Nearly 70% of millennials expect to receive an inheritance of some sort in their adult life. But according to recent studies, only 40% of parents from the baby boomer era plan to leave anything for their offspring.
If you are one of the chosen ones who will in fact benefit financially from your parents (or any relative for that matter), then you are going to want to protect what is being passed down to you as you enter into a lifelong commitment of marriage. If you and your fiancé haven’t yet discussed how a prenuptial agreement can protect any future inheritance, you may want to add that to your wedding planning to-do list.
What Exactly is a Prenup?
Before we jump into the reason you clicked on this blog, it is important to understand what a prenuptial agreement (prenup) is. This legal document used to be one that seemingly only the rich and famous used in order to protect their assets, but nowadays having a prenuptial agreement is becoming increasingly popular for couples, regardless of their financial status.
When you think of what is included in a typical prenup, you might think of physical items you own such as a house or any other properties you have, cars, artwork, or anything of high value or importance. But what about something that you know is coming your way eventually, but it is not yours yet? Hello, inheritance.
If you or your future spouse has already received an inheritance, or you are awaiting for what the future may hold, having a prenup can protect the person who is on the receiving end from any issues should you part ways down the road.
Let’s take a look at three ways having a prenup can protect your inheritances:
1. Ensures Your Assets Remain Non-Marital Property
Right now you are engaged, planning your big day, and dreaming of happily ever after. This should be a relatively carefree and exciting time in your lives, but it is important you don’t overlook financial security should things ever go south in the future.
If you expect to inherit anything in your future, a prenup can protect what is being passed down to you as an individual. It can also protect any inheritance you may have acquired already by separating it out as “Separate Property.” You and your spouse can both choose to claim any inheritances you might receive as separate property when creating your prenup. If you choose to forego having a prenup, you are risking having to split any future inheritance you receive 50/50 with your partner if you ever get divorced. Why? Some states consider inheritance to be separate, some consider it to be marital. There is not one size fits all rule here.
2. Protects You, The Inheritor
Choosing to create a prenuptial agreement with your future spouse will protect the both of you from hours (or days) spent trying to divvy up who gets what, whether it be property, financial assets, or anything else acquired as a married couple.
If you are someone who is likely to benefit from the Great Wealth Transfer, then a prenup will not only protect your inheritance, but it will also protect YOU. Baby Boomers are the wealthiest generation in American History and their offspring (meaning you) are likely to be on the receiving end of all their hard work.
Whether you are a celebrity, you come from a very affluent family, or you are just an average joe, having a partner who is willing to discuss AND create a prenup can protect you from marrying someone who “isn’t in it for the right reasons”. No matter how in love you are, many couples seek financial protection in the form of a prenup because no one knows what the future holds.
Want to know more about famous celeb prenups?
3. Protects Generational Wealth
Generational Wealth is just as it sounds, assets that are passed down from one generation to the next (Daugherty, 2022). In some cases the subject of inheritance and a prenup becomes a whole family affair with parents wanting to protect what is still theirs and ensure that their families wealth does not vanish with an ex-spouse (Prince, 2021). Whether your parents are involved or not, having a prenup will help ensure your inheritance is protected so that you can someday pass the torch to future generations.
Examples of Generational Wealth include, family business, real estate empires, stocks, bonds, investments, or anything else of high monetary value. More often than not it takes a lot of time and hard work to build up such profitable assets, and it would be a shame to jeopardize that with a messy divorce down the road. Having a prenup doesn’t guarantee there will be anything to pass down to future generations (due to circumstances outside of marriage), but it does ensure that your wealth is protected and the possibility is there.
Once you are engaged, all your focus tends to go towards wedding planning and daydreaming about happily ever after. Deciding whether a prenuptial agreement is right for you and your future spouse is oftentimes overlooked, but it is an equally important part of the planning process leading up to the big day. The hope is that once you sign your prenup, you never have to look at it again, but with things like inheritance on the line, you can never be too prepared. If you want to know more about prenuptial agreements, and how HelloPrenup can guide you through this process, be sure to download our free prenup guide.
Daugherty, G. (2022, May 11). What is generational wealth? Investopedia. Retrieved May 11, 2022, from https://www.investopedia.com/generational-wealth-definition-5189580Non-matrimonial assets and how to protect them: IMD Solicitors LLP. IMD Solicitors | International Lawyers in London & Manchester UK. (2020, October 19). Retrieved May 12, 2022, from https://imd.co.uk/non-matrimonial-assets-and-how-to-protect-them/
Prince, R. A. (2021, January 11). The importance of prenuptial agreements for children of wealth. Forbes. Retrieved May 12, 2022, from https://www.forbes.com/sites/russalanprince/2018/05/03/the-importance-of-prenuptial-agreements-for-children-of-wealth/?sh=3e95f4240a72
Shorterstory. (2017, June 6). 68% of young people expect an inheritance, yet only 40% of their parents will leave one. CNBC. Retrieved May 14, 2022, from https://www.cnbc.com/2017/06/06/68-percent-of-millennials-expect-an-inheritance-only-40-percent-of-them-will-get.html
Julia Rodgers is HelloPrenup’s CEO and Co-Founder. She is a Massachusetts family law attorney and true believer in the value of prenuptial agreements. HelloPrenup was created with the goal of automating the prenup process, making it more collaborative, time efficient and cost effective. Julia believes that a healthy marriage is one in which couples can openly communicate about finances and life goals. You can read more about us here Questions? Reach out to Julia directly at [email protected].