Financial Planning Briefs


Preparing for a Child’s Marriage?

Introduce a Dose of Optimism and Protection

Financial advisors and clients regularly discuss risk mitigation as it relates to financial threats.  Life, health and property insurance are core elements of financial planning, yet a relatively common life occurrence isn’t broached nearly enough: divorce.  Hoping for the best is insufficient, whether it relates to one’s own situation or those of your children.

According to the WSJ1, divorce rates are at a 40-year low. While the divorce rate dropped in 2017 to 16.1 per thousand marriages from 22.6 in 1979, aggregate statistics have no value if the person getting divorced is your daughter or son.  Divorce settlements can compromise generational asset transfer and/or wealth creation, along with taking an emotional toll.

We frequently speak with parents concerned about the future possibility of a child’s divorce and are often asked what can be done to protect inherited wealth.  Our recommendations typically focus on prenuptial agreements and dispositive provisions in estate planning documents.

Prenuptial Agreements

A prenuptial agreement offers a contractual roadmap concerning the property rights of each spouse in the event of a divorce or separation. In our view, prenuptial agreements are not just for the very rich and famous. Parents with concerns ought to consider the following:

1. Review, if only in broad terms, your own wealth, financial and legacy goals and values with your children;

2. Discuss the benefits of a prenuptial agreement long before a child’s marriage is on the horizon.  This can avoid “stigmatizing” a soon-to-be son or daughter-in-law as the wedding approaches; and

3. Prepare for questions and resistance with a sober, but firm rationale.

Estate Planning

Parents also need to understand how their estate plans are to be distributed to their children.  Many estate plans pay out fully upon the death of the surviving spouse, or in sequential payments upon heirs reaching certain ages. These pay-out methods are fixed and, as such, cannot easily be changed.

A few estate planning options are worth considering as you think about what might work for your family:

1. Maintain assets in trust for your children’s entire lives and discuss why. This is what we’d call a “backdoor prenup”;

2. Add broader, more flexible discretionary distribution language; and

3. Name a friendly, knowledgeable Trustee.

Our Recommendations

We understand that these are not easy conversations.  Nonetheless, assessing your options long before a pending marriage can ultimately help protect you and your children.  We suggest at least thinking about the merits and tradeoffs associated with prenuptial agreements and estate plan distribution structures.  Above all, we are happy to discuss your family’s unique circumstances.

How can we help you?  Please contact:
Jim O’Neil, Managing Director, 617-338-0700 x775
[email protected]

This commentary reflects the opinions of Appleton Partners based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor. While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.  Specific securities identified and described may or may not be held in portfolios managed by the Adviser and do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed are, were or will be profitable. Any securities identified were selected for illustrative purposes only, as a vehicle for demonstrating investment analysis and decision making. Investment process, strategies, philosophies, allocations, performance composition, target characteristics and other parameters are current as of the date indicated and are subject to change without prior notice. Registration with the SEC should not be construed as an endorsement or an indicator of investment skill acumen or experience. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.
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