A prenuptial or prenup agreement is commonly used by one or both partners in a marriage to provide clarity and define expectations for the marriage. A prenup agreement can distinguish between separate and marital property. Separate property is defined as any assets owned by a spouse before marriage, as well as any gifts and inheritances received individually before marriage. Marital property is any property acquired during marriage.
Many attribute the importance of a prenup agreement to protecting one partner in the event of a divorce. However, prenup agreements are also important when a spouse dies, and their estate must be distributed.
What is a prenup agreement?
A prenuptial agreement is a contract between two people that both parties sign before they get married. To ensure fairness and provide evidence that one partner did not sign the agreement under duress, both partners should have their lawyers available when they sign the agreement.
The agreement should be signed well before the wedding and made only after both partners have fully disclosed their financial situations. Both parties should also have their attorneys review the prenuptial agreement before they sign it.
Can’t a will take the place of a prenuptial agreement?
A will can be used to designate who will receive your possessions, but some state laws provide surviving spouses with an “elective share,” which entitles them to receive a defined share of the estate, whether the deceased spouse intended for them to have it or not.
Probate laws covering rights of survivorship and a last will and testament may be sufficient to meet your needs, especially if this is a first marriage for you and your partner. It is important to talk with your estate planning attorney to see if this is the case with your family.
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How can a prenup agreement help with estate planning?
A prenuptial agreement can protect both partners in a marriage and can be an important part of estate planning for all families. Examples of how a prenuptial agreement can help with estate planning include situations in which one or both intended spouses:
- Have children from a previous marriage. A prenup can protect the assets the spouse wants to pass to their children from their current spouse.
- Have accumulated significant wealth before the marriage. A prenup agreement can help ensure the inheritance does not end up getting divided during a divorce settlement.
- Have a large inheritance from their family and want to ensure that the inheritance stays in their family.
- Have property that makes it difficult to separate private property from joint property acquired during the marriage. A prenup agreement can help determine ownership and property inheritance.
- Believe a prenup agreement is necessary to prevent disagreements during the probate process.
- Want to waive certain assets or claims to a statutory share of the estate.
- Own a share, partial ownership, or control of a family business.
- Want to designate life insurance or retirement beneficiaries.
- Provide financial support for a previous spouse or children from a previous marriage.
- May want to disinherit a spouse.
- May want to waive their spousal rights to certain assets the other spouse owns, such as a family home or jewelry.
States have laws in place to protect a spouse and provide support for them upon the death of a spouse.
Prenup agreements are not substitutes for a comprehensive estate plan. Instead, they reinforce wills or trusts and provide additional protections from state laws that may override an estate plan and give assets to a spouse, even if this is counter to a deceased spouse’s will or trust plan.
Prenup agreements, as part of a comprehensive estate plan, can provide peace of mind to all involved parties as they learn everyone’s intentions upfront.
Many engaged couples do not seem to need or want a prenup agreement, but as time passes and they learn more about each other’s motivations, goals, financial strategies, and loyalties, they may look back and wish they had signed an agreement.
Another option is to implement a prenuptial agreement but include a sunset clause. As long as both partners agree to the plan, a prenuptial agreement can be revoked or amended at any time during the marriage.
A prenuptial agreement is not your only option if you want to avoid the probate process. In many cases, creating a trust is a better option because it enables you to manage your assets while you are alive and fully describe how you want them managed upon your death.
You can schedule a call with us or reach out to us directly at 855.356.0573 to learn more about how best to plan today to protect those most important to you.
