Tags: marriage | divorce | investment | risk

Solving the Investment Problem of the Marriage Risk

By    |   Monday, 20 August 2012 08:14 AM

It is not surprising that marriage represents the biggest and most likely investment risk of loss.

At least, the divorce part of it.

The reality is that the commitment by most people to share their lives these days still comes by way of the social contract known as marriage.

And with marriage comes something called "marital property."

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Just the sound of that word can make a divorce lawyer giddy and tingle all over with the anticipation of another feast of fees on a silver platter.

When love has gone out of the relationship, or something more desirable comes along, all that marital property becomes subject to the divorce court and the divorce professionals — lawyers, accountants, forensic accountants, tax pros, appraisers, valuation experts, psychologists and a whole host of other experts.

All of them, of course, get paid out of the marital property.

What property is left is subject to the party who claims victimhood and the need for compensation for the enormous aggrievement and pain suffered by being married.

The fact is that investors work hard to make gains, avoid losses and deal with the reality of economic, tax and political risks from every corner.

Then comes a divorce.

The Beach Boys had a very popular song that describes what happens next. It is called "Wipe Out."

Nearly all lawyers who practice law with individuals as clients will, of course, recommend a prenuptial agreement. I know I regularly bring up the subject to clients with varying degrees of success depending on how many prior marriages they've had.

Prenuptial agreements are helpful and can be very effective. But the process of getting to an agreement is not easy and sometimes gets to be a road that is just too hard for one party or the other to navigate.

Prenuptial agreements involve the process where lawyers "negotiate" every aspect of your married life, including how much you will pay from your hard-earned investments to get out of the mess the marriage might, in the future, become. And you aren’t even married yet.

Many times clients have asked me for an alternative where the pain and suffering of this lawyer-controlled process can be avoided.

My advice to clients at that point is to recommend an integrated estate and wealth-protection plan.

This form of legal structuring varies significantly, since it is dependent on facts, circumstances, objectives, taxes, investment control and many other factors.

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There are no guarantees when it comes to anything dealing with the law. Especially, when it comes to the potentially lethal combination of lawyers, judges and juries.

But an integrated plan can protect investments, business interests and personal assets (artwork or pets), while dealing with all the estate planning difficulties that apply whenever dealing with human beings as well as taxes.

Marriage, as a legally binding social contract, is unquestionably a great economic risk for investors. Half the value of investments, or more, can be lost by a signature on a settlement agreement.

Fortunately, there are solutions to this potential investment risk.

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Monday, 20 August 2012 08:14 AM
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