How to Respond When Asked, “Why Do I Need a Prenuptial Agreement When Everything is in Trust?”

Prenuptial agreements (prenups), also known as “antenuptials” or “premarital agreements,” address topics ranging from defining property and its treatment in the event of divorce (including residences and illiquid business interests), spousal support and counsel fees and rights in a spouse’s estate on their death. As couples are increasingly getting married later in life or after establishing their careers, prenups are reportedly becoming more common among Millennials, many of whom are also the children of divorce.1 Traditionally, however, prenups were entered into only by the offspring of wealthy families. When imagining a bride- or groom-to-be proposing a prenup, you might assume a desire to protect a substantial family estate as the impetus for the agreement. Such families are likely to have complex estate plans in place, including trusts for the benefit of future generations. In that case, when the family assets are already “protected” in trusts, many clients question whether a prenup is necessary and, if so, why. The answer: Even
when a potential client holds minimal assets in their name, each of the topics noted above may be impacted or implicated, and trust assets may be (or become) exposed without a prenup. Accordingly, keep in mind several key points when advising a potential client, the client’s family and the client’s financial/trusted advisors with respect to the strengths and potential vulnerabilities of assets held in trust and the benefits a prenup may provide.