Prenups As Part Of An Estate Plan

Prenups As Part Of An Estate Plan

Prenuptial agreements "prenups" may be beneficial to a couple marrying. They are not just for the rich and famous. A key reason to have a prenup is to contractually bind the other spouse to a plan for the disposition of both estates on the death of either spouse. In the absence of the prenup, unless the couple draws up a joint, contractual Will, each spouse is free to change their Will at any time, during or following the death of the other spouse. Joint, contractual Wills are rarely done.

Here are some reasons why having a prenup as part of your estate planning could be wise.

Protection Of Inheritance For Children From A Prior Relationship

The prenup can be a very important estate planning tool for a couple contemplating marriage. This is especially true if either of them brings children into the new marriage. 

In a typical Will, a husband will leave everything on his death to his wife, and vice versa. In the absence of a binding contractual agreement then, such as the prenup, the surviving spouse could change their Will to completely cut out the other spouse's children following his or her death. I've seen this happen numerous times, and it tears families apart forever.

When a prenup is used as an estate planning tool, however, the spouses are able to prevent this from happening and ensure the rights of children from previous relationships are protected. A frequent concern of children from prior relationships when their parent is remarrying is the surviving spouse cutting them out of their parent's estate. Providing for how those children will be dealt with on the death of each of the spouses can be a critical factor in gaining approval of the marriage by all the children. The prenup that protects the rights of children from prior relationships also saves a lot of bitterness that can result if there was no provision in the estate plan to protect those rights. 

On the flip side, few couples realize that, if there is no Will providing otherwise, on the death of one spouse with children from a prior relationship, those children inherit their parent's interest in community property. Failure of the couple to plan that community property to pass to the surviving spouse also can result in bad feelings and legal entanglements between the surviving spouse and the children of the deceased spouse's prior relationships.

Recognition Of Substantial Caregiving By A Spouse During The Marriage

Another reason a prenup may be a desirable estate planning tool is to recognize the contributions of each spouse to the marriage relationship. A prenup may allow a spouse that comes into the marriage with substantially less property than the other to receive some portion of the other spouse's separate property on his or her death. 

Again, in the absence of a contractual obligation in a prenup, the spouse with less could end up with virtually nothing. After a long marriage in which that spouse spent substantial time and effort taking care of the wealthier spouse, this seems grossly unfair and leaves bitter feelings.

A Prenup Is A Good Piece Of An Estate Planning Package

The same kind of estate-related provisions discussed above can be drafted separately from a prenup, but a couple entering into a marriage where a prenup is wise should definitely take advantage of this estate planning opportunity as part of the whole package. Wills, which mirror the provisions of the prenup for the distribution of property on the death of either spouse, can and probably should be drawn up for each spouse at the same time,  

The prenup also should refer to the Wills and provide that the terms of the prenup are contractually binding, regardless of any change one of the spouses might attempt to make in his or her Will. The prenup trumps other general estate planning laws, binding each spouse to those provisions unless they both agree to make changes during their joint lifetimes.

Next Steps To Drawing Up A Prenup

If you are contemplating marriage and would like to discuss the wisdom of drawing up a prenup, contact Adair M. Buckner for a free initial consultation*.

Schedule A Free Consultation

*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)

** This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal, or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.