Can a Premarital Agreement Affect Your Estate?
It is obvious why premarital agreements– aka prenups–are most often associated with couples who are going through a divorce. However, divorce and the subsequent division of property is not the only arena in which a premarital (or postnuptial) agreement may come into play. Both prenuptial agreements and postnuptial agreements can be drafted to address inheritance rights should either partner die during the course of the marriage. If you are considering a prenuptial or postnuptial agreement, it is important to truly understand how such an agreement might affect your interest in an estate.
While this article will go over some basics on this issue, the details and complications of individual cases are, of course, unique. Very often the outcome of cases hinges on the specifics of an individual case. For expert advice on your own specific case, contact the prenuptial and postnuptial agreement attorneys at Cardwell, Steigerwald Young.
What is a Prenup (or Postnup)?
California law defines a premarital agreement as an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage. While marriage is a contract in and of itself, a prenup is a contract on top of that contract that states additional terms that are to apply in that particular marriage. Unlike other forms of contract, California does not mandate that consideration be given for entering into a premarital contract.
California law establishes that a California prenuptial agreement will only take effect if and when the signing parties marry. California requires a prenuptial agreement to be in writing and signed with the knowing consent of both parties. If these standards are not met, the prenuptial agreement will be deemed invalid if challenged. Postnuptial agreements operate in essentially the same way as prenuptial agreements, with the caveat that postnuptial agreements are signed and entered into by a couple after the couple has already married.
Prenuptial Agreement Impact on Your Estate Plan
Prenuptial/postnuptial agreements and estate law can intersect in a rather complex way. It is essential to understand how one affects the other if you are to understand your estate and your significant other’s stance in it once you enter into a prenuptial/postnuptial agreement. Some examples of the effects a prenuptial/postnuptial agreement can have include:
- Protection of Separate Property:
Prenuptial agreements are very often put in place to protect assets that are brought into the marriage. Significant assets can be singled out by a prenuptial agreement as remaining the sole and separate property of one party. When it comes to estate planning, this means that these assets can be left to others according to that one party’s interest – it is not subject to community property laws and remains under the control of one party. - Clear Intentions:
A well-drafted prenup can provide clarity as to each spouse’s intention toward a specific asset. For example, a valid prenuptial agreement could clearly state that certain assets are to remain one party’s separate property and are to be passed on directly solely to children from a previous marriage.3. Avoiding Legal Challenges:
Prenuptial and postnuptial agreements can provide clarity and help parties to avoid disputes which might otherwise arise during the course of estate administration.4. Impact on Spousal Rights:
California recognizes a spouse’s right to inherit a portion of their spouse’s estate: even if they are not included in the last will and testament (known as the spousal elective share).
Titanic Effect
While not a California case, the concepts outlined above can be illustrated by the ill-fated story of Mr. and Mrs. John Jacob Astor. As many readers may know, the Astors were passengers on the Titanic Ocean liner. While the pregnant Mrs. Madeleine Astor (18 years old) survived the disaster; Mr. Astor (one of the richest men in the world, at the time) did not.
What is lesser known is that Mrs. Madeleine Astor’s claims to Mr. Astor’s estate were limited by a premarital agreement. Inflated for today’s currency, Mr. Astor was worth 2.75 billion dollars at his death. However, his widow only inherited $100,000. In accordance with the premarital agreement/estate documents, so long as Madeline remained unmarried, she could also access an income from a five-million-dollar fund, use of two mansions, and a car and 5 horses from Mr. Astor’s estate.
Contact Cardwell, Steigerwald Young Today
Premarital and postnuptial agreements help many individuals, and are not solely tools for divorce. They are also of great service to couples looking to clarify their wishes for their estate. Contact our San Francisco prenuptial and postnuptial agreement attorneys at Cardwell, Steigerwald Young to learn more about how these legal tools can be put to use for you.
Sources:
leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=FAM&division=4.&title=&part=5.&chapter=2.&article=2.
nytimes.com/1913/12/12/archives/mrs-astor-fights-tax-property-came-to-her-in-antenuptial-agreement.html
