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Prenups for Seniors
Why is it important to get a prenuptial agreement for a second marriage?

Due to an increased life expectancy, a 50% or higher divorce rate in the United States, and an increasing amount serial marriages, prenuptial agreements are now widely accepted. It is very important for senior to approach the idea of a prenuptial agreement with an open mind. It must be emphasized that by signing a prenuptial agreement this not mean you are planning to get a divorce, or that you do not trust your new spouse. Instead, senior couples are now recognizing the seriousness of their upcoming commitment of getting married. Moreover, senior couples are now communicating their concerns for the future financial security of their other relatives, and are expressing their respect for the hard-earned assets and accomplishments of their future spouse.

Although many people look at a prenuptial contract as rather "unromantic", the reality is that individuals in middle and later life are likely to have more significant assets than younger couples. Additionally, seniors often have important financial obligations in the form of alimony or child support payments, hard-earned estates they wish to leave to their children, and emotional baggage from their previous marriages. In order to provide a solid foundation for their future marriage, seniors should consider sorting through their finances. They should also create a plan for how they will merge their economic as well as their emotional lives.

In short, seniors should not jump into getting married. Marriage is serious business. There are some very harsh consequences that can occur if a senior does not carefully plan economic ramifications of getting remarried. Life is not a romantic experience. If some of the seniors came with me to divorce court for a week, then at least one half would then choose not to get remarried. At this stage of life, seniors should carefully prepare a detailed and comprehensive prenuptial agreement that addresses every aspect of their financial life.

What are the major drawbacks that a senior encounters if he or she remarries?

The number of men and women who are 65 and older and choose to live together without getting married has nearly doubled in a decade. So what stops so many seniors from taking the plunge of getting remarried? The primary factor is that they just don't want to get financially destroyed in a second marriage.

Outweighing even the desire for romance, or the religious or social blessing of marriage, many seniors often are terrified of the fear of losing all of their assets in a nasty divorce. Therefore, many seniors simply choose to cohabitate rather than to get married once again. Moreover, many seniors are exploring forming a domestic partnership instead of getting remarried.

Additionally, many seniors fear that if they get remarried that they will lose their former spouse's pension payments, Social Security benefits, and medical insurance benefits. Many seniors are faced with health challenges and they are living on limited incomes. For many seniors, they simply can't give up these benefits that were obtained from a prior marriage. Also, many seniors avoid getting remarried because they have legitimate fears that they will put their children's inheritances at risk. By not getting married, they are protecting their estates and their children's potential inheritances.

Furthermore, many seniors who are recovering from traumatic marriages and divorces sometimes vow not to marry again. Many seniors have learned the hard way that even with prenuptial agreements, marriages can end up in costly legal and financial warfare. Many unmarried seniors are instead opting for cohabitation agreements. Cohabitation agreements separate their assets and outline inheritances while they are living together.

What is the elective share?

If a spouse dies, then the surviving spouse may elect to take a one-third share of their estate. This is called an elective share. Basically, a spouse can't be disinherited. The surviving spouse has a right to an elective share of the deceased's estate. The only way that a surviving spouse can be completely disinherited is if the parties execute a prenuptial agreement. In a prenuptial agreement both spouses can agree to waive any claims to an elective share of each other's respective estates.

Your Elective Estate not only includes property in your name alone, but it also includes most assets with beneficiary designations such as bank accounts, securities, IRA accounts, your interest in jointly held property, annuities, certain interests in trusts, the cash value of life insurance, and even property that you might transfer to a child during the one-year period preceding your death. In other words, you cannot easily ignore your spouse's rights to his or her elective share of your estate. Many clients ask me how the surviving spouse will be able to claim his or her share if the assets are left in trust for a child. The answer is that the surviving spouse can file a probate proceeding, and then force the child to return the assets to satisfy the elective share obligation.

What are the estate planning considerations in a second marriage later in life?

Many widows and widowers simply do not like living alone after their beloved spouse dies. As widows and widowers increasingly meet and decide to get remarried, they need to be aware of important estate planning considerations. As the life expectancy of people in the United States dramatically increases, the reality of second and third marriages becomes more likely. Widows and widowers are increasingly likely to meet and decide that a second marriage is an excellent way to avoid spending their golden years alone.

A remarriage can be one of the best parts of a senior's life. However, a remarriage later in life often creates a unique set of legal questions. For example, many older clients take it for granted that their adult children will inherit from them when they pass away. The reasoning behind this assumption is because the majority of their property and life have been spent with their previous spouse, who was often a co-parent to those children, and the one who helped to build or sustain the family assets. A new marriage means that the marital property is governed by the laws of the new marriage. If there is no prenuptial agreement, then the surviving spouse would under the laws of New Jersey inherit at least one third of the estate. This means that the adult children from the first marriage might be in for a rude awakening. A large part of the children's inheritance might be "swallowed up" by the second spouse's right to inherit one third of her new husband's estate.

The problems that are created by second marriages should not be taken lightly. It is important to talk these things through with your future spouse because, chances are, they want to make sure that their adult children get their assets upon their passing just as much as you do. If you don't have a frank discussion with your would-be spouse, then you may end up causing all those whom you love a great deal of heartache and confusion as they struggle to figure out what would be best, and what you would have wanted. This happens every day. Earnest people do their best to honor their deceased loved one. They honestly and simply disagree about what he or she would have wanted. This nasty situation is further complicated by those who just want to fight for any dollar they can get their hands on.

What are some common sense tips to use when you negotiate a prenuptial agreement?

The old saying goes "a little bit older, a little bit wiser." If your next marriage isn't your first one, then you have probably learned that marriage is more than romance - it's finance. You don't have to be a multi-millionaire to consider the benefits of a prenuptial agreement. Think of it as a business arrangement or as an insurance policy to help remove some of the emotional angst of getting remarried. A prenuptial agreement and the earnest discussions that go with it can help ensure the financial well-being of the marriage. Under the laws of New Jersey the court divides assets based on what it considers a fair distribution. The judge would take into consideration such factors as the length of the marriage, whether there are children born of the marriage, and the couple's age, health, job skills, the income of the parties, and other factors.

With those facts in mind, it is easy to see why a prenuptial agreement could be one of the best decisions that you make in your life. Here's are some tips as to successfully deal with some of the thorny issues that surround a prenuptial agreement:

  • Discuss the subject early. The mention of a prenuptial agreement shouldn't come as a surprise if you and your companion have been open with each other as the relationship became more serious.
  • Ask your attorney at the first meeting what the anticipated charges will be.
  • Hire separate attorneys. To help ensure that a prenuptial agreement will be legally enforceable, both spouses must hire separate lawyers. Use only matrimonial lawyers who are familiar with prenuptial agreements. Moreover, make sure that your lawyer has at least ten years of experience.
  • Make sure the agreement is in writing and the signing is witnessed by a lawyer.

I was widowed at the age 66, and I am financially comfortable…

"For the past two years, I have been dating with a widower who has just turned 70. We are both in good health, and we enjoy each other so much that we have been discussing getting married. But the five children by our prior marriages (two are mine and three are his) are very concerned. We want to make sure there are no claims by either of us against the assets of the other, and that no one contests our agreements. The lawyers tell us that there is no way to ensure that our agreement will not be attacked. Are there any other options that we are missing?"

Because of the changing nature of the American family, a prenuptial agreement should be viewed as not only a contract to establish financial responsibilities of both the husband and wife if there is a divorce, but also, and probably more importantly when it comes to seniors, as a plan for future health care issues, death, and disability.

Generally speaking, when a couple considers a prenuptial agreement, the prospective spouse with more assets has one agenda, while the dependent spouse has quite another. The negotiation of this type of agreement must satisfy the needs of both parties. This is a very difficult task. Because of the scrutiny with which prenuptial agreements may be viewed if they are later attacked, in order to survive judicial scrutiny, the agreement must be fair, it must be reasonable, and there must be full financial disclosures. Each spouse should have an independent attorney to represent your interests.

While there are no guarantees against one spouse later attacking a prenuptial agreement, there are several ways to try to "bullet proof" it. For example:

  • Keep all assets titled separately. The married couple should only maintain only one joint checking account. This joint checking account should only have enough money deposited into it to pay the monthly bills.
  • If one or both of you will sell a house and purchase a new one, then make sure that you divide the equity on the second death based on the percentage of the down payment each spouse contributes. Make sure that the survivor has the right to continue residing in the marital home until his or her death or disability. Thereafter, the marital home will be sold and the proceeds would be divided.
  • Consider complete estate waivers and waivers of all rights to be beneficiaries of each other's qualified funds. At the first death, the survivor will have no claims whatsoever.
  • Despite the waivers, consider including a bonus payment to the surviving spouse at the time that the estate of the first to die is to be closed even though there would be no obligation to do so. This payment could be based on the length of the marriage, or it could be a percentage of the estate.
  • Include economic penalties if either spouse takes any position inconsistent with the terms of the agreement.
  • Consider a trust agreement and an independent trustee with instructions not to make any payments if an attack on the prenuptial agreement is later made.
  • Provide that all disputes regarding the agreement will be resolved through final and binding arbitration and not through the courts.

What are the Medicaid implications of a second marriage?

Seniors who get remarried are often concerned about what will happen to their assets if their new spouse enters the nursing home in the future. They are concerned that their hard earned assets they saved could be lost. They also want to make sure that when they die their assets will go to their children. Although the prenuptial agreement will protect the senior's assets from claims of his surviving spouse when he dies, the prenuptial agreement does not protect his assets from his spouse's nursing home expenses. Seniors who have entered into second marriages are often surprised to learn that the prenuptial agreement that specified that their spouse had no claim to their assets, does not prevent Medicaid from counting the assets of the spouse at home in determining Medicaid eligibility.

Medicaid is the governmental program that pays nursing home costs when a senior runs out of assets. Until the nursing home resident has less than $2,000 of countable assets, he must pay his own nursing home costs. But when, on the first of a month, his countable assets are less than $2,000, Medicaid will then begin paying the senior's nursing home costs.

But just because the nursing home spouse has less than $2,000 of assets does not necessarily mean that the nursing home spouse will be eligible for Medicaid. Instead, despite the prenuptial agreement, Medicaid looks at the assets of both spouses. The rules for determining Medicaid eligibility are exactly the same for couples with prenuptial agreements and those without them.

However, this does not mean that all of the assets of both spouses must be used up before Medicaid will begin paying nursing home costs. Congress passed what are known as the spousal impoverishment rules to keep the spouse at home from having to be completely impoverished before Medicaid begins paying nursing home costs.

The spousal impoverishment rules base the amount that the spouse at home can keep on the resources the couple has at the time one spouse enters an institution. Resources are counted (often referred to as a "snapshot" of resources) as of the date a senior first begins a period of continuous institutionalization. This can be either when the senior enters a nursing home or when he has first entered a hospital. So if a spouse first enters a hospital, and then a nursing home, the snapshot is taken based on the date of admission to the hospital, not the nursing home.

The spouse at home is permitted to keep half of the couple's countable assets as of the snapshot date up to $101,640, but the spouse in the nursing home is limited to $2,000 of countable assets.

How does Medicaid treat and divide a married couple assets?

The division of assets is the name commonly used for the Spousal Impoverishment provisions of the Medicare Catastrophic Act of 1988. It applies only to couples. The intent of the law was to change the eligibility requirements for Medicaid where one spouse needs nursing home care while the other spouse remains in the community (i.e., at home). The law, in effect, recognizes that it makes very little sense to impoverish both spouses when only one needs to qualify for Medicaid assistance for nursing home care.

As a result of this recognition, the division of assets was created. Basically, in a division of assets, the couple gathers all their countable assets together in a review. Exempt assets are not counted.

The countable assets are then divided in two, with the at-home or "community spouse" allowed to keep one half of all countable assets to a maximum of approx. $101,640. The other half of countable assets must be "spent down" until $2,000 remains. The amount of the countable assets which the at-home spouse gets to keep is called the Community Spouse Resource Allowance (CSRA).

Each state also establishes a monthly income floor for the at-home spouse. This is called the Minimum Monthly Maintenance Needs Allowance (MMMNA). This permits the community spouse to keep a minimum monthly income ranging from about $1,650 to $2,541.

If the community spouse does not have at least $1,650 in income, then he or she is allowed to take the income of the nursing home spouse in an amount large enough to reach the MMMNA (i.e. up to $1,650). The nursing home spouse's remaining income then goes to the nursing home. This avoids the necessity (hopefully) for the at-home spouse to dip into savings each month which would result in impoverishment.

The floor can be raised by certain living allowances and utility allowances which are allowed by the state. Under no circumstances, will the at-home spouse be allowed to keep more than $2,541 of total income. If "hardship" circumstances warrant, then this allowance can be appealed.

Can a spouse keep the marital home if the other spouse has to enter into a long-term facility?

Many families are concerned that if a spouse enters a long-term care facility, then the marital home will be eventually lost. Medicaid has no intention of evicting the at-home spouse (also known as the Community Spouse). Nor does Medicaid require the at-home spouse to sell the home and apply the proceeds toward long term care costs. What Medicaid can do, under the veil of estate recovery, is place a "lien" of claim on the subject premises. When the Community Spouse passes away, or when the Community Spouse sells the house, then Medicaid can demand to be reimbursed for all monies expended on behalf of the ailing spouse.

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