Friday, February 27, 2009

Prenuptial Agreements - Trusts as an Alternative?

Payback Time from Barrons has more to do with Wall Streeters but I was struck by a possible alternative to a pre-nup agreement - with two very serious preconditions.

"But these days, even though lovebirds may not be utilizing the pre-nup much, it doesn't necessarily mean they aren't covering their assets. Mitch Drossman, national director of wealth-planning strategies at U.S. Trust, is seeing an increase in self-settled trusts, where people can park their assets, or third-party trusts, to protect the family inheritance just in case the romance sours. Happily, the survey found that only 2% of those in first marriages sought pre-nups, compared with 18% of the recidivists. Which may just prove that young love, at least, still is blind"
What is this serious precondition? Trusts can cost more than a prenuptial agreement. That limits their use to those who can afford them. The other problem has to do more with my reluctance to place non-liquid assets in a trust.

Since I also write about cohabitation agreements, I see no reason that a trust could not also protect a person's liquid assets when cohabiting. However, I think the problems of cost and protecting non-liquid assets will be even greater for non-married couples.

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