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Capital Acumen Issue 31

Tying A Better Knot

As a new husband or wife is welcomed into a successful family, these steps may help pave the way for the marriage to be a happy one — and lessen the impact if it’s not. 

2 gold rings arranged so that they form a heart symbol

Like most marriages, this one started with joy and promises of a lifetime of devotion. The daughter of a successful businessman and her fiancé shared a passion for human rights causes, the outdoors and travel to exotic locations. While the marriage lasted a few years, the couple eventually found themselves falling out of love.

In due course, they were embroiled in a confrontational divorce, during which the husband threatened to seek a share of the successful privately held manufacturing business that the young woman’s parents and grandparents had built and the family still owned.

Fortunately for the young woman and her family, they didn’t have to worry about that kind of unsettling scenario. A prenuptial agreement — a contract entered into prior to marriage — ensured that the family enterprise was off limits in the case of divorce. “It was crystal clear,” says Stacy Allred, managing director at Merrill Lynch’s Center for Family Wealth Dynamics and Governance.™** “The business was to stay entirely within the wife’s family.” While it isn’t a fairy-tale ending to the marriage, the impact on the business was mitigated. This resolution underscores how important it can be for families, even amid the excitement of an approaching wedding, to consider the financial implications of a marriage and its potential dissolution.

Overcoming Prenup Resistance

Some couples will not feel the need for a prenuptial agreement. And, of course, these agreements are not essential to a happy marriage. While prenups can be understandably hard to warm up to, they can be much easier to accept, according to Allred, if broaching the topic is seen as an extension of a family’s overall approach to money. “Families are coming to recognize the value of being up front with their children about the family’s wealth and all of the responsibilities that go along with it,” she says. In this context, then, a prenup becomes just one part of a broader discussion about how the new spouse is going to fit into the family dynamic. In that sense, the agreement can be seen as a way “in” rather than keeping the new spouse “out.”

Laying the Groundwork

Teaching children about the meaning of wealth may be the surest way to make them better stewards of their own money and could ultimately improve the chances that they’ll seek a spouse who shares their views on finances. Families should consider having meetings in which all members gather to discuss such issues as philanthropy, budgeting, confidentiality and resisting peer pressure to overspend. As children mature and become involved in serious relationships, the family wealth conversation expands to include the potential role that spouses will play, including the degree to which a spouse may be included in family meetings. U.S. Trust’s financial education program for young adults, Financial Empowerment, helps foster these family conversations and also has content available specifically around the financial implications of getting married, including prenuptual agreements. (To learn more, visit or contact your advisor.)

Let Your Child Be the Driver

Ultimately, the child getting married has to take the lead in communicating the family’s point of view to his or her prospective spouse. With luck, such discussions become just one part of the natural process by which the couple begin to define the roles of their life together. Even if parents have reason to mistrust a prospective spouse, they should be careful not to overstep their bounds, says Arlene Dubin, a Manhattan-based matrimonial attorney and author of Prenups for Lovers: A Romantic Guide to Prenuptial Agreements. “Ask your daughter what she knows about her partner. Empower her. Share your concerns and let her know you will help her in any way you can, but let her be the driver.”

The Use of Trusts

For an added layer of protection, there are long-term trusts, says Steven Lavner of the National Wealth Planning Strategies group of U.S. Trust. Whereas a traditional trust may distribute wealth when a child reaches a milestone (age 30, for example), some trusts are tailored to last much longer. According to Lavner, long-term trusts can provide added security, either in conjunction with a prenup or on their own. He sees more and more parents using long-term trusts that withhold control and distribution of the money or other assets until their sons or daughters turn 50, 60 or even older. Beneficiaries may still receive distributions at the discretion of the trustee before reaching that age, but since the beneficiaries don’t control the assets or distributions, they are generally safe from claims by a spouse during divorce proceedings, as well as from creditors.

Working Together

What is often seen as an “us vs. them” scenario can and should be seen as a “win-win.” That is, a prenup can be a marriage plan instead of a divorce plan, focusing on the couple rather than the individual (with lawyers, likewise, working together). It can be a thoughtful collaboration between people who care about the future. And that discussion goes best if both parties feel educated and empowered, rather than forced and threatened.

Crafting the Agreement

If a prenup is called for, keep in mind that there are many varieties. An agreement might specify how the couple will provide for pre- and post-marital debts; what will happen to post-marital property and family business interests in the event of death or divorce; and the status of gifts, inheritances and trusts that benefit either spouse before or after the marriage. A prenuptial agreement can do much more than just provide protection in case of divorce, says Allred. A couple can use a prenup as an opportunity to have a productive conversation about money — discussing financial philosophies, working through concerns and setting clear boundaries at the outset of their marriage. 

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