offered through HighTower Advisors, LLC.

HighTower Advisors LLC, its affiliates and HighTower Advisor’s Financial Advisors do not provide tax or legal advice.  You need to consult your legal and tax  

[1] U.S. Trust Cites Top 5 Risks to Family Wealth. Retrieved 9/20/17 from https://www.forbes.com/sites/ashleaebeling/2014/06/20/u-s-trust-cites-top-5-risks-to-family-wealth/

Scannell Wealth Management is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.