Will Your Prenup Fail You as You Age?

By Pati Bedwell, Elder Care Coordinator

According to Pew Research Center, forty-one percent of American adults have at least one step-relative in their family; almost twenty percent have a stepparent, and thirteen percent have at least one stepchild. Some stepfamilies never fully blend, and stepsiblings may not be close, especially in the case of late-life remarriages.

More than a few of these families end up on our office when one of these spouses, now elderly, needs care. We're seeing couples in subsequent marriages that have lasted ten, fifteen, or even twenty-five years where they each have children from their previous marriages. Many of these couples have prenuptial agreements, and they all believe that their prenup agreements will enable them to sidestep disagreements about who will pay for long-term care.

Except they won’t.

Not long ago, we had a couple in the office who believed that their prenup would protect them. The husband was healthy, but the wife needed long-term care and they were interested in applying for Medicaid. They believed that the prenup would keep the husband’s assets from being considered as countable resources. They were wrong.

Public benefit programs like Medicaid and VA benefits look at your income as a married couple. Your income is combined regardless of what that prenup agreement says. Once the couple realizes this, they can usually accept it after the initial shock wears off.

Not so for the adult children from each spouse’s earlier marriages. The issues of who pays for a stepparent’s long-term care and where the money will come from can cause more than a little conflict in a blended family. In fact, the Pew study shows that while stepfamily relationships can be close, only 56% of stepchildren feel a sense of obligation to care for stepparents, compared with 83% of biological children.

Expectations are a complicating factor, especially for the adult children of people who enter into later-in-life marriages. Adult children may have been told what would happen to mom or dad's things. They might have preconceived notions about the equal and equitable distribution of the parent’s assets. These expectations may not include paying for the stepparent’s care.

One couple I know went through this. Let’s call them Ted and Carol. Married later in life, they came to our firm for an estate plan. They were living together in Ted’s house when he was diagnosed with dementia. Carol was taking care of him, and things were going smoothly, that is until she couldn’t manage his care anymore. Ted moved to a nursing home and Carol continued to live in his house, exactly as they had planned.

While Ted was in the facility, Carol’s health eventually declined to the point where she needed long-term care outside the home. By now, she had used up most of their assets paying for their care. There was nothing left except the house she was living in, so Carol decided to sell it. Ted’s kids objected. The house was supposed to go to them, they claimed. Carol couldn’t use an asset they thought was rightfully theirs to pay for her care, they proclaimed.

This case is now being litigated. 

We’re seeing more situations like these. Everyone thinks that a prenup is a magic wand that you wave over a couple to draw a clear line between what belongs to whom.

Except when it doesn’t.

If your family is caught in a trap created by a prenuptial agreement, working with a firm like Takacs McGinnis can help you find more effective solutions.

We’re here for you. Just give us a call at 615.824.2571.

 

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