Picture this: You’re a divorce with two kids from your previous marriage. You meet the true love of your life and get married. You live happily ever after…Until you start getting older. Then, you start to think about what happens when you die. Do you want your kids to inherit everything? But what about your second spouse?
Blended families pose important inheritance questions: How do you want your family to inherit with you after you’re gone? The answer to this question likely depends on your specific situation—the size of your estate, the financial independence of your kids and your second spouse, your relationship with each person, and your desires. So, what can you do? Well, besides getting a solid estate plan in place with an estate planning attorney, you can also use a postnuptial agreement as a supplementary (but crucial) tool to protect your children’s inheritance. Let’s dive in.
Understanding the challenges of inheritance in blended families
First things first, let’s talk quickly about the challenges of estate planning when you have a blended family. If you have children from a previous marriage or relationship, and you want to make sure they get all or most of your estate, you may be wondering how to do that. Without a trust, will. or postnup in place, the default law (regardless of state) typically says your spouse gets a significant portion of your estate, regardless of whether they are your first, second, third, or fourth spouse. This may or may not be acceptable to you. Perhaps you want your kids to inherit everything and your spouse to get nothing. Perhaps you want your kids to simply get 90%, but you still want to allot a portion to your second spouse. Whatever the case may be, this can be a challenge for many blended families.
What is a postnup?
A postnup is an agreement signed between two spouses who are already married and intend to stay married. It’s purpose is to clarify financial obligations and promote marital harmony. A postnup is different from a prenup in that it is signed during the marriage, whereas a prenup is signed before the marriage. In a postnup, you can outline property division, spousal support (in some states), and other matters. State law governs the rules surrounding postnups, so each state law may vary slightly on what is required for a valid and enforceable postnup.
How postnups can protect your kids’ inheritance
Postnups can be used as a supplement to an estate plan (i.e., a will and/or trust) to protect your kids’ future inheritance. With a postnup, you can ensure assets stay separate in the event of a divorce and also make sure that your assets stay separate in the event of death.
For example, without an enforceable postnup, if you get a divorce from your second/third spouse, you may be losing assets to this spouse, which cuts into your kids’ future inheritance. In addition, if you die while still married (without a postnup or estate plan), the default law will pass a portion of your estate automatically to your spouse. With a postnup, you can avoid both of these outcomes.
Provisions in a postnup that help protect your kids
Now, let’s get into the specifics of the provisions in a postnup that help to protect your kids’ inheritance. Every situation is different, but here are some provisions that may help ensure your estate stays within the family according to your wishes:
Elective share waiver
There is something called a spousal elective share, which may vary state by state but effectively says that a spousal can “elect a share” of their deceased spouse’s estate, regardless of whether they are written into the will! That means EVEN IF you write your second spouse out of the will, they can potentially still inherit a portion of your estate. Ouch! The good news? You and your spouse can waive this right in a postnup. Meaning the surviving spouse cannot “elect a share” of the estate anymore.
Note: You can still provide for your spouse through your will or trust, even if you have an elective share waiver in your postnup. For instance, if you want to simply give a small portion (say 5%) of your estate to your spouse, you can do that via elective share waiver in the postnup and a will stating they get 5% instead of your spouse being able to elect 25-50% of your estate through their elective share right.
Keeping assets separate
Making sure assets are categorized as separate property in the event of a divorce is an important tool to ensure your kids’ inheritance stays intact. This means that in a divorce, your spouse won’t take half of everything, leaving your kids’ inheritance slashed in half.
Example scenario of how to protect your children’s inheritance with a postnup
We get that this stuff is complicated so we created a sample scenario to demonstrate how this might work in the real world. John and Lisa are married—it’s both their second marriage. John has two kids from his previous marriage. John is getting older and wants to ensure his kids get his estate when he passes. Of course, he still wants Lisa to be taken care of, but he wants most of his money to be given to his kids.
John’s estate is worth a total of $500,000. John and Lisa get a postnup that ensures each person’s assets are separate property, and they both waive their right to an elective share. This means that Lisa cannot invoke her right to a share of John’s estate after he dies (unless his will says otherwise).
John then gets a will that states $450,000 goes to his two kids equally. The remaining $50,000 should go to Lisa. This is generally less than what Lisa would claim under default law, but John wanted to give her something. He wanted to make sure his kids got the bulk of his money.
As you can see, through the use of a postnup and an estate plan, John was able to protect his children’s inheritance while still providing something to his second spouse, Lisa.
Other ways to protect your children’s inheritance
A postnup is a great supplemental tool for a fully fleshed out estate plan. An estate plan can be a will and/or a trust that devises assets according to your wishes. Whether you get a trust or a will is dependent on your unique situation. Postnups work together with your trust and/or will (as you can see from the example above) to ensure that your estate passes mostly or totally to your kids.
The bottom line
Postnups are a great tool to utilize when you have a blended family (i.e., a second or third or fourth marriage with kids from previous relationships). They can ensure that your children get all or most of your estate if that is what you want. With a postnup, you can keep assets separate in the event of divorce and make sure that your spouse doesn’t take a portion of your estate once you’re gone (unless you devise stuff for them in an estate plan, which you can do). At the end of the day, it’s all about what you want to do with your hard-earned estate. Always consider speaking with a lawyer to ensure your legal documents are up to par with the legal requirements in your state!
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
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