Only 32% of Americans say they have a will! That’s way less than half! On the other hand, 47% of Gen Z and Millennials have signed a prenuptial agreement. But how do you combine the two to make a powerful plan for your assets? While a will is key to estate planning and ensuring your assets are distributed as you want them to be, a prenup can also be a powerful supplemental tool for estate planning. Let’s explore how prenups work alongside wills to ensure your assets go where you want them to.
How is a prenup enforced after one spouse dies?
If one spouse dies, does your prenup just automatically “kick in” and start working? No. The deceased spouse’s assets will be distributed based on a will or intestate laws if they don’t have a will (i.e., the default property distribution laws of your state). A prenup does not necessarily provide an outline for probate court on how specific assets are distributed (i.e., John gets my furniture, Jane gets my car). That’s not what prenups do. Instead, a prenup can include a waiver of elective share, which disinherits the spouse (more on the elective share below). It can also make clear that marital property goes to the surviving spouse, and not to the deceased’s estate.
If the children or family of the deceased spouse believe that the surviving spouse is not entitled to certain assets based on what is said in their prenup, the deceased’s family will need to bring an action in court claiming a breach of contract (i.e., arguing that the terms of the prenup have been breached).
Does a prenup protect you if your spouse dies?
In some ways, yes, a prenup can protect you if your spouse dies.
- Life insurance clause: You can include a requirement for life insurance in your prenup. This means your prenup legally mandates your spouse to get a life insurance policy with you as the beneficiary. Now, if they pass away, you’ll have to make sure that they actually did, in fact, get that life insurance policy set up properly.
- Proving ownership: One thing a prenup could potentially be used for is determining ownership of certain assets. If there is ever a question of which spouse owned a certain asset, then a prenup could be used to prove that something is actually yours and not your partner’s through financial disclosure statements or certain separate property clauses. For example, if there was an expensive jewelry collection and the children of the deceased wanted to claim it was their deceased parent’s and not yours, you could use your prenup to show that (1) you listed the jewelry collection as your asset; and/or (2) you listed the jewelry collection specifically as your separate property brought into the marriage.
- Protecting certain assets: Prenups generally do not distribute assets upon death in the way that a will does–they don’t say “who gets what” when you die. However, a prenup can require a will to be made, make sure the will trumps the prenup, waive the spousal elective share, and ensure the deceased’s portion of marital property goes to the surviving spouse.
Bottom line? Prenups aren’t as beneficial as wills are in protecting you in case your spouse dies, but there are some ways that they can support you in this situation through life insurance requirement clauses and proving ownership.
What is the spousal elective share?
Spousal elective share rights (sometimes called spousal inheritance rights) are the rights given to married couples in the event that one spouse dies. This right says the surviving spouse is entitled to a certain portion of the deceased spouse’s estate. This concept protects surviving spouses from being entirely disinherited. Even if a will does exist disinheriting the surviving spouse, the survivor still typically has legal rights to their spouse’s property.
The specific rules and percentage of the estate a spouse can claim vary by state. For example, in Indiana, the spouse may take 50% of the deceased spouse’s estate against the will. However, the rules are different if they are a second spouse (Ind. Code § 29-1-3-1). In California, the surviving spouse is entitled to one-half of the community property (Cal. Prob. Code §§ 100, 101). In Maryland, the elective share percentage depends on whether or not the deceased had children. If there are children, the surviving spouse can take one-third of the estate. If there were no children, the surviving spouse can take one-half of the estate (Md. Code Est. & Trusts § 3-403).
Example scenarios
The topic of spousal inheritance rights, elective shares, wills, and prenups is very complex. We’ve broken down some example scenarios of different ways this could play out below, including how wills and prenups intersect.
Scenario 1: A will and a prenup override the elective share right
Here’s a scenario showing what happens when there is a will leaving everything to someone other than the surviving spouse and a prenup with a waiver of spousal elective share (also sometimes called a death clause).
Situation
Let’s say your will leaves everything to your cousin Billy. You intentionally disinherited your spouse because your cousin is like a child to you, and you want to ensure he is taken care of when you’re gone. In addition, your prenup includes a clause where your spouse waives their right to an elective share.
Outcome
When you die, the state elective share laws are bypassed, meaning your spouse cannot take a percentage of your estate according to the elective share laws. Your spouse is not entitled to any inheritance, and your cousin Billy receives your entire estate.
Scenario 2: A will but no prenup
This is a scenario where there is only a will, no prenup, and no waiver of elective share.
Situation
Your will leaves everything to your daughter Jane and nothing to your spouse. You did not have a prenup in which your spouse waived their right to an elective share.
Outcome
Elective share rights may still apply, depending on your state laws. This means your spouse may still be able to claim a portion of your estate, overriding the will’s intent to leave everything to your daughter Jane.
Scenario 3: Prenup but no will
Here is a scenario where there is a prenuptial agreement but no will.
Situation
You have a prenup with an enforceable waiver of spousal elective share, disinheriting your spouse. However, you never create a will.
Outcome
Since you do not have a will, your assets are distributed according to your state’s intestacy laws (the default rules when no will exists). This distribution typically prioritizes: spouses, children, parents, siblings, etc. So even though your spouse waived their right to an elective share, they may still take a portion of your estate through intestacy laws since you did not create a will.
HelloPrenup’s death clause
At HelloPrenup, we offer the option to include a death clause in your prenuptial agreement, clarifying the distribution of both marital/community property and separate property if one spouse should die during the marriage (without any pending separation or divorce action).
According to this provision, all separate property and debts linked to the deceased spouse are assigned to the deceased’s estate. This means that if your estate says all of your stuff goes to cousin Billy, then that’s what should happen. It is important to note that the inclusion of a death clause does not prevent either party from receiving any property specifically given to them in the other spouse’s last will and testament.
How can a prenup distribute assets upon death?
A prenup primarily enables asset division by allowing spouses to waive inheritance rights and directs attention to a separate will. However, a prenup does not distribute specific assets (e.g., Cousin Billy gets the house, Jane gets the car). Let’s break it down:
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- Waive Elective Share: The prenup can include a clause where a spouse agrees to give up potential claims to the other spouse’s estate.
- Refer to Will: The prenup specifies that asset distribution should follow the terms of a will.
The prenup itself doesn’t directly divide assets, but it creates the legal framework for the will to take full effect.
The bottom line on dividing assets after death with a prenup
As you can see, having a prenup and a will is your best bet to have your assets divided up in the most efficient and accurate way possible. Remember, without a prenup, your spouse may have a right to an elective share, which means even if you write them out of the will, they may still be able to take a portion of it. With a prenup, they can waive their right to the elective share, so that doesn’t happen. And without a will, your property will go through the state’s “default will” that determines how to divide your assets. This is why the best combo is a prenuptial agreement and a will to make sure your wishes are met after you pass on. Happy planning!
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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