A marriage announcement can bring parents excitement, but also worry. The protection felt for children also extends in a different form to the business and financial assets they have grown and nurtured. As such, prenuptial agreements are becoming an increasingly critical component of wealth preservation planning.
For many, however, this conversation is far removed from their own views and experience of dating and marriage, leaving parents worried about the long term impact the prenuptial conversation can have. They look not only at the relationship between their child and future spouse but also at the relationship between themselves and their own children.
Below are some approaches for families to consider as they think about initiating the prenuptial conversation:
Freedom of Choice: Reminding children that they and their spouse are free to choose advisors to act on their own behalf is key to maintaining an open dialogue. Some encourage spouses within the family who have already signed a prenuptial agreement to discuss their experience with new spouses.
Early Communication: A conversation about prenuptials should be initiated long before wedding planning begins. This is important both for harmony, and to avoid an agreement being signed under pressure in the countdown to the wedding.
Fairness and Generosity: Reminding children that a prenuptial agreement does not mean depriving spouses from involvement in the wealth and that an agreement can be fair to all parties. While transfer of business asset ownership may be limited by the prenuptial agreement, the enjoyment of assets can be facilitated by lifetime gifts to spouses or liberal estate planning. These are a couple of options that some have considered.
Clarity: Some families, especially entrepreneurs, are surrounded by complex structures and affairs that they themselves don’t fully understand. Creating a ‘family balance sheet’ can be key so that children can rely on their parents for factual clarity as they strive for emotional clarity. Alongside this balance sheet should sit a clear understanding of the purpose and values that lie behind the wealth.
These are some preliminary thoughts to help frame a complex discussion that looms for an increasing number of clients. Naturally, initiating, or even simply discussing, such a personal subject will never be as straightforward as the above points make out but with a practical, sensitive and well-thought out approach, there is no reason why prenuptial agreements cannot benefit and protect both partners.