Getting couples to warm to marriage contracts can be tricky because the idea things might not work out seems ridiculous—they’re in love.
But advisors should discuss marriage contracts as part of every client’s financial plan, says Zena Amundsen, an advisor at Tyler & Associates in Regina, Sask.
Her clients fill out worksheets that include assets, liabilities, insurance and benefits—the latter are usually afterthoughts for clients, so she makes them the forefront of conversation.
“If they have personal insurance or group benefits, they may have never spoken about that,” she says. “So they’ve forgotten they need to change their beneficiaries in a new marriage.”
And when openly taking inventory of expenses and assets, she says, clients often learn new tidbits that help them realize protecting wealth is important. For instance, one client never knew her fiancé had a boat and an RV in storage.
Once they’ve agreed to negotiate and sign a contract, explain they must each have independent legal advice and there must be complete disclosure of income and assets, says Jennifer Jolly, a lawyer at BLG.
“If they aren’t disclosing a material asset, then the contract won’t be worth what it’s written on,” she says.
A court can set aside a contract if it’s unconscionable, including if a significant asset wasn’t disclosed.
For instance, if the contract states one spouse is worth $100,000, but in fact her total worth is closer to $600,000, notes Jolly, it could be nullified.
Advisors should refer clients to lawyers who specialize in family law, adds Amundsen.
A (smarter) happily ever after