For many people, navigating life as a divorcee means finding a balance between being able to trust again but also a need to learn from their past mistakes. While many people would ascribe these growing pains to romance and relationships, they also come heavily into play when thinking about money. When contemplating getting remarried, it’s important to consider the financial implications of remarriage and how income and property are viewed under the law, particularly if are a parent looking to leave an inheritance to your children. For many looking at getting remarried after divorce, a prenuptial agreement can be a powerful tool to against loss and provide financial protection for your children.
1. Understanding Finances When Getting Remarriage
One of the most important legal concepts many couples fail to grasp until they plan to divorce is that all income and property acquired during the marriage is presumed to be marital and subject to division. These days, most married couples both work outside of the home. Many couples, particularly younger couples, have separate bank accounts created from when they worked prior to the marriage and, after the marriage, continue to deposit their paychecks into their individual bank account. The couple then generally work together to divide their shared living expenses like the mortgage/rent payment, utilities, groceries, etc. But it is important to know that even if your paychecks go into separate bank accounts, they still constitute married money that is subject to division based on how much you earn and how much your spouse earns.
2. Equitable is NOT Equal
Many couples are surprised and disappointed by how Illinois law divides property, assets, and debts. Many feel that they should be able to take out of the marriage what they brought in, particularly regarding retirement accounts and bank balances. On the other hand, Illinois law seeks an equitable division of income, assets, and debts, which often means the person earning more ends up getting less as part of the divorce. Or they assume everything will be divided 50/50, even if they significantly outearn their spouse.
It’s critical for people to understand that when dividing assets and debts, the keyword is “equitable”—NOT equal. If you earn more, you are most likely walking away with less. That is because, as the higher earner, you will have the ability to earn more in the future than your spouse. While the goal is equalization between the parties, this can leave some divorcees feeling like they lost their proverbial shirt.
3. Understanding Prenuptial Agreements
For those unaware of the concept, a prenuptial agreement, or prenup, is a written legal agreement that both parties must enter into and sign, stating that they want to make certain financial arrangements prior to the marriage. This not only allows an individual to protect their property earned/acquired before the marriage, which can include houses, cars, jewelry, bank accounts, retirement accounts, and so on. A prenup can also protect nonmarital property from conversion to marital property, either intentional or unintentional. For example, if an individual decided to use $50,000.00 from an inheritance to put a down payment on a new home during the marriage, that $50,000.00 could be seen as a gift to the marriage, which the giver would be unable to recoup in full. But if they enter into a prenup stating that nonmarital assets always remain nonmarital, no matter how spent or where deposited, the individual who made the down payment will be entitled to receive their entire $50,000.00 down payment back. Likewise, it protects the owner of that inheritance from accidental commingling by depositing nonmarital funds into a share or marital account. In short, it allows couples to retain a certain amount of financial separateness and protection after the marriage to promote the stability of their individual estates.
4. Provide Financial Stability for Your Children
The ability to exert greater control over one’s finances upon remarriage is also a valuable tool for parents creating blended families. A prenuptial agreement can be used to guarantee that each spouse’s nonmarital estate will remain separate, which allows them greater control in how they allocate and pass down their estate to their children. Preventing certain property from becoming comingled preserves the nonmarital designation of certain assets, allowing the parties to remove those assets from their soon-to-be spouse’s possible possession or control. Keeping these funds separate can help maintain financial stability and protect from division funds saved to pay for college and/or create an inheritance for their children and grandchildren.
However, when considering the impact of a prenuptial agreement on children, it is important to be aware that it cannot be used to make child-related decisions about parenting time, decision-making, or child support. No one can use a prenuptial agreement to waive their right to child support or get out of their obligation to pay child support.
5. Determine the Division of Future Marital Assets
For those wanting to remarry but also wanting to avoid the possibility of financial loss and/or preserve a certain portion of their estate exclusively for their children, a prenuptial agreement is a means to preserve their nonmarital assets and control the division of future marital assets. It can also be an important way of reducing the time and money spent litigating their divorce, which can be an enormous drain on funds because a prenuptial agreement can include terms touching every part of the marriage except child support, parenting time, and parental decision-making. Negotiating the agreement while the parties are on good terms it promotes the ability to make thoughtful financial decisions at an amicable time, which can lead to better future outcomes if the second marriage goes the way of the first.