Prenuptial Agreements and Estate Planning
There are many complexities with estate planning that you have to navigate with the help of a legal professional. If you're planning on getting married, you may also be wondering how prenuptial agreements affect your estate planning. With the help of an attorney, you can discover how prenuptial agreements are a useful tool in estate planning.
The Benefits of Prenuptial Agreements
There are many reasons legal professionals recommend obtaining a prenuptial agreement before the wedding day. This gives couples the ability to list out the assets that they consider to be separate property and which ones are their shared property in the marriage. This reduces the risk of certain assets becoming misclassified if one of the spouses passes away.
For those who are getting married a second time, a prenuptial agreement is useful because it can prevent children or previous spouses from obtaining or inheriting any of the assets. They're also effective for avoiding conflicts and disputes that are common between family members. When everything is in writing, it makes it easier to determine which spouse owns what. All of the assets that are owned by each spouse needs to be fully disclosed, which includes any debt that has been acquired.
Prenuptial agreements are often controversial but can be necessary if you're financially secure before the marriage. They're often common if one of the spouses has a significant amount of wealth or has inherited money. They're ideal if you're re-entering marriage with children from previous marriages or if one of the spouses has a lot of debt. You can also consider creating a prenuptial agreement to protect your estate if you want to leave most of your assets and money to children from a previous marriage instead of leaving it to the person you're about to marry.
What to Expect Without a Prenuptial Agreement
If you don't obtain a prenuptial agreement and choose to get a divorce, you can expect it to be a lengthy and complicated process trying to divide all of your assets and agree on who gets what items. If you live in an equitable distribution/community property state, you don't have the freedom to disinherit your former spouse, which means they're automatically entitled to a portion of your estate. In some locations, including New York, they will acquire one-third of your items, and in other states, they may receive half of everything you own.
Some spouses can even have the option of requesting more of the estate for those who leave less than a certain amount behind. A prenuptial agreement needs to be created for those who want to leave behind a certain percentage of their estate. Prenuptial agreements are recommended if you want to prevent your spouse from taking more of your estate to ensure more of what you leave behind is inherited by your children.
The states that are considered to be community states and marital property are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
The Last Will and Prenuptial Agreement
When you pass away, you'll need a Last Will and Testament to tell the courts who you want to inherit your money and assets after your death. Your Will can work with your prenuptial agreement to protect your assets and ensure they go to the right place. You'll need to update your Will to ensure you're satisfied with the details, and it includes any new assets or money you've acquired. This is necessary if you choose to get married a second time. Additional events or circumstances that require updating the document include if you've adopted or have birthed a child, if one of your executors have passed away, if you've increased or decreased any of your assets or debts, major surgery or illness, if you have new grandchildren, or if you've recently become separated or have gotten married.
Pros and Cons of Prenuptial Agreements
It's important to weigh the pros and cons of a prenuptial agreement to determine if it's the right choice for you. Prenuptial agreements are commonly put into place before the union is finalized, but some couples still choose to sign postnuptial agreements. These are still designed to offer protection. Some people find it challenging or intimidating to speak to their spouse or a legal professional about their finances, but this can be a good exercise that is necessary to ensure the marriage succeeds. This can establish how the finances will be managed if it's already discussed earlier in the marriage before it's too late.
One of the main advantages of prenuptial agreements is that it gives you complete control over your money. It is also useful for creating a plan on how the money will be used and will ensure that your children's inheritance rights are protected after your death. It will also allow the assets to remain in the family. They're considered to be more powerful than Wills and reduce complications that can transpire if you choose to get divorced. Not only do they protect your personal money and assets, but they can also protect the assets of your business. In some cases, they also limit the spousal support that your spouse receives if you get divorced, but some couples may also consider this to be a drawback. Prenups prevent battles from developing over the finances and can expedite the divorce process, even making it less expensive while working with a legal professional. You can feel good knowing there won't be significant conflict over your money after the prenuptial agreement is created.
There are also a few drawbacks of prenups to be aware of to ensure you understand what to expect. This means you're making yourself bound to a legal contract instead of laws where you live. The agreement can be unequal and can cause tensions to arise when you're getting ready to marry your partner. You have to be prepared to have a few uncomfortable conversations that can be challenging to work through, especially if you're the one that is pushing for a prenuptial agreement to be put into place. Your spouse may feel that you don't trust them, which can cause you to get off on a rocky start at the beginning of your marriage. It's important to understand the details of the document with the help of a lawyer to ensure you understand what you're asking from your spouse and what you agree to in advance.
Benefits of Using a Prenuptial Agreement in Estate Planning
There are many reasons it's considered to be wise to use a prenuptial agreement in estate planning. If you live in a community property state, your spouse is automatically entitled to a certain percentage of your money and assets. You can't try to write your spouse out of your Will or disinherit them, which can make a prenuptial agreement your best defense. The prenuptial agreement will guarantee your spouse gets the specific percentage you include in the document.
Assets to Include in a Prenuptial Agreement
Your prenuptial agreement can include marital property, any property that you purchased before the marriage, property rights of any children you have from prior marriages, how the property will be distributed if the marriage ends in divorce, how property is distributed if one of the spouses passes away, and family properties like a business.
When you're creating the prenup, you can't include verbal agreements, unfair terms, forfeiting alimony rights, and custody or visitation rights.
Creating a Trust
Some people choose to create a trust to determine the rights of a widow or widower to the deceased spouse's estate. The trust agreement can spell out what the surviving spouse will or will not receive from the trust. The trust can specify what the children will inherit upon the death of the surviving spouse. This is ideal because getting remarried with children from a prior marriage can cause complications. A trust can make it a smoother transaction that reduces conflict and confusion.
The Law Offices of Jeffrey A. Asher, PC, can help you navigate the complexities of creating a prenuptial agreement and using it within your estate plan. We can inform you of your rights and will advise you what to include to ensure the courts recognize the document and that your wishes are honored after your death or if a divorce occurs.