Oh, wait, it’s still a pandemic. Sorry- just another COVID fantasy. For the time being, lets talk about prenups and estate management!
Hindsight is 2020, they say. This saying holds new and ironic meaning in 2021 because, hey, last year was rough. If 2020 taught us anything, it was that we need to be prepared for unseen crisis. While tragic, the overwhelming loss of life families have experienced in the last 12 months really highlights the need for estate planning. Hopefully the worst of the Covid-19 pandemic is behind us, but that doesn’t mean we should stop planning.
Planning for unexpected life changes, such as death or divorce, can be easy to put off when you’re happy, healthy, and celebrating your engagement to The One. It may feel overwhelming to add one more task to your premarital to-do list because planning a wedding can feel like a full-time job itself. That said, getting your affairs in order before signing that marriage certificate is a small sacrifice to make in the end, at least when compared to the time and money it can take to resolve the end of a marriage.
So, what are some of the ways an engaged couple can go about planning for the good, the bad, and the ugly? While we often think of divorce when we think of the end of a marriage, marriages also come to an end when one spouse dies. There are two popular types of legal documents that dictate what happens to assets when a marriage ends due to the death of a spouse. Those instruments are (drumroll please) wills and prenups.
Prenups Can Do That?
A prenup, short for prenuptial agreement, is a contractual agreement between two people planning to get married. The agreement is signed by both of the individuals and is legally binding. Depending on the laws of the state where you live, the prenup may also have to be signed in front of a notary or comply with rules assuring both parties have had time to review the agreement. Each state may have different rules.
Entering into a prenup before marriage requires that each partner conduct a full accounting of their debts and assets so that those items can be included in the prenup. Remember, including something in a prenup doesn’t mean you’re giving up ownership of it. In fact, it can mean just the opposite—that you wish to retain ownership rights should the marriage end.
You might be wondering how in the “H” “E” Double Hockey Sticks a prenup can be used to manage the property of a spouse after death, and that’s okay. Let’s discuss it! In terms of estate planning, you may desire that your children from an earlier marriage or relationship receive ownership of certain assets if you die. Prenups are often touted as important tools in protecting the inheritance of children from earlier relationships.
Additionally, if a prenup provides for spousal support at the end of a marriage, then the surviving spouse may be able to point to that provision in requesting a spousal inheritance. Likewise, if the prenup specifically allocates a lesser percentage of spousal support after marriage, then the prenup could take precedence.
Prenups provide a roadmap for the end of a marriage that terminates because of either death or divorce. Although there was a time in the history of the prenup where courts didn’t favor prenups, the trend has shifted in the opposite direction. Nowadays, there is a broad recognition that prenups are a valuable tool for individuals, courts, and attorneys in ascertaining the wishes of someone who has died.
What About My Last Will and Testament?
Now, let’s switch gears and talk about the other popular legal tool used for estate planning. Wills are probably the first thing that come to mind when you think about how your assets will be divided up after your death and there’s good reason for that. That is what they are designed to do.
Like a prenup, a will also requires an accounting of your personal assets but oftentimes they do not provide a detailed snapshot of pre-marital assets.
Unlike a prenup, the only person who needs to agree to the terms of your will is you. While many couples prepare their wills with their partner in mind, your partner ultimately has no say in how you decide to divide your assets when you die. If they do disagree with how you’ve drawn up your will, they will have to save it for the probate court, though most experts (i.e. marriage counselors) would suggest you and your partner attempt to stay on the same page about these things.
Although wills and prenups are different legal instruments often considered for very different purposes, it is worth noting that, while a will does not dictate how your assets will be handled at the end of a divorce, a prenup can provide for a division of assets if one spouse dies before the other. This overlap often leads many couples to consider their prenup when they create their estate plans and it’s always a good idea to speak to an experienced attorney about how a prenup might affect a will.
If you have no will and no prenup when you or your spouse dies, the laws of the state where you live will decide how your assets will be distributed and to whom. So, even if you told your great grandniece that she’d one day inherit your collection of haunted porcelain dolls, state law will prevail and it’s likely that your children or surviving spouse will end up them instead (lucky them!).
Will Versus Prenup, Which One Goes?
So, great! You’re convinced that both a will and a prenup are a good idea, but maybe you still have a few questions. For example, which instrument holds more weight in court? This is a great question, and if you also guessed that the answer can be complicated, you are right.
Sometimes a prenup can reinforce or clarify the provisions of a will when a spouse dies. A prenup can often provide a more specific snapshot of individual assets owned by the spouse, helping to define exactly what property a will may be discussing in one of its provisions. This is because a prenup’s purpose is, in large part, to define what assets each partner brings to the marriage and how they intend to own those assets during and after the marriage. A prenup can clarify that the other spouse should *not* inherit under the estate of their spouse, which is an important factor when entering a second marriage.
On the flip side, sometimes a will and a prenup will mix like oil and water. A problem can arise if the prenup and the will contradict one other. Because a prenup can oftentimes be more specific, and because it is a contractual agreement, it can supersede the will. This is assuming that the prenup was made in good faith and it comports with the laws of the state.
What If I Need to Change My Prenup?
There may be some circumstances that require your prenup to be amended later down the road. It could be a little ways or a long ways down that road, but there are many reasons that a married couple may decide that their prenup no longer fits their life.
If you were an early investor in a booming company, like Zoom, for example, you might decide that now would be a good time to reallocate your assets. Or maybe a long-lost son showed up on your doorstep one morning calling you Dad, and you now want to make sure he inherits your great grandfather’s pocket watch. Hey, stranger things have happened!
The point is that it’s never too late to make amendments to your prenup. Since it is a legally binding contract, both you and your spouse will need to agree to the changes, and sign the amendment in good faith, but it isn’t any more complicated than the steps you took to create your original prenup before you got married. Even if you married without entering into a prenup, you can still draw up a postnuptial agreement, aka a postnup. As the name implies, a postnup is a formal agreement that takes place after you marry. It is important to check on what your state’s standpoint is on amendment of a prenup, and follow any specific requirements.
The same can be said for a will. You can make changes to a will, or prepare a new will, at any time before you die. When you create or change a prenup or a will, you should talk to an estate planning attorney to make sure the instruments complement each other and don’t create unnecessary confusion. If couples want to further clarify how their prenup and their wills may affect one another, they could include provisions within each instrument that state which one should prevail if they are found to be in conflicting.
There are many nuances in the law when it comes to a person’s estate when they pass away. For the ultimate peace of mind, you should consider detailing a death clause in your prenup. Don’t hesitate to make sure that when the time comes, your great grandniece will inherit your creepy doll collection.
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