Wondering how a prenup, typically associated with divorce, can impact asset distribution after death? While a will is key, a prenup can be a powerful tool for shaping your legacy. Let’s explore how prenups work alongside wills to ensure your assets go where you want them to.
Spousal inheritance rights: What surviving spouses are entitled to
“Spousal inheritance rights” are the rights given to married couples in the event that one partner dies. They are protected by laws that say the surviving spouse is entitled to certain assets if their partner dies. Let’s discuss further:
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State Laws Matter: Each state has specific rules about how spousal inheritances work and how assets are distributed after someone dies, with or without a will. For example, in California, the surviving spouse is entitled to one-half of
the community property (Cal. Prob. Code §§ 100, 101). -
Surviving Spouses have Rights: Even if a will exists, surviving spouses typically have legal rights to a portion of the deceased spouse’s estate. Again, this can vary by state. This is known as the “elective share.”
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The “Elective Share”: This concept protects spouses from being entirely disinherited. 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).
What is an elective share?
An elective share is the right for a surviving spouse to take a percentage of their deceased spouse’s estate, regardless of what the will says. A.k.a., states may protect surviving spouses from being written out of the partner’s will. Let’s discuss this topic further:
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What it is: The minimum amount a surviving spouse is legally entitled to inherit, regardless of what their partner’s will says.
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Amount: Typically a percentage of the deceased spouse’s estate (e.g., one-third, one-half). This percentage can vary based on factors like:
- Whether there are children
- The length of the marriage
- State laws
- Example: The elective share percentage in Maryland 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).
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Why it matters: The elective share prevents spouses from being completely disinherited, a.k.a. protects them from being written out of the will. You can waive your right to an elective share in a prenup.
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Waiving elective share in a prenup: Research your state’s specific elective share laws to understand your rights and what potential scenarios would be without a prenup. Decide if you and your partner want to waive elective share in your prenup.
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: Will + Prenup Override Elective Share
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Situation:
- Your will leaves everything to your cousin Billy.
- Your prenup includes a clause where your spouse waives their right to an elective share.
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Outcome:
- State elective share laws are bypassed. Your spouse cannot take a percentage of your estate according to the elective share laws.
- Your spouse is not entitled to any inheritance.
- Your cousin Billy receives your entire estate.
Scenario 2: A Will Alone Might Not Be Enough
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Situation:
- Your will leaves everything to your daughter Jane, excluding your spouse.
- You did NOT have a prenup.
- Your spouse did not waive their right to an elective share.
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Key Point: Elective share rights may still apply, depending on your state’s laws.
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Potential Outcome: Your spouse could claim a portion of your estate, overriding the will’s intent.
Scenario 3: Prenup and No Will
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Situation:
- Prenup disinherits your spouse, specifying assets will pass through your estate.
- You never created a will.
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Outcome:
- Prenup likely prevents your spouse from inheriting.
- Assets are distributed according to your state’s intestacy laws (the default rules when no will exists).
- Distribution typically prioritizes: children, parents, siblings, etc.
What is a death clause in a prenup?
A death clause is a provision in a prenuptial agreement that works alongside other estate planning documents.
Essentially, it outlines that if one or both spouses pass away while married, the terms specified in the prenuptial agreement will remain in effect, as they would if both individuals were alive.
In simpler terms, a death clause ensures that any separate property remains separate and is allocated according to the instructions in the dead spouse’s estate.
By including a death clause, both parties agree to relinquish their rights to each other’s estate, which they would otherwise have as surviving spouses.
HelloPrenup’s death clause
At HelloPrenup, we offer the option to include a death clause in our prenuptial agreements, 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 their 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.
In other words, if a death clause exists and the deceased spouse’s will states that their separate property goes to their surviving spouse, then the spouse can still receive that property.
How can a prenup distribute assets upon death?
A prenup primarily enables asset division by allowing a spouse to waive inheritance rights and directs attention to a separate will. However, a prenup does not distribute specific assets (Cousin Billy gets the house, Jane gets the car). Let’s discuss how a prenup can still be a supplement to a will:
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Mechanism:
- Waive Elective Share: The prenup includes 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.
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Prenup’s Role: The prenup itself doesn’t directly divide assets, but it creates the legal framework for the will to take full effect.
The bottom line
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. Without a will, your “stuff” will go through the state’s “default will” that determines how to divide your assets.
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: [email protected]
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