How do postnuptial agreements and estate planning work together? These crucial legal tools can be used together to safeguard your financial well-being in any event—whether divorce, incapacitation, or death. By strategically integrating the two, you can achieve the best possible outcome, ensuring your wishes are honored. Let’s explore everything you need to know about postnuptial agreements and estate planning.
What is estate planning?
Estate planning is the process of planning one’s financial and life affairs after passing away. It includes things like where your assets will go, how you want your money distributed, who should take what physical property, how you want your pets and children to be taken care of, certain end-of-life arrangements, and much more. Estate planning documents can include a Last Will and Testament, Trusts, Power of Attorney, Healthcare Directives, and other documents.
What is a postnuptial agreement?
A postnuptial agreement (postnup) is a marital contract between two spouses who are already married and NOT planning on getting a divorce. A postnup is a way for couples who plan to stay married to map out their finances and other marital issues. You can include property division, alimony (in some states), inheritances, businesses, death, and other clauses in a postnup. If a couple wants to get divorced, they should not be getting a postnuptial agreement; instead, they should get a settlement agreement and speak with an attorney.
Postnups are a relatively newer legal concept that courts have only recently begun to accept. In fact, many states don’t have any statutes or case law outlining the law on postnups. The states that do have laws on postnups generally require postnups to be scrutinized more heavily than prenups because postnups are made when a couple is already married and potentially at a disadvantaged bargaining point than if not already married.
How do estate planning and postnuptial agreements intersect?
You may be wondering, “How on earth do these two areas intersect (postnups and estate planning)”? They seem totally different. The truth is–they’re very interconnected! A postnuptial agreement can actually specify how assets will be divided between spouses upon divorce or death, which aligns with the goals outlined in an estate plan. This integration ensures that a couple’s wishes regarding property distribution and inheritance are clear and legally enforceable, reducing potential disputes and providing peace of mind.
To get more specific, there is something called an elective share waiver that many states offer surviving spouses–essentially a way to take a portion of their deceased spouse’s will, even if they were written out of the will. If your goal for your estate plan is to ensure your children from a previous marriage are the sole beneficiaries of your estate and not your second/third spouse, then making sure you have a postnup with an elective share waiver AND an estate plan outlining your children as your beneficiaries is your best bet.
By working together, these two legal tools can help couples protect their assets, minimize conflict, and ensure a smooth transition of wealth, regardless of life’s uncertainties.
Benefits of getting both a postnup and an estate plan
Let’s dig a little deeper into this connection between postnups and estate plans. What are the benefits of getting both? Here are several benefits to getting both legal tools:
Waiving elective spousal share
Do you want to ensure your spouse doesn’t take anything from your estate when you pass? Did you know that putting that in a will isn’t enough in some states? That’s right, some states say that your spouse can still take a portion of your estate even if you wrote them out of the will. However, you can get a postnup that waives that right. In other words, your spouse signs something in the postnup that says they promise NOT to take their elective share of your estate after you die. (And then they really can’t).
Clarity on wishes
If you just get a postnup that has an elective share waiver saying your spouse can’t take any of your assets upon death, you should still get a will or a trust that outlines what should happen to your estate. If not your spouse, then who gets your stuff? Providing clarity in an estate plan is helpful.
Determining what is separate vs. marital
Upon your death, assets categorized as “separate property” will be transferred to your estate and ultimately distributed to your beneficiaries. For example, if you own a house that is categorized as your separate property (not marital) and you also hold a jointly owned investment account with your spouse (marital property), the house will pass to your estate. However, the disposition of the investment account depends on the provisions outlined in your will and/or postnuptial agreement. These documents can specify whether the marital property is divided between your estate and your spouse or passes entirely to your spouse—the decision is yours.
The bottom line on postnups and estate planning
Postnups and estate planning go hand in hand. You work out how property is handled between the marriage and in the event of a divorce, and then you work out how that property is distributed upon your death. Maybe it includes your spouse, or maybe it does not–and the choice is up to you. Having both legal tools under your belt really makes sure your finances are covered in any scenario life throws your way!
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: Nicole@Helloprenup.com
0 Comments