Nobody wants to be the bossy in-law — well, most people don’t. And there’s plenty of stress around a pending wedding for one of your kids already without adding to it with discussion of a prenuptial agreement. But with a projected $60 trillion wealth transfer from Baby Boomer parents to their Millennial offspring looming on the horizon, more and more parents in families with significant wealth are involving themselves directly in this part of the wedding planning. Is this a good idea? Well, it depends.
A recent survey of the American Academy of Matrimonial Lawyers indicated that 62% of participants noted an increase in the use of prenuptial agreements, including an increase among Millennial clients. But many respondents also reported an uptick in the number of parents of Millennials who are directly involved in the processes surrounding the agreements, including discussion of specific terms and assets to be included.
In some cases, this works in the soon-to-be-married young person’s favor. When a family trust or a family corporation requires a prenuptial agreement in the event of the marriage of a family member — especially one who will potentially be a leader in the organization — it can actually take pressure off the prospective newlywed and remove some of the tension from the conversation. “It’s just a requirement of the trust” obviously sounds a whole lot more friendly than “I have to be protected in case we divorce.” Also, in many cases, the parent has a better or more complete view of the assets that should be included in the agreement, so their involvement — especially in an advisory capacity — can be helpful.
But a problem arises when the parent, who is technically not the client requesting the agreement, tries to become too dominant or actually undermines the wishes of the child. Sometimes, parents may have the misguided intention of manipulating disclosure of assets in such a way as to make the ensuing agreement more vulnerable to litigation in the event of a divorce. In such cases, attorney-client privilege may even prohibit the involvement of the parent.
To make the process less stressful and the outcome more beneficial to all involved, everyone in the conversation — parents, children and prospective spouses, and legal advisors — should be clear about desired outcomes. A prenuptial agreement is not the place for parents to impose their financial, marital, or career philosophies on their children; it is intended to protect the soon-to-be-married child’s assets in a worst-case scenario for the marriage.
For high-net-worth families and their children, prenuptial agreements can provide significant peace of mind. And the ultimate goal, of course, is that once the prenuptial agreement is signed, it will never actually be needed. But going in, it’s vital for everyone to understand what the ultimate goals are — and what they aren’t.
As a fiduciary financial advisor, I specialize in helping family stewards plan for and protect the assets of family corporations, trusts, and other entities. If I can answer a question or provide helpful information, I’d love to hear from you. To read my recent blog, “Romance and Finance: Smart Tips for Couples,” click here.
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