“When I was your age, I was married with children.”
It’s a refrain many women over age 25 are still familiar with. And if that “helpful” reminder seems antiquated, it’s because it is. In 2021, the median marrying age for an American woman was 28 years old—drastically different from the median marrying age of 20 in the 1960s.
Women are entering marriage with more assets as they gain higher-paid positions in the workplace, own more businesses and gain more inherited wealth. By 2030 women are expected to control a large stake of the $30 trillion worth of assets currently held by baby boomers. Taking those factors into account, more women are weighing the financial implications of saying “I do” before they walk down the aisle and are looking for methods to protect their assets within the marriage and potentially after it.
Many of these women will turn to their financial advisors for help in guiding them through this process. While implementation of the plan will include an attorney, advisors are well positioned to help frame the conversation, educate their clients about their options, and coordinate with the drafting attorney to ensure their client’s needs are met.
Below are some of the kinds of legal agreements that women may want to put in place before tying the knot:
One of the most well-known ways of protecting an individual’s assets within a marriage is to draft and sign a prenuptial agreement (“prenup”), entered into prior to marriage, or a postnuptial agreement (“postnup”), entered into after marriage. In the event the couple splits up, these documents set forth which assets may be available to each partner, which will remain the sole property of an individual and how assets will be split after the union ends. Historically these have been used by men to protect their assets, but as women marry later in life, often bringing more accumulated wealth into their marriage, advisors and industry observers have noted an increase in women seeking prenups to help protect that wealth.
However, prenups are not always viable or palatable. Many women don’t feel comfortable raising the issue, whether that is due to fear that their partner will be offended, a desire to avoid full disclosure of financial assets prior to the wedding, or any number of other reasons personal to the individual.
Asset protection trust.
In such cases, an asset protection trust can be a good alternative. Both prenups and asset protection trusts allow a woman to contribute to a joint marital bank account for shared expenses while still maintaining autonomy over her own premarital wealth. When properly established, funded and administered, an asset protection trust can shield the assets within it from substantially all creditors, including a future spouse. Whether it be from debts incurred by a spouse during the marriage or support/alimony claims upon divorce, these assets remain protected.
In the last several decades, women have increasingly entered into nonmarital long-term relationships. In such cases, prenups will not apply, although an asset protection trust can still be effective. Another option is a legal cohabitation agreement. Much like a prenup, this document sets forth which assets may be available to each partner, which assets remain the sole property of the individual, and how assets will be split should the relationship end. In an agreement between unmarried partners it is especially important to address what will happen to the couple’s home, whether it be rented or owned, so that one partner doesn’t find herself financially liable for a lease on a dwelling she no longer lives in or without equity in a home she has financially contributed to.
The percentage of never-married women has increased considerably since 2006. For those who choose not to get married or live with a partner, the importance of having an up-to-date estate plan is significant. Planning for incapacity takes on additional importance when there isn’t a spouse to step into the role of decision-maker, from both a medical and financial standpoint. Creating and regularly updating medical and financial powers of attorney ensures that the right person can receive medical and financial information and make those critical decisions. Additionally, having a revocable trust or will ensures that assets pass as intended, and not as per the state law default.
As it stands today, only one-third of women cite themselves as the financial decision-maker in their household, despite the number of dual income households having remained at over 50% for the past two decades. Even though women increasingly contribute to their household’s wealth, many still cede control of the majority of their assets to their spouse. However, that doesn’t have to be the case. With proper trust and estate planning that’s personalized to address specific circumstances, advisors working in tandem with attorneys can help more women retain autonomy over earned or inherited personal wealth while positioning themselves to earn even more.
This article was written by Sara Wendt and Gina Nelson, Chilton Trust Company, and published in Barron’s on May 18, 2022.
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