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NEWSLETTERS
Prenup May Be a Very Loving Gift
by Jacqueline Skay
One of my favorite clients came in recently with a wonderful new problem. She is getting married again. She and her fiancé had several concerns. A primary concern was the threat of my client losing her separate property assets to her new husband's ex-wife. On the other hand, they expressed their hearts' desire to combine all their assets and create a whole new life together. They liked the idea of creating community property. They did not think a Prenuptial Agreement sounded at all romantic or optimistic.
I strongly recommended a Prenuptial Agreement spelling out the nature and identity of each of their assets and the characterization of any income they each may earn during the marriage. I explained that by so doing, they will still be liable for the necessities of each other's life but as to the spouse's separate obligations, the spouse's separate property will be the primary property at risk.
I reminded them that the necessities of life includes paying medical bills which may extend over a long period of time if the spouse suffers a long term illness. The separate property of the ill spouse is the primary source for payments of the expenses of the ill spouse, the next source is community property of the couple and finally, the separate property of the well spouse is liable. Another concern for my client is that she will lose some of her income by remarrying. This is often the case in second marriages. Before remarrying, it is important to consider the loss of spousal support, pension or social security benefits, as well as medical and other insurance coverage.
Other questions they are considering are whether to file joint tax returns or to file as married filing separately. A qualified tax advisor should be consulted to determine not only which is least expensive year to year, but also which is the safest with regard to exposure to liability. This is of particular concern if one spouse is self-employed in a business about which the other spouse knows little or nothing. In this case, it may not be wise to file a joint tax return with him or her. There are innocent spouse provisions but most of us would not want to be in that position. There are also some tax advantages in being married. The IRS permits an individual to exclude $250,000 of capital gains on the sale of the primary residence providing you have lived there two of the last five years. A married couple may double that amount. This is not the old Section 121 which was a one-time exemption for people 55 and over. This exemption can be used repeatedly by persons of all ages.
Another big consideration is estate planning. My client and her fiancé each have children from prior marriages and question whether they should have one joint trust or two separate trusts. An unlimited amount may be passed to a citizen spouse tax-free. A properly created trust permits persons with larger estates to create an exempt trust from which the surviving spouse can benefit during life, with the remainder passing to the designated beneficiaries of the first spouse to die, and effectively doubling the amount which can pass estate tax free.
My client and fiancé are weighing the pros and cons of a Prenuptial and of creating a joint trust or two separate trusts. They will let me know what they decide. Philosophically, they do not like the sound of a Prenuptial - it just isn't very romantic - but they are trying to objectively weigh the risks and benefits.
You may contact the office of JACQUELINE SKAY at 760-745-7576 for any questions.
by Jacqueline Skay
One of my favorite clients came in recently with a wonderful new problem. She is getting married again. She and her fiancé had several concerns. A primary concern was the threat of my client losing her separate property assets to her new husband's ex-wife. On the other hand, they expressed their hearts' desire to combine all their assets and create a whole new life together. They liked the idea of creating community property. They did not think a Prenuptial Agreement sounded at all romantic or optimistic.
I strongly recommended a Prenuptial Agreement spelling out the nature and identity of each of their assets and the characterization of any income they each may earn during the marriage. I explained that by so doing, they will still be liable for the necessities of each other's life but as to the spouse's separate obligations, the spouse's separate property will be the primary property at risk.
I reminded them that the necessities of life includes paying medical bills which may extend over a long period of time if the spouse suffers a long term illness. The separate property of the ill spouse is the primary source for payments of the expenses of the ill spouse, the next source is community property of the couple and finally, the separate property of the well spouse is liable. Another concern for my client is that she will lose some of her income by remarrying. This is often the case in second marriages. Before remarrying, it is important to consider the loss of spousal support, pension or social security benefits, as well as medical and other insurance coverage.
Other questions they are considering are whether to file joint tax returns or to file as married filing separately. A qualified tax advisor should be consulted to determine not only which is least expensive year to year, but also which is the safest with regard to exposure to liability. This is of particular concern if one spouse is self-employed in a business about which the other spouse knows little or nothing. In this case, it may not be wise to file a joint tax return with him or her. There are innocent spouse provisions but most of us would not want to be in that position. There are also some tax advantages in being married. The IRS permits an individual to exclude $250,000 of capital gains on the sale of the primary residence providing you have lived there two of the last five years. A married couple may double that amount. This is not the old Section 121 which was a one-time exemption for people 55 and over. This exemption can be used repeatedly by persons of all ages.
Another big consideration is estate planning. My client and her fiancé each have children from prior marriages and question whether they should have one joint trust or two separate trusts. An unlimited amount may be passed to a citizen spouse tax-free. A properly created trust permits persons with larger estates to create an exempt trust from which the surviving spouse can benefit during life, with the remainder passing to the designated beneficiaries of the first spouse to die, and effectively doubling the amount which can pass estate tax free.
My client and fiancé are weighing the pros and cons of a Prenuptial and of creating a joint trust or two separate trusts. They will let me know what they decide. Philosophically, they do not like the sound of a Prenuptial - it just isn't very romantic - but they are trying to objectively weigh the risks and benefits.
You may contact the office of JACQUELINE SKAY at 760-745-7576 for any questions.
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
Copyright 2023 © by Jacqueline M. Skay. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.
Copyright 2023 © by Jacqueline M. Skay. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.