Yet some feel uncomfortable with the idea. "This is a hard thing for people entering a second marriage," says John Burke, president of Burke Financial Strategies in Iselin, N.J. "You want to trust each other."
He tries to help clients understand that such agreements are merely tools to provide clarity. "If the marriage works out, the prenup is superfluous. If not, you will be glad you have it," he tells clients.
Another way to avoid unnecessary stress is to make sure all legal and financial documents are consistent. "In a case where your will gives one direction as to who inherits an account and the prenuptial agreement states something else, it may take a court decision to settle this," says Ekaterina Klimentova, a certified divorce financial analyst and partner in the New York office of HPM Partners.
She had a client who remarried after the death of his first wife. She calls him Mr. Jones. "Mr. Jones’ plan was to leave his 401(k) to his children [from his first marriage], as he had other assets to leave to his new wife and stepson. So he never changed the beneficiary designation," she says.
When Mr. Jones died, however, his second wife inherited the 401(k), not his children. "Under federal law, a spouse is entitled to inherit a 401(k) plan unless she signed a waiver," Klimentova explains, adding, "Mr. Jones’ estate plan failed."
So when a client is contemplating a second (or third) marriage, make sure all beneficiary designations are up-to-date. "Beneficiary designations trump all other estate planning documents, including the will or any trusts," says Charles Lewis Sizemore of Sizemore Capital Management in Dallas. "I've had clients review their beneficiary forms on IRAs and 401(k)s and find that their ex-wife or ex-husband is still their beneficiary, even if they've been remarried for years.”