July 5, 2008

WHAT YOU NEED TO KNOW ABOUT MARITAL AGREEMENTS

By Catherine J. Furay
Murphy & Desmond, S.C.

Q: What is a Marital Agreement?

A: A Marital Agreement is a flexible planning tool that permits spouses to structure and change the way that all or a part of their property is classified under the law. Typically, the law treats all income and possessions acquired by a couple after their marriage as marital property. The spouses own marital property equally. Individual property is owned by only one spouse and includes property brought to the marriage or received by gift or inheritance.

Q: I am re-marrying and have two children from my prior marriage. Should I consider having a marital agreement?

A: A marital agreement may be appropriate to provide you, your children and your new spouse with protections that may not be available without an agreement. For example, you may have investments or other property that you currently own. You may want to use the investments and income from it to pay for college for your children. Individual property can unintentionally become marital property. All of the income from that property is marital property unless you and your fiancée have a marital agreement or you take other action.

Q: If I do not have a will and I re-marry, will marital property have an effect on how my property is distributed?

A: Because you have children from a prior marriage, one-half of your individual property estate would be distributed to your children and one-half would automatically go to your new spouse. Your spouse and children will divide your one-half interest in the marital property. A marital property agreement is one way to change this result if you want to assure that more than one-half of the property is available for the needs of your children.

Q: My children are the beneficiaries on my life insurance. Will marital property effect my life insurance?

A: Life insurance has special rules under marital property. You are likely to continue maintain your life insurance after you marry. Under the special rules governing life insurance, it is possible that all of the death benefits may be classified as marital property and your spouse may be entitled to at least half of the death benefits even if he is not a named beneficiary. If you want to name the children from your prior marriage as beneficiaries you will need a marital agreement to assure they receive the insurance benefits.

Q: Are there other reasons that I should consider having a marital agreement?

A: Marital agreements can address a myriad of situations. Without a marital agreement, your income and all assets acquired after marriage would be available to pay creditors of your spouse. You can address how too pay expenses, the provisions each of you will make for the other in a will, taxes, and debts and liabilities in a marital agreement. An agreement is also a way you may be able to address any concerns about property division in the event you and your spouse divorce.

Q: What will a lawyer need to know to help me with a martial agreement?

A: First, tell the lawyer your concerns and goals. Are there assets you want to protect and to maintain as separate from your spouse? Second, provide the lawyer with as much information as you have available regarding the assets you and your spouse to be own, the value of the assets and any outstanding liabilities. In addition, provide the lawyer with information about your income and that of your spouse to be.

Catherine Furay is a shareholder in Murphy & Desmond, S.C., Madison, Wisconsin practicing in all aspects of marital property law, general commercial law and civil litigation.