Stealth Pre-Nuptial Agreements
It is a classic dilemma. Your child has found true love. You are overjoyed or maybe you are unsure it will last. Regardless, as you reflect on this family-changing event, you determine to be a good steward of your family’s wealth, particularly in light of the alarming divorce rate.
The first thing that springs to mind is a pre-nuptial agreement (a “pre-nup”). Pre-nups govern property distribution at the dissolution of a marriage, whether by divorce or death.
In most jurisdictions, however, each party must have his or her own attorney and make full disclosure about his or her assets and expectancies. Discussions of such matters are awkward at best, especially for a young couple. Often, the process remains incomplete or, if completed, leaves a lingering bad taste — and there remains the risk of the pre-nup being contested years later.
With more than a century of experience, we have seen this situation many times. One of our favorite alternatives is what we call a “stealth pre-nup.” Ironically, a stealth pre-nup is not a pre-nup at all, but rather a thoughtful use of trusts and family investment vehicles, such as limited partnerships or LLCs.
Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.