You may have heard about a death clause in a prenup and thought, “what in *heavens* could a death clause do?” Or maybe it’s too sad and morbid to think about, so you push it out of your mind. We understand it’s not one of the most glamorous things to think about; however, it’s one of the harsh realities of life. Deciding what happens if you or your spouse dies (because… it WILL happen to all of us) is crucial when having the P-talk (i.e., the prenup talk). Let’s dive into all things death clause (fun!).
The death clause explained
A death clause is an addition to a prenuptial agreement that works in conjunction with other estate planning documents. Essentially, a death clause stipulates that in the event that one or both spouses pass away while married, the terms outlined in the prenuptial agreement will remain in effect, just as they would if both parties were alive.
In other words, any separate property that each party brought into the marriage should remain separate and go to the deceased’s estate. By including a death clause in a prenuptial agreement, both parties agree to waive their rights to each other’s estate that they would otherwise have as a surviving spouse.
HelloPrenup’s death clause
At HelloPrenup, we include the option for a death clause in our prenuptial agreements that says what will happen to both marital/community property and separate property if one spouse passes away while they are still married (and no separation or divorce action is pending).
In this situation, all marital/community property and liabilities associated with that property will be passed to the surviving spouse. Additionally, all separate property and debts associated with the deceased spouse will belong to their estate.
It’s important to note that the death clause does not preclude either party from receiving any property that is specifically bequeathed to them in the other’s last will and testament. In other words, if you have a death clause and your will also says your spouse gets your separate property, that is okay!
How does estate planning coincide with a death clause in a prenup?
A very important aspect of a prenup death clause is the estate planning that goes hand in hand. Put simply, a death clause points to an estate plan (i.e., a will or trust), so without one, the death clause may not be as useful as you had hoped.
Let’s use an example to demonstrate:
- Jen and John have a death clause in their prenup stating each of their separate assets will belong to their respective estates. All marital/community property will pass to the other surviving spouse.
- John dies while they’re still married.
- The marital/community property between Jen and John goes to Jen.
- John’s separate property goes through his estate. His separate property includes a boat and $40,000.
- John’s estate (i.e., his will) states that his cousin should get the boat, and Jen should get $40,000.
- The result? John was able to ensure that his cousin received his boat instead of his wife, and he was still able to pass most of his property to his wife.
As you can see in the scenario above, John was successfully able to use his prenup in the wake of his death in order to ensure his assets were divided up exactly in the manner he wished, thanks to the death clause.
Benefits of a death clause
Why would someone choose to include a death clause in their prenup? Well, there are certain benefits, such as:
- Protecting children from another marriage through estate planning and death clause
- Maintaining control over the distribution of assets in the event of death
- Ensuring their spouse is provided for in the event of death
- Avoiding disputes between family members over the estate after you’re already gone
Examples of how it may work in real life
A quick note: estate planning is very state-specific, and what “flies” in one state may not “fly” in the other state. In other words, the following scenarios may not be exactly what would happen in YOUR state, but you can get an idea of how this whole process generally works with a few examples.
Scenario 1: Death Clause with No Estate Plan in Place
Katie and Kyle are getting married soon and planning their prenup. They’re 30 years old, and neither has an estate plan in place yet. They both plan to get one but just don’t have one yet.
In their prenup, they include a death clause that says:
- Upon the death of either spouse, while still married
- Each spouse will receive the deceased spouse’s half of the marital property of the marriage
- And the deceased spouse’s separate property will pass through their will.
- Even without a will, the spouse waives their right to any separate property
Kyle intended to include a death clause in his prenup in order to give his treasured art collection to his brother upon his passing via his will (and then the rest of his stuff would go to his wife, Katie).
A very unfortunate accident occurs, and Kyle passes away before he is able to set up a will. They had no children at the time of his passing.
So… what happens? Well, without the will in place, intestate laws of their state will apply. But, since Katie waived her right to any separate property, even without a will, she is prevented from having a claim to any of Kevin’s separate property. This means whatever the state deems should happen to your stuff is what will happen, but it will skip over the spouse. Usually, it goes to your spouse and/or children by default (if you have any). In this case, intestate laws may provide for Kyle’s brother since there are no children, and the death clause skips over Katie as the spouse, so the next of kin might just be Kyle’s brother (depending on the state). It may also be Kyle’s parents.
If he had the prenup with the death clause AND a will set up, he would’ve been able to pass on the art collection to his brother successfully. Without the will and death clause, everything will pass through state law but skip over the wife.
Scenario 2: Death Clause with an Estate Plan in Place
Tom and Tracy are on their second marriage, both with children from another relationship. They have a prenup with a death clause and also have wills.
Their will(s) state the following:
- Tracy gives all of her separate assets to her children from a previous marriage
- Tom gives all of his separate assets to his children from a previous marriage
Their prenup includes a death clause that states the following:
- If one spouse should die during the marriage,
- The living spouse will receive the marital property of the other spouse,
- And the separate property of the deceased spouse will pass through the estate.
Tom dies during his marriage to Tracy. According to their valid and enforceable prenup and will, Tom’s half of the marital property goes to Tracy, and all of his separate assets go to his children from a previous marriage.
Frequently Asked Questions (FAQs) about death clauses
We understand that this topic can be a little confusing, but we’re here to clear things up for you.
Q: Does a death clause make sure all of my assets are distributed after I die?
A: No! A death clause merely ensures that your separate assets go through your estate. A death clause may also ensure that your shared marital/community property goes to your spouse.
Q: Do I need an estate plan in place to have a death clause in my prenup?
A: Yes, you should already have or plan to get an estate plan ASAP (will, trust, etc.). Otherwise, the death clause points to your estate plan, which does not exist. This won’t necessarily hurt you, but it won’t accomplish what you’re trying to accomplish, which is divvying your assets in a certain way. You can see in Scenario 1 above how this might turn out.
Q: Is a death clause equivalent to an estate plan?
A: No, the only way to ensure your assets are distributed how you want them to be is through estate planning documents. A death clause in your prenup is supplemental protection.
Q: Do I have to include a death clause?
A: No, you don’t have to include a death clause in your prenup. HelloPrenup also gives you the option to include or not include. If this is not in your prenup, and you die, the state laws will, and your estate plans (if you have one) will apply to distribute your assets.
Ultimately, a death clause supplements your estate planning documents. A death clause is not a stand-alone estate plan. You should get both for the fullest level of financial protection of your estate. We know it’s not the brightest of topics to discuss with your honey before your wedding day, but it’s necessary to ensure you, your family, and your future spouse are all protected in any case scenario!