A prenup and an estate plan can work alongside one another to safeguard your property and your loved ones. Prenups can be a effective estate planning device since they can restrict a living spouse’s right to inherit. Find out more concerning the rights of a surviving spouse and how the agreement can impact those rights.
A Surviving Spouse’s Right to Inherit
In each state, the law safeguards the property rights of surviving spouses. Traditionally, the objective of these laws was to stop a non-income earning spouse from being left with zero at the passing of the income earning spouse. To provide this safeguarding, states take one of two processes, depending on whether the state is a “common law” or “community property” state. Common law states provide living spouses the entitlement to inherit property, whereas community property states offer spouses rights to their spouse’s acquired property throughout life. A prenup agreement can be beneficial in both cases.
Elective Share – A Spouse’s Right to Property Inheritance
In states that are common law ones, without a prenup agreement, your spouse has the right to inherit property from you should you pass away. This is true even when you had a genuine will, no matter the conditions of the will. When you attempt to disinherit your spouse by leaving them little to nothing out of your will, following your passing, they have 2 choices:
- claim the “elective share” or
- claim the property you designated in your will.
The elective share is the minimal amount in which a spouse has a right to through state law. It is typically the amount given to spouses through intestacy laws (if there isn’t a will). This amount is typically a set portion – typically 1/3 or 1/2 of the decedent spouse’s estate—but the amount can differ on the basis of the marriage length and if children are involved. So, when you live in a state that is a common law one and your will does not leave your spouse, at the minimum, the elective share amount, your spouse can decide to claim the elective share amount alternatively. When this occurs, your spouse is going to wind up with more of your property than you planned, and other heirs are going to wind up with less.
Community Property – A Spouse’s Right to Property Ownership Throughout the Marriage
In states that are community property ones, without a prenup, your spouse has the right to an equal 1/2 share of all income and assets obtained throughout the marriage. You can appoint how your separate property is distributed following your passing. Separate property in these states comprises of gifts, inheritances, and property you owned prior to your marriage. You can drop your 1/2 of all community property through your will or other estate planning documentation, but you can’t drop your spouse’s share without their consent unless your agreement stipulates otherwise.
Prenuptial Agreements Surpass State Property Laws
Through a prenup, spouses can determine who owns what and what property rights each spouse is going to have following the passing of the other. The decisions made – and are in agreement with – in a prenup overrule the laws intended to safeguard a surviving spouse. So through a prenup, community property laws and elective shares do not apply. For instance, when you want to leave most of your estate to children from a previous marriage (and little to none to your spouse), they can agree to surrender the elective share in a prenup. You can also utilize your prenup to determine those of your assets are separate property and those are marital and/or community property. These agreements alter your spouse’s entitlement to inherit that property when you pass away. Likewise, you and your spouse could use the agreement to surrender your rights to one another’s retirement accounts. The agreement can specify that earned income by a spouse is their separate property, invalidating the default regulation in community property states.
Requirements of a Prenup Agreements
Below are some general requirements for making a valid prenup agreement:
- The spouses must voluntarily agree to the conditions.
- Each spouse must present full and correct financial disclosures.
- The spouses must have the chance to pursue independent legal counsel.
- The agreement is required to be fair.
Should your spouse contest a prenup, the court may contemplate procedural and substantive fairness to establish if the documentation should stand. This is about timing and planning – like if your spouse had sufficient time to examine the agreement prior to signing it. When the bride is presented with a prenup on the day before the wedding, a court might deduce she signed it under pressure. Substantive fairness is about if the conditions of the agreement were fair to each of the spouses. States vary as to if the agreement only needed to be fair at the time it was created or if the agreement needs to also be fair at the time that it is carried out, like at divorce or a death. Should a prenup agreement cause a spouse to become impoverished, it’s doubtful it is going to be upheld in court. The laws that oversee prenup agreements are state-specific, and you are going to need a lawyer’s help to create one. Having said that, you and your partner can work with each other to draft your own agreement prior to you going to a lawyer.
You Still Require an Estate Plan
A prenup agreement can impact how your property is allocated following your passing, however, it is not an estate plan and is not an alternate for one. Instead, your agreement should work in conjunction with your estate plan. For instance, the agreement can establish which of your property is separate property, then your will or trust establishes who receives that property when you pass away. Comparably, you could have the agreement surrender your spouse’s rights to the elective share, then have your will or trust declare that your spouse should get several particular items from your estate. Furthermore, your estate plan can do a lot of things that your prenup agreement can’t do. Utilize your estate plan to:
- Establish who gets your property when you pass away.
- Designate your executor.
- Appoint a guardian for your minor children.
- Choose who is able to make financial and medical decisions for you.
- Record your end-of-life or emergency health care desires.
- Present final arrangements for burying, cremation, funeral, memorial, etc.
So while you are thinking about the future with a prenup, take care to also create a comprehensive estate plan to safeguard yourself, your spouse, and your family.
Valerie Keene, A. (2018, May 30). Prenuptial agreements and inheritance rights. www.nolo.com. Retrieved July 14, 2022, from https://www.nolo.com/legal-encyclopedia/prenuptial-agreements-and-inheritance-rights.html
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