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Consolidating Finances


The following excerpt is from Kerry Hannon's book,
Suddenly Single: Money Skills for Divorcées and Widows.

What is a Prenup?

Simply put, a prenuptual agreement a document or pact signed before your marriage that spells out how your assets will be divided in the event of death or divorce. Some people even use it as a plan for how all finances will be managed during their marriage. Some agreements go as far as to require that the husband or wife maintain a regular sexual relationship with the other partner in order to be eligible for any portion of assets. Anything goes. But the important thing is that you discuss your financial lives openly before you remarry. If the man you are planning to marry has been married before or widowed, he may have children to rear. He may also have debts you know nothing about. You need to decide how you want to share your two sets of assets.

There is no need to feel obligated to join your financial lives together in a formal manner. Most financial advisors argue that mingling assets by including your new husband on the title of your house or adding his name to your investments can lead to nothing but trouble, particularly if the man has fewer assets than you. To ensure that your hard-earned financial stability holds firm, it's advisable to sign a prenup.

The idea of signing a marriage agreement that concerns financial matters isn't new at all. Jewish marriage ceremonies have included the act of signing the ketubah for centuries. The ketubah is a Hebrew pact that defines a husband's obligations to his bride. It covers everything from providing clothes and food to sexual relations. It also states that the husband is responsible for providing a set amount of money for his wife should he leave her through divorce or death.

Writing a prenuptial agreement might cost you a few thousand dollars depending on how complicated it is, but it is a step worth taking for most women marrying for the second time. The agreement can't cover issues related to children, such as child support or custody, but the contract can protect your other assets and even determine who will get custody of your labrador retriever.

How to Make a Prenup Hold Up in Court

The key to making these agreements successful is to begin by each of you hiring your own lawyer. There are thousands of attorneys who specialize in matrimonial law and handle prenups frequently. You don't want your new spouse to be able to argue that there was any type of conflict of interest.

Both you and your future spouse must divulge detailed financial information, including all assets, income, and debts. Full disclosure is paramount. Then the pact must be signed voluntarily by both of you and far enough in advance of your wedding day so your husband can't claim he signed under duress. Two or three months ahead of your wedding date is advisable. And it's probably a good idea to videotape the signing so you have a record. If there are bad feelings about signing a prenup, you might consider setting a future date on which the contract will expire.

Who Needs a Prenup?

  • A woman who is bringing a lot of assets to the partnership ($100,000 and up)
  • A woman who has children from a prior marriage
  • A woman who owns her own business or is a partner in a company
  • A woman on a fast career path who is likely to earn a hefty salary
  • A woman who is paying for her spouse to get an advanced degree

Postnuptial Agreements

If you don't have a prenup and can't come to an agreement with your ex-spouse during the divorce proceedings, your state laws will dictate division of the assets. That means that in community-property states--Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin--you will probably get half of everything. In other states, assets will be split by the court depending on factors such as how long you were married and what you actually accumulated together.

It's never too late to draw up an agreement, even after you have been married for a while. A postnuptial agreement is just as valid as a prenup and is set up the same way. You should seriously consider this option if you inherit a lump sum of money or have a large cash infusion from selling a business.

These agreements will hold up in court if they are written properly. Never lose sight of your goal: keeping your financial independence. If the man you want to marry is unwilling to sign an agreement, you should probably take some time to think things through.

Be pragmatic when it comes to linking your life to a new person. Living happily ever after doesn't always happen for most of us. You've learned that the hard way. It takes time to recover from the loss of a spouse, so take it slowly and be honest with yourself. But never forget that being responsible for your own finances and striving constantly to educate yourself about money issues will give you confidence and freedom to survive these life-shattering blows. Taking control of your financial life is a necessity.

With your financial plan firmly in place, handling money will become a routine part of your daily life. The most difficult work is behind you. You'll want to make a habit of checking up on your investments every six months or so to make sure everything is still on track. Nobody ever said life was fair, but being fiscally fit will make your future brighter.

Excerpted from "Suddenly Single: Money Skills for Divorcées and Widows" with the permission of the publisher John Wiley & Sons, Inc. Copyright ©1999 by Ernst & Young LLP. This book is available at all bookstores and from the Wiley Web site at www.wiley.com, 1-800-225-5945.

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