by Justin A. Reckers, CFP®, CDFATM, Director of Financial Planning
Pacific Wealth Management and Pacific Divorce Management
Most people who divorce do not have the financial concerns of Rupert Murdoch. The wealthy media mogul recently announced the impending divorce from his third wife, Wendi Deng, after 14 years of marriage.
You don’t have to be as wealthy as Rupert Murdoch and Wendi Deng to benefit from a prenuptial agreement.
Murdoch, CEO and chairman of News Corp., ranks number 91 on Forbes Magazine’s list of the world’s billionaires, with a net worth of $11.2 billion. Speculation is rampant about the possible settlement with Wendi Deng. Various media reports claimed Murdoch’s payout in his second divorce from wife Anna in 1999 cost $1.7 billion.
The media has assumed that Murdoch and Deng have a prenuptial agreement. I have no doubt given Murdoch’s marital history and the fact he has children with one of his former wives. But even with wealthy people, it isn’t always the case.
The idea of getting a prenup tends to fly by even the wealthiest clients. People still think if you get a prenuptial agreement, it means you are planning for divorce even before you say “I do.” They believe it seems cold and unromantic.
From my viewpoint as a financial planner, I disagree with this thinking. It can be very romantic to have this discussion about money. Discussing money values, learning how your future spouse views financial decision making, their experience with money management and agreeing up front to some ground rules for managing your family finances can be a source of safety, financial security and comfort.
When financial advisers work with soon-to-be-wed couples, we help them determine how best to divvy up assets and streams of income. We also work side-by-side with family law lawyers who draft the prenuptial agreements. We examine the tax implications of dividing certain assets should it be necessary, and we figure out the long-term impact of ensuring the spouse with less money receives sufficient income.
We make sure both parties think through the implications of their decisions, and that they consider the many life stages they will go through. How will they provide for their children if they are divorced? What if one of the individuals becomes ill or disabled and cannot earn an income? What happens as each spouse ages?
When a couple is focused on starting their new life together, they don’t often stop to picture what might happen down the road. Financial and legal experts can help insure important decisions are made with complete information and adequate consideration of the financial intricacies of marriage and divorce.
There are as many versions of prenuptial agreements as there are couples. One size never fits all. And prenuptial agreements aren’t financial straightjackets either. In some cases, spouses going through a divorce contest assets and whether their status is truly “separate.” It can become complicated when an asset considered separate property is sold, and then the money is reinvested. Is the new property still a separate property? Or is it now marital property? If it’s not part of the original agreement, this is where things can get a little complex.
It is smart to put a prenuptial agreement together before marriage as well as to update it periodically just as you would update your estate planning when circumstances change.
You don’t have to be as wealthy as Rupert Murdoch. You only have to be conscious of the emotions that often complicate financial decision making and be willing to be open and honest with the person you love.