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Estate Planning Checklist

Everyone needs some degree of estate planning. Estate plans need to be tailored to the needs of the individual. The following estate plan checklist will explain various types of estate planning documents, and help you evaluate those that will be of value to you. Even if you decide to turn the matter over to an estate planning attorney, you should still have a basic understanding of what is involved.

1. Cover Estate Planning Basics

A comprehensive estate plan should consider what happens in the event of both death and disability. It should take into consideration what you want to happen to your property upon your death, the financial well-being of your family, the degree to which probate can be avoided, and how to eliminate or minimize estate taxes. These goals can be accomplished through various means, including properly setting up ownership of assets, designating beneficiaries where possible, and executing one or more estate planning forms. In addition to financial matters, an estate planning checklist should also consider the guardianship of any minor children, and medical treatment planning.

2. Plan Your Asset Ownership

Any asset that has title documents (real estate, motor vehicles, etc.) can be set up so that upon your death the title automatically passes to a co-owner. Most often this is a spouse. The title document must clearly indicate that ownership is held as joint tenants with rights of survivorship, as tenants by the entireties, or as community property.

There are two potential downsides to adding someone as a joint owner. First, you will need the joint owner to agree to any sale of, or loan secured by, the property. Second, if the value of the property exceeds a certain amount, it could trigger the federal gift tax.

3. Determine Beneficiary Designations

For some assets you can designate someone to receive the property upon your death, without giving them any current ownership rights. This is often done with bank and other financial accounts (usually called pay-on-death or POD). Designating a beneficiary is available in almost all states for brokerage accounts, and in some states for real estate, motor vehicles, and other assets with title documents (usually called transfer-on-death or TOD).

3. Cover Your Debts With Insurance

One way to ensure that all of your debts (including burial expenses) are paid in the event of death or disability, and that your loved ones are provided for, is through auto, homeowners, disability, and life insurance.

4. Get A Last Will and Testament

A last will and testament takes care of any property that must be probated. A last will can also deal with the care of any minor children (or adult children with disabilities). You designate who will get any property that hasn’t been handled through joint ownership or a beneficiary designation, appoint someone you trust as the executor of your estate, and appoint someone you trust to be the guardian or conservator of your minor or disabled children.

5. Consider A Living Trust

Especially if you have a large estate, or many beneficiaries, a living trust is usually the best choice for handling distribution of property, avoiding probate, and minimizing estate taxes. To avoid probate, most people create a revocable living trust (“revocable” since you may revoke the trust at any time). Property title is transferred from you to the living trust, and you become the trustee. While you are still alive, you control the property. You manage the property the same as if it was still in your name (sell or mortgage it, for example), and may acquire more property and add it to the trust. Upon death, a person you appoint as your successor trustee assures that the property is transferred to those you designate as trust beneficiaries. This transfer does not require probate. The successor trustee would also manage the trust if you become mentally incapacitated. People sometimes create an irrevocable living trust (most often for Medicaid planning), which also avoids probate, but requires the person creating it to give up the right to revoke it.

6. Consider A Financial Power of Attorney

A financial power of attorney authorizes someone you trust to act on your behalf in financial matters. The person who gives the authority is called the principal, and the person who has the authority to act for the principal is called the agent or the attorney-in-fact. Many states have an official financial power of attorney form.

Depending upon how it is worded, a power of attorney (or POA) can either become effective immediately, or upon the occurrence of a future event (such as your mental incapacity). If effective immediately, your agent may act even if you are available and not incapacitated. If a POA becomes effective upon the occurrence of a future event, it is called a springing power of attorney, because it “springs” into effect if the event occurs. The authority conferred by a POA always ends upon the death of the principal.

7. Consider A Health Care Power of Attorney

A health care power of attorney designates someone you trust to make decisions regarding your health care in the event you are mentally or physically unable to make decisions for yourself. You should discuss your desires for medical treatment with your health care agent (sometimes called a surrogate).

8. Get A Living Will

A living will, also known as an advance directive, sets forth your wishes regarding what types of life-prolonging medical treatment you do, or do not, want in the event you become terminally ill or injured and are unable to communicate your wishes. A living will goes along with a health care power of attorney, as it can serve as a guide to your agent, or can express your wishes in the event your agent is unavailable at a crucial moment.

9. Leave Information for Executor and Statement of Desires

This is not a legally binding document, but gives valuable information and guidance to your executor. It should include the information needed to clearly identify and locate all of your financial accounts, insurance policies, credit cards, vehicle loans, and mortgages. It should include contact information for relatives and close friends to be notified of your death; where assets are located (safe deposit boxes, storage units, etc.); and instructions regarding your desires for burial, cremation, funeral ceremonies, organ donation, etc.

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No-Contest Clauses in Wills and Trusts

 

No-Contest Clauses in Wills and Trusts

Is there a chance that any of your beneficiaries could be so disgruntled about what you’ve left them in your last will and testament or trust that they would bring a legal challenge against it?

If so, you may consider adding a “no-contest clause” to your will, which provides that anyone who disputes the validity of the document in court will end up inheriting nothing at all.

What exactly happens in the case of a contested will or trust, and can a no-contest clause really help you avoid that whole mess? Read on.

The Process of Contesting a Will or Living Trust

A last will and testament communicates your wishes regarding the distribution of your property after your death. A living trust holds your assets for your benefit during your lifetime and for transferring to your chosen beneficiaries at your death by the person you have designated as your “successor trustee.”

So what happens if someone wants to contest a will or trust?

Contesting a will requires that a beneficiary file a formal legal challenge against the validity of the will. A person must have standing to bring a will contest, which means he or she must have a financial interest in the estate, usually as a named beneficiary or someone who is entitled to inherit based on existing law.

Grounds for a will contest may focus on the testator’s capacity—that he or she was not of sound mind when the document was executed—or external forces such as undue influence, fraud, or duress, all of which allege that someone had forced the hand, so to speak, of the testator in drawing up the will.

Additionally, a will contest may seek to present a newer version of the document, alleging that it is the valid one.

Challenges to the validity of a trust are similar in nature and generally call into question whether the trust accurately reflects the trust creator’s wishes. As with a will, duress, fraud, undue influence, and even ambiguity in the trust’s terms may be alleged.

The process for disputing a will or trust can mean additional costs for the estate—and less inheritance for beneficiaries. And since we’re talking about court processes, it’s no surprise that all of this can take quite a bit of time—years even—to sort out.

None of these side effects of a will or trust contest are desirable for your beneficiaries, so it’s likely something you’ll want to try to avoid.

Enter the no-contest clause.

What Does a No-Contest Clause in a Will Do?

A no-contest will clause uses the threat of no inheritance at all—even what is bequeathed to the person within the document—to dissuade beneficiaries from challenging the validity of a will.

A sample no-contest clause in a will looks something like this:

“Notwithstanding anything herein to the contrary, if any beneficiary contests the terms of this Will, including, without limitation, filing a contest of admission of this Will to probate under [applicable section of the state Probate Code], that beneficiary shall not be entitled to any property under the terms of this Will, and for all purposes of this Will, that beneficiary shall then be deemed to have predeceased me.”

A no-contest clause in a trust would contain similar language, but remember that your state may have specific requirements, so it’s always best to consult a professional when incorporating legal language into your will or trust.

Pros and Cons of No-Contest Will Clauses

The main “pro” to including a no-contest clause is that it often does effectively deter beneficiaries from bringing a legal challenge to the will. On the flip side, however, if there actually were any errors in the will or trust, the existence of the no-contest clause leaves no recourse for that beneficiary.

Something else to keep in mind is that a no-contest clause doesn’t automatically mean there will be no issues or disagreements over the estate. One big caveat, for example, is that some states actually allow a beneficiary to bring a will contest—even in the presence of a no-contest clause—so long as she has probable cause to do so. And some states, such as Florida, will not enforce no-contest clauses at all.

Another important limitation of no-contest clauses is that they don’t apply to a person who is not a named beneficiary in the will. That is, even if there is a no-contest clause, a person omitted from the will who brings a contest will have no fear of repercussions of non-inheritance. He or she simply isn’t covered by the clause.

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How to Ensure Your Estate Plan Is Executed Properly

How to Ensure Your Estate Plan Is Executed Properly

by Brette Sember, Esq.

Jun 2016

You’ve completed a will or living trust because planning your estate is important to you, but have you done everything necessary to make sure your documents are legal? Some people start preparing the documents but can’t quite finish.

Your estate plan won’t do what you want it to do if you don’t take all the steps necessary to make sure it will go into effect when you need it to. Don’t leave your heirs hanging!

Making the Tough Decisions

One of hardest parts about creating a will or living trust is deciding how you’re going to distribute your assets. This can be a very emotional decision for some people. Once you’ve worked through this, completing your estate plan can become much easier.

Completing Your Will

You’ve decided who’s in and who’s out. You’ve divvied up your belongings, but you’re not done yet!

To make sure your will is valid, it’s a good idea to complete a self-proving affidavit if your state allows it. This is signed in front of a notary and is attached to the will, basically swearing that you meet your state’s requirements to complete a will.

Signing Your Life Away

Your will is not valid until it is signed in front of two witnesses. You’ll sign the will while the witnesses watch and then ask the witnesses to sign as well. This is a crucial step, because a will that is signed without witnesses is generally not valid.

Storage Matters

It’s important that the completed will is kept in a safe place because it does you no good to have a will that no one can find after your death. Your home safe can be a good place. Your attorney also can keep the will. Make sure your beneficiaries and family know that you have a will and where to locate it.

Completing a Living Trust

Your living trust allows you to use your assets during your life and control their distribution after your death when your successor trustee takes over. After you complete and sign your trust document, there is more work to be done. Your trust is not functional until you actually transfer your assets into it, which is called funding the trust.

This means you will need to change legal ownership of every asset you want to place into the trust, including bank accounts, real estate, investments, and more. These assets will now be owned by “(Your Name), Trustee of the (Your Name) Living Trust.”

An additional document you may need is a Certificate of Trust. This is basically a summary of the trust that you can use to show that the trust exists and how title to trust assets is to be held.

Transferring Assets to Your Trust

Follow these steps to transfer assets to your living trust:

  • Transfer real estate with a quitclaim deed, and also change your homeowner’s insurance to reflect the name change.
  • To transfer bank accounts and investments, you will need to complete a form from the financial institution and will likely need to provide a Certificate of Trust as proof of the trust’s existence.
  • You should create a list of the assets that you want to transfer into the trust, including personal property, such as jewelry and furniture, and attach this as a property schedule to the trust., indicating that ownership of these items is being transferred to the trust. Also, prepare and sign a document assigning the property to the trust.

Managing Your Trust

It’s important to stay on top of your trust. As you buy things, be sure to do so in the name of the trust and to update the property schedule. It is also a good idea to create a simple will (called a pour-over will) that will take anything you’ve forgotten and transfer it to your trust when you die.

Carefully completing your estate plan will keep things organized and give you greater peace of mind.

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A Lesson in Estate Planning

A Lesson in Estate Planning from David Bowie

Few pop stars have endured or left a legacy as diverse and successful as that of David Bowie. He died last week of liver cancer, just two days after his 69th birthday and the release of his latest album, Blackstar. He was inventive and cutting edge; the fans who transcended generations adored him. Those who didn’t know what to make of the androgynous pop star nevertheless remained fascinated by his ever-evolving, iconic personas. Over more than 50 years, he produced an extraordinary body of work that spanned music and film.

Bowie amassed considerable wealth

Bowie died a very wealthy man—his estate is worth an estimated $100M—and that’s before the inevitable spike in sales that will continue with his death. (In the 6 years since Michael Jackson’s death, his estate has grossed nearly $2B.) Yet in the 70s and 80s, Bowie struggled financially, reportedly nearing bankruptcy.

A brilliant plan for creating—and sustaining–wealth: Bowie Bonds

With the help of an investment banker, Bowie developed a brilliant plan for creating and sustaining wealth: Bowie sold a stake in his catalog of music. Instead of outright selling his songwriting, performance and licensing rights to his many successful songs, Bowie created “Bowie Bonds.” These allowed him to sell – for $55M– a 10-year investment, which operated like an annuity, providing a fixed-rate of return of 7.9%. The payouts were secured by all of his royalties and copyrights from the music. Prudential Insurance purchased the Bowie Bonds and was paid off in full during the 10-year timeframe. The Bowie Bonds transaction provided tax savings and ensured that his estate would benefit from his music catalogue.

Apparently Bowie was motivated by the desire to protect his family—his wife, Iman, their daughter, and a son from a former marriage. He had apparently always been interested in estate planning and wanted to make sure his assets passed on to his loved ones.

Bowie likely used one or more Revocable or Irrevocable Trusts

Given Bowie’s careful attention to financial planning, it’s likely that he used one or more Revocable or Irrevocable Trusts. In this way, he could have maximized the value of assets with the lowest tax consequences, but his assets could also pass privately, without the public scrutiny that accompanies Probate Court, which is the case with those who do not create a Living Trust.

Bowie’s final wishes

It was just revealed that Bowie’s $100M fortune will be distributed among his family and several loyal employees. Iman will receive half of his fortune as well as their Soho apartment; his children will each receive an estimated $25M. Bowie was a longtime Buddhist and requested that he be cremated in Bali in accordance with Buddhist rituals. He noted that if that was not practical, he could be cremated elsewhere, with his ashes scattered in Bali. The Bali cremation may have been problematic, for Bowie was cremated in New Jersey, but we can assume that his family scattered his ashes in Bali, according to Bowie’s final wishes.

A Living Trust ensures that your heirs will not have to deal with Probate and that your estate will remain a private matter. We assist our clients through every step of the Living Trust process.

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Corporation, LLC & Partnership Books and Records

MAINTAINING YOUR ENTITY RECORDS

Avoid Late Penalty Fees and possible loss of your entity name.

Now is the perfect time to avoid possible late penalty fees and to start thinking about the maintenance of your entity records. With the new year beginning; Corporations, LLC’s and Partnerships formed in previous years will be filing annual reports, biennial reports and or making annual tax payments.

Many important due dates and deadlines depend on the Corporation, LLC or Partnership’s state of formation, fiscal or calendar year and your entity’s formation date.

We can assist you with your Minute Book, Corporate Seal, or any other necessary report or document relating to your entity.

CORPORATION OR LLC REINSTATEMENT

Reinstating a company is the process of returning a company that is in default or revoked status back to good standing within the entities state. Reinstatement is an option for owners that want to continue using the same entity and it’s bank accounts and Federal Tax ID number.

In addition, by reinstating your entity, you will continue to have the liability protection of a Corporation or LLC.

TEAM Legal Document Services can assist you with the reinstatement process.

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Should I change my name after a Divorce

Divorce can be a long process that may drain your energy and leave you feeling out of control. No matter what has occurred in your past, your future always offers a fresh start. Now, more than ever, you have the chance to build the life you’ve always wanted.

The first step in creating your new life is to find out what you want. Then take the steps you need to have your dreams become reality. If you’re ready to create a new life after divorce getting your name back may be just the action necessary to kick-start the new you.

Changing your name after a divorce is a very personal decision and a complicated process, which tends to raise a large number of questions. Before you begin your name-change, it may be beneficial for you to read through some of the most frequently asked questions below.

Do I have to change my name after the divorce?

There are no requirements for you to change your name after your divorce. Resuming your former name marks a return to your former self, and for many women, it represents a positive step towards their new life.

How do I make sure I can change my name after the divorce?

Be sure to request that the judge presiding over your divorce makes a formal order restoring your former or birth name. If your divorce decree contains a name-change order it will serve as legal proof of your intended name change when you file your state and government forms.

What if my divorce decree does NOT have an order that restores my name?
You should be able to modify your divorce decree to include a name-change order. It is easiest to contact the court clerk that issued your divorce decree to request a modification.

What do I need to do to change my name?

You will need to complete and file name-change forms for Social Security, IRS 8822, United States Passport, United States Postal Service, and your state driver’s license. After filing those forms you will need to call or submit letters to all of your creditors such as banks, credit cards, physicians, insurances, ect.

How do I know when I’ve gotten my name back?
Once you’ve filed all of your state & U.S. government name-change forms and notified all of your creditors of your new name, your name-change is almost complete. You will know that your name is legally changed when you receive your new Social Security card, Driver’s license, and U.S. passport with your new name on them.

For further information or to get started please contact us 1-800-524-6801 or info@legaldocs101.com

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Special Needs Trusts

Special Needs Trusts

A special needs trust, sometimes called a supplemental needs trust, holds assets for the benefit of a person, under the age of 65, who has been determined to be disabled by the Social Security Administration. These trusts shelter assets so that they are not considered when the person qualifies for need-based governmental benefits, such as Medicaid or Supplemental Security Income from the Social Security Administration. Assets held in a special needs trust are meant to supplement these government benefits. For instance, trust assets may be used for medical expenses above and beyond what is covered by government benefits, transportation and other necessary expenses. The assets are managed by a trustee, who usually pays trust assets directly to the providers of goods and services for the benefit of the disabled beneficiary.

Creating a Special Needs Trust

To leave a disabled loved one an inheritance, a parent or other family member will often create a special needs trust in his will. The will can simply state that if a beneficiary is deemed disabled at the time of the testator’s death, assets will go into a special needs trust This provision of the will names a trustee and lists the terms of the trust, the same as for a standard trust document. In this case, any inheritance is paid directly to the trust, and not to the disabled beneficiary.

Self-Settled Special Needs Trusts

If a disabled person receives an inheritance outright and he is under age 65, he can use the inherited funds to establish a self-settled special needs trust. It is called self-settled because the trust is funded with the disabled individual’s own money. The trust is still managed by a trustee, and the trustee can make direct payments to the providers of goods and services. Although created with the disabled person’s inheritance, the trust is established by a parent, grandparent, guardian or the court on that person’s behalf. A self-settled special need trust usually contains a pay-back provision to the effect that the state will be repaid for Medicaid costs expended for the beneficiary’s benefit upon his death.

Pooled Trusts

If a disabled person is over age 65, he may have the option to put his inheritance into a pooled trust. This is a trust managed by a non-profit organization for the benefit of a large group of people. Generally, there is no pay-back provision with this type of trust. Upon the beneficiary’s death, the money remains in the pooled trust for the benefit of the surviving members of the group. Medicaid laws change often, and, in some states, transfers to a pooled trust can affect Medicaid eligibility. Consult an estate panning attorney for the laws in your state.

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Do it yourself Divorce

At the heart of every divorce are four issues:

1. Division of community and/or marital property
2. Division of debt
3. Custody of any children
4. Payment of child and/or spousal support

While no divorce is truly “uncontested” in the sense that there are no disagreements, these disputes do not always have to be resolved in court. That’s what we mean by an uncontested divorce – one where the spouses can reach a decision as to the terms of the divorce without going to trial. Uncontested divorces move more quickly through the courts and are less expensive than contested divorces.

Every couple seeking a divorce should first attempt to work out mutual terms for the separation without going to court. If the spouses cannot resolve disputes on their own, many people utilize arbitration and mediation, with or without attorney representation. This saves time and money by bypassing the lengthy litigation and trial process. An uncontested divorce typically reduces hostility, allowing both parties to resume their lives more quickly.

Complex issues, high financial stakes and technical legal procedures are the marks of contested divorces. While an uncontested divorce can often be performed without an attorney, litigation often makes experienced counsel necessary for a contested divorce. If one spouse is represented by an attorney or there are difficult financial issues, seeking an attorney may be wise.

Under most state laws, a divorce (or “dissolution”) action must be filed and decided in court. All states have a “no-fault divorce” policy. In other words, the courts are not concerned with which spouse was guilty of marital misconduct.

The following legal requirements are necessary to file for divorce in most states:
1. Residency: The spouse filing for divorce must have resided in the state and county for a certain period. Six months is a common state requirement, and three months is typical at the county level.

2. Waiting Period: Most states have a mandatory waiting period from the filing to the finalization of a divorce. In other words, you cannot file and finalize a divorce on the same day. The average waiting period is 6 months but can be anywhere from 0 to 12 months. After the waiting period, the divorce is finalized and both parties are free to remarry.

3. Legal Grounds: States generally recognize two legal grounds for divorce: (1) irreconcilable differences and (2) separation. “Irreconcilable differences” simply means there are marital difficulties that cannot be reconciled and have led to the permanent breakdown of the marriage.

4. Jurisdictional Requirement: An action for divorce must be filed with the proper court. The appropriate court is typically in the county where either the wife or husband has resided for at least 3-6 months prior to filing for divorce.

A divorce starts with a divorce petition. The petition is written by one spouse (the petitioner) and served on the other spouse. The petition is then filed in a state court in the county where one of the spouses resides. It does not matter where the marriage occurred. The petition includes important information regarding the marriage. It names the husband, wife and any children and states if there is any separate property or community property, child custody, and child or spousal support.

Serving the Divorce Petition

The petition (or the divorce papers) must be served on the other spouse. This phase of the process is called “service of process.” If both spouses agree to the divorce, the other spouse only needs to sign an acknowledgement of the receipt of service. However, if the other spouse refuses to sign or is difficult to locate, you can hire a professional process server to personally deliver the papers.

Completing service of process starts the clock running on your state’s waiting period. It also sets automatic restraining orders on the spouses and helps establish the date of separation. At this point, the spouses are not permitted to take any children out of state, sell any property, borrow against property, or borrow or sell insurance held for the other spouse.

Divorce Petition Response

The other spouse is known as the “respondent.” Although it’s not required, the respondent can file a response to the petition saying he or she agrees. Filing a response shows both parties agree to the divorce. This makes it more likely the case will proceed without a court hearing, which could delay the process and cost more. Generally, if a response is not filed within 30 days, the petitioner can request that a default be entered by the court. The responding spouse can also use the response to disagree with information presented in the petition.

Final Steps of a Divorce

Both spouses are required to disclose information regarding their assets, liabilities, income and expenses. If the divorce is uncontested and the spouses can agree on the terms of the divorce, there is only a bit more paperwork to file. Once the court enters the judgment, the divorce is final. However, the marriage is not formally dissolved and the spouses cannot remarry until the end of the state’s waiting period. If there are disputes that cannot be resolved, court hearings and maybe even a trial will be required.

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Prenuptial Agreements

Most state laws regarding the distribution of property after death or in the event of divorce leave plenty of room for a judge’ s interpretation. Therefore, you can never be sure what a judge will decide is really your property after a marriage. The only way to possibly avoid this is with  pre-nuptial agreements.

The need to have  pre-nuptial agreements often does not become apparent until there is a divorce or a death, which is when problems you never thought of tend to emerge. Divorce is more common than most want to believe. Some statistics suggest the divorce rate is even higher in second marriages than in first marriages. Do not forget that prenuptial agreements can be useful in the event of death, which is a subject even fewer people seem comfortable thinking about.

Most people think that  pre-nuptial agreements are what rich people use to protect their property in the event of divorce from their less wealthy spouse. Actually, there are many more reasons to use a pre-nuptial agreement.

First Marriages

Even if you and your partner are a young couple with no significant property and typical jobs, and this is the first marriage for both of you, there is some evidence to indicate that pre-nuptial agreements actually promote stability in a marriage. This is because preparing one gives you a chance to carefully think about the significance of marriage, to clearly understand each other’s financial situation, and to consider how you see your financial futures (individually and together). Discussing a pre-nuptial agreement, even if one is never finalized, will make you realize that by getting married, you are entering into a legally binding contract with financial rights and obligations. This side of marriage is usually totally overshadowed by the romantic and religious aspects, and by the ceremony and honeymoon planning.

Many spouses do not know any of the details of the other’s finances. Since one of the requirements of a prenuptial agreement is fully disclosing each party’s financial situation, preparing one will help the couple get a clearer understanding of their total financial health. This can be very helpful in making financial decisions.

It is also good for a couple to share common dreams and goals. Focusing on a prenuptial agreement can help the couple discuss their career and economic goals in life. Especially with the common two-career couple, it is important to share thoughts on where each person intends his or her career to head. If each person is intent on developing his or her career, it might be a good idea for the couple to sign a prenuptial agreement giving up rights in each other’s income or business (especially if they have a fairly equivalent earning potential and they are just starting out in their careers). On the other hand, if they are in business together, a prenuptial agreement could outline how the business will be divided in the event of divorce. This document could avoid expensive attorneys’ fees later, and prevent a fight over the business in the divorce proceeding.

Children of Prior Marriages

One of the main circumstances for a pre-nuptial agreement is when one or both of the parties have children from a prior marriage or relationship. In such cases, a prenuptial agreement may be the one way to assure that the children are protected in the event of divorce or death. Otherwise, all of your property may go to your second spouse, with your children getting nothing.

Example: Rob and Rita are married and have no children together, but Rob has two adult children from his former marriage. If Rob dies without leaving a will, under the laws of their state, all of Rob’s property goes to Rita. Rob’s children will receive nothing.

A pre-nuptial agreement can help assure that children from a prior marriage will be provided for as intended by their parent. Your future spouse should have no objection to you wanting to take care of your children.

Business or Investment Partners

If you have business partners, you should have a prenuptial agreement to prevent disruption of the business in the event of divorce or death. Otherwise, you or your partners may end up with your spouse as a business partner, and that can cause all kinds of problems.

This caution also applies if the business is a privately held corporation. Many problems have occurred when a spouse inherits stock as part of a divorce judgment.

Example: Mark and his brother Jim each hold 50% of the stock in a small restaurant business started by their father. Mark married Jane, and several years later Mark died, leaving Jane his half of the stock. Jane was then the business partner of her brother-in-law. Jane then married Fred. When she and Fred divorced two years later, she gave Fred the stock in the restaurant as part of the property settlement. Now Jim has Fred for a partner. Is this what Mark would have wanted? Is this what Mark and Jim’s father intended to happen to his family business?

Suppose Mark and Jane had divorced. A judge might have divided the stock between them. Now Jim would have 50%, and Mark and Jane would each have 25% percent. Now Mark has his ex-wife as a business partner.

Deciding on a Pre-nuptial Agreement

Your state government has created a plan for how your property will be divided in the event of divorce or death. Ask yourself if you are satisfied with the state’s plan or if you want your own plan. Think about all of the laws your state legislature has passed. Then, ask yourself if you like any plan the legislature came up with on any subject.

Most state laws regarding the distribution of property after death or in the event of divorce leave plenty of room for a judge’ s interpretation. Therefore, you can never be sure what a judge will decide is really your property after a marriage. The only way to possibly avoid this is with a prenuptial agreement.

The need to have a pre-nuptial agreement often does not become apparent until there is a divorce or a death, which is when problems you never thought of tend to emerge. Divorce is more common than most want to believe. Some statistics suggest the divorce rate is even higher in second marriages than in first marriages. Do not forget that prenuptial agreements can be useful in the event of death, which is a subject even fewer people seem comfortable thinking about.

Most people think that a pre-nuptial agreement is what rich people use to protect their property in the event of divorce from their less wealthy spouse. Actually, there are many more reasons to use a prenuptial agreement.

A pre-nuptial agreement is entered into before marriage. This agreement can set forth what will happen to your and your spouse’s assets and income in the unfortunate event of divorce, separation or death. Most importantly, a prenuptial agreement can preserve the nature of property in the event the marriage ends. In other words, separate property can remain separate, instead of being subject to community property or equitable distribution laws.
Pre-nuptial agreements are gaining in popularity for a variety of reasons. One reason is that people today are focusing on their careers and delaying marriage. By the time they do marry, both partners have property and financial worth to protect. Prenuptial agreements make this easy to do. Pre-nuptial agreements are also common when one partner has children from a former marriage. Such an agreement makes sure a spouse’s separate property goes to their own children.

The greatest problem in most divorces is deciding how to divide property and money. Many prenuptial agreements are entered into simply because couples do not want the courts to decide on asset distribution should the marriage end. A few minutes of upfront planning have the potential to save headaches and tremendous financial hardships in the long run.

Whatever the reason, we can help you create a personalized prenuptial agreement. Simply answer a few questions online from the comfort of your home, and we will assemble the necessary documents for you.

Benefits of Pre-nuptial Agreements

The benefits of  pre-nuptial agreements cannot be overstated. Although many divorces do not end up in court, they can still be extremely costly. Most people overlook the fact that marriage is a communion of property.

Deciding who receives what property can be a painstaking process requiring a lot of time and money. Lawyers can charge an average of $200 an hour to solve these problems for you. The minimal time investment of a prenuptial now can save you the potential cost and hassle of a difficult divorce later.

Pre-nuptial agreements primarily deal with couples who want to keep property separate and avoid court distribution in the event of divorce. Any kind of property can be included in the agreement, such as homes, automobiles, stocks, checking accounts, business interests and personal belongings. Debts can also be categorized as separate property. This prevents one spouse from being liable for the debts of the other should the marriage dissolve.

Validity of Pre-nuptial Agreements

The courts typically uphold pre-nuptial agreements unless one person shows:

  1. The agreement is likely to promote divorce
  2. The agreement was written and signed with the intention of divorcing
  3. One party was forced into signing
  4. The agreement was created unfairly

In addition, all pre-nuptial agreements should be based on the full disclosure of assets and debts by both parties. If you do not fully disclose your financial position, the prenuptial will be vulnerable in court. In addition, while you do not need an attorney to create a prenuptial agreement, it may be a good idea to retain one if the other spouse does so.

To understand what a pre-nuptial agreement can do, it is important to understand community and separate property. Community property is observed in the following states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. All other states follow equitable distribution laws.

In a community property state, the husband and wife equally own all income and assets earned or acquired during the marriage. This means the husband and wife equally own all money earned by either one of them during the marriage, even if only one spouse works. In addition, all property gained during the marriage with “community” money is deemed to be owned equally by both the wife and husband, regardless of who purchased it.

In a community property state, all debts contracted from the beginning of the marriage until the date of separation are community debts. This means both spouses are equally liable for these debts. In most cases, this includes unpaid balances on credit cards, home mortgages and car loan balances.

In equitable distribution states, property acquired during the marriage belongs to the spouse who earned it. In a divorce, the property will be divided between the spouses in a fair and equitable manner. There is no set rule for determining who receives what or how much, but a variety of factors are considered. For example, the court may look to the relative earnings contribution of the spouses, the value of one spouse staying at home or raising the children, and the earning potential of each. Often, each spouse will receive one-third to two-thirds of the marital property.

Regardless of your state’s property division laws, a prenuptial agreement lets you decide how marital property will be divided in the event of a divorce. For example, a prenuptial agreement can state that income earned during the marriage will belong to the spouse who earned it. In this sense, a prenuptial agreement can “override” community property or equitable distribution laws.

Separate Property in  Pre-nuptial Agreements

The rules of community property and equitable distribution only apply to income and assets earned or acquired during the marriage. Separate property is everything a husband and wife own separately. In most cases, separate property includes:

  1. Anything owned prior to the marriage
  2. Anything inherited or received as a gift during the marriage
  3. Anything either spouse earned after the date of separation

In the event of a divorce, separate property will not be divided.

Similar to separate property, separate debts belong to one spouse. All debts incurred before marriage are separate debts. Educational or job training loans acquired before marriage are examples of separate debts.

One of the main benefits of  pre-nuptial agreements is that separate property can be prevented from being accidentally re-classified as joint property. This can happen when funds are co-mingled or payments are made out of joint funds. For instance, if one spouse owes a large student loan, both may agree to keep that loan as a separate debt. Then, only one spouse would be liable for the debt in case of divorce.

No state allows limitations on child support payment amounts in a prenuptial agreement. Child support payments are defined by state guidelines.
On the other hand, spousal support waivers vary from state to state. States which follow the Uniform Pre-Marital Agreement Act permit the waiver of spousal support. However, the laws on this topic are constantly changing. For example, the California Supreme Court ruled that these types of waivers are enforceable. The state legislature amended the statutes to require legal counsel for spouses who plan to sign a waiver.

In general, a blanket waiver is acceptable in many states. Specific spousal support agreements (for instance, that a spouse will receive $2,000 per month in the event of divorce) are more problematic and can be difficult to uphold.

A pre-nuptial agreement is a contract between two persons planning to marry that determines the rights they have to each other’s property. You may also see them called antenuptial agreements, or pre-marital agreements. Prenuptial agreements are used to control how property will be divided in the event of divorce or the death of one of the spouses.

Most people do not fully appreciate the legal rights and obligations that are created when they marry. The legal aspects are often overlooked until it comes time for divorce. Then they find out that marriage is easy to get into, but difficult to get out of. The death of a spouse can also cause various problems with the couple’s property.

When you get married, the law gives you and your spouse certain rights in each other’s property. This includes property you acquire during your marriage, and may include property you acquired before you got married. The law also has provisions for how this property is handled in the event of divorce or death.

A pre-nuptial agreement might be considered a will for the death of a marriage (either due to actual death or to divorce). Just as a will can be used to avoid some of the hassles of probate, a prenuptial agreement can be used to avoid some of the hassles of divorce (and probate). Actually, everyone already has a will and a prenuptial agreement through the law. These are the probate and divorce laws, which can be viewed as the will and prenuptial agreement the state writes for you if you do not write your own. The divorce laws and the probate laws of your state give guidelines for the judge to follow in determining how property should be divided or distributed. By using a prenuptial agreement, you and your spouse can write your own guidelines to be used instead of your state’s laws.

For a long time, many courts would not enforce pre-nuptial agreements. The law has traditionally favored marriage. In the minds of lawmakers and judges, a prenuptial agreement seemed to encourage divorce, so the lawmakers would not approve them and the judges would not enforce them. However, with the simplified divorce procedures and high divorce rate in more modern times, lawmakers and judges finally came to accept reality. Every state’s laws now allow for prenuptial agreements.

Some people even include non-financial rights and responsibilities, as specific as who takes out the garbage and who does the dishes. However, since these types of agreements will not usually be enforced by the courts, they are better left out of the prenuptial agreement. If desired, these types of provisions should be part of a separate agreement that is just used to remind the husband and wife of their rights and responsibilities when disagreements arise.