If you have signed or plan to sign a prenuptial agreement, you may wonder how it will affect your estate plan. Depending on the specific language of your agreement, it could have a major effect on how your estate is distributed.
What Is a Prenuptial Agreement?
“Prenuptial” simply means before marriage. A prenuptial agreement (often called a “prenup”) is a contract between prospective spouses concerning their property and rights relating to the property. Many wealthier people and celebrities sign prenups before marriage because they want to protect their personal assets should the couple divorce or separate. Since about half of all marriages end in divorce, you do not need to be wealthy or famous to want this kind of an agreement. But prenups also can affect estate plans.
Waivers: The Most Important Parts of a Prenup
For estate planning purposes, the most important parts of a prenuptial agreement are the waivers. Waivers indicate the rights that the prospective spouses give up by signing the agreement. In California, two significant waivers are the waiver of community property rights and the waiver of the spouse’s statutory share.
The waiver of community property rights, included in many prenups, states that the spouses will not create any community property when they acquire property during the marriage. Usually, most items that either spouse earns or purchases during the marriage become community property (property of both spouses jointly). When one spouse dies, the other spouse automatically – without the need for probate – inherits all the community property (and also may inherit part or all of the separate property). With a prenup, you can waive the creation of any community property. The surviving spouse subject to a prenup with this waiver would only receive a portion of the separate property automatically if there was no will.
The waiver of the spouse’s statutory share also prevents a surviving spouse from inheriting. A statutory share is the amount that the surviving spouse receives if the deceased spouse disinherits the surviving spouse (intentionally or unintentionally). Depending on the number of children and other relatives, a spouse’s statutory share could be substantial. A waiver in a prenup nullifies the surviving spouse’s ability to receive this inheritance.
Estate Planning Around a Prenup
As a result of the waivers, a prenup can essentially disinherit a spouse or ensure that he or she only receives a small inheritance. A contradictory will or estate plan could cause problems when a spouse’s estate is being distributed – and the prenup might be honored rather than the will. As a result, it is very important to make sure that your prenup and your will (and other estate planning structures) correspond with each other. You may even need to change your prenup with your spouse’s consent.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.