On occasion, we have clients in their 50s and 60s who are considering remarriage after the kids have grown up, or after they are ready to finally recommit to someone. As an estate planning attorney, what options can we offer them with regard to a prenuptial agreement? Perhaps the answer is an Irrevocable Pure Grantor Trust® (IPug®).
Typically, older clients have accumulated some assets, and getting married again creates a whole new dynamic for them. It could be that they lost their spouse or are divorced. The question is, how do you ensure that your client's assets are protected from a second marriage but still ensure that the marriage is whole – that is, both husband and wife participate in the financial responsibilities? An IPug may be your answer. An irrevocable pure grantor trust allows the grantor to maintain full control as trustee. The grantor can modify the trust in any way for the rest of his life, other than to convey the assets back to himself; and can even retain some benefit from the trust, including being able to live in the real estate and retain all of the income from the trust assets.
In most states, for a prenuptial agreement to be valid, each spouse must declare their assets to the other and have the other sign off on their rights to those assets after the marriage. Prenuptial agreements are a common practice to ensure that the assets of each spouse are protected from the other if the marriage does not last, or if one spouse later dies. Prenuptial agreements can be quite dicey to bring up in a new relationship, as it calls into question the very act of marriage, which is supposedly "forever," and it also raises the question of whether one “trusts” the other.
A solution that can manage all of this is to use an IPug. As an irrevocable trust, once funded, the grantor can never again take ownership of the assets, but the grantor can still control all of the assets and maintain basic benefits. Since you irrevocably give up your right to even get out the assets you put into an IPug, your spouse can’t own them in a divorce and will have no dowry or right of election. Having an individual create an IPug and put the majority, if not all, of their assets into it is a proper way to protect their assets from creditors and predators. Is a spouse not a potential creditor or predator? So utilizing an IPug trust might be an ideal way to have the same legal effect as a prenuptial agreement. The question becomes determining the powers of appointment language to ensure that your assets are protected, but also so you have the option to benefit those you intend, including your new spouse if you so desire.
Allowing your spouse to be a beneficiary of your power of appointment would subject the trust principal to being an available resource if the spouse needed long-term care. Alternatively, if the client has long-term care insurance and other means to pay for long-term care, one could consider allowing the grantor to include a spouse in the powers of appointment. Obviously, the power is retained by the grantor, and only he or she would decide if and when a new spouse may be able to benefit from the IPug.
So, prenup or IPug? And, if IPug, what are the provisions? That's where the Lawyers with Purpose, client-centered software will help you. Contact us now for a live software demo.
David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center
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