Can a Prenup Keep You From Inheriting From Your Spouse?
Most people think of prenuptial agreements, or prenups, as something to put in place in case of divorce: should you and your future spouse decide to part ways, the prenup can dictate whether there will be spousal support, and how property will be divided. But can a prenup keep you from inheriting from your spouse, or keep your spouse from inheriting from you? The answer is yes—and that may be a good thing.
Why Do Spouses Disinherit Each Other?
Why on earth would you want to disinherit a spouse? You may hear “disinherit” and think of controlling parents and wayward children. It may be better to think in terms of controlling the disposition of assets in your estate.
Engaged couples who have children from previous marriages or relationships may choose to execute a prenup in order to make sure that those children inherit what they intend them to. Let’s imagine that Chad and Kimberly are planning to get married. Chad has sold his house and has moved into Kimberly’s house, which is in her sole name. Both have adult children from their previous marriages. If they marry, and Chad suffers a fatal heart attack on the honeymoon before he gets around to making a will, Kimberly is entitled to the first $100,000 from his estate, plus one half of the remainder of the estate (Chad’s children get the other half). If Kimberly expires from a broken heart a week later, her share of Chad’s estate will go to her children.
If it seems like this outcome is unfair to Chad’s children, you’re right. So how can it be avoided? One option is for Chad to make a will immediately, leaving the majority of his assets to his children. But even this option isn’t foolproof. In Michigan, as in many states, there is something called an “elective share” that could alter the disposition of the estate that Chad intended.
Reasons to Pair Estate Planning With a Prenup
The elective share is the portion of the estate a surviving spouse has the right to claim, regardless of the will. The amount is set by statute: one-half of the amount that would have gone to the surviving spouse had the deceased spouse died intestate (without a will), reduced by one-half the value of the property that the surviving spouse derived from the deceased by means other than testate or intestate succession. A spouse receives other statutory allowances as well as the elective share (homestead allowance, family allowance, and personal property allowance, which add up to about $55,000).
If Chad’s estate was worth one million, but he left Kimberly $20,000, or even $200,000, she might well choose to take her elective share. That would be half of $550,000, or $275,000 (Kimberly’s share of the estate under Michigan’s intestacy law would have been the first $100,000, plus half of the remaining $900,000). Plus, she could take her other statutory allowances, further reducing the amount Chad’s children would take.
So making a will, by itself, does not ensure that Chad’s children will get the amount that he intended, if Kimberly decides to exercise her right to the elective share. However, if she and Chad signed a valid prenuptial agreement prior to their marriage specifying that neither would elect against, or challenge, each other’s will, Chad’s children’s inheritance would be secure.
Alternatives to Prenuptial Agreements in Estate Planning
Prenuptial agreements have their place, and they can be useful in estate planning. A prenuptial agreement is not the only way to ensure that your wishes are known and followed, though. Despite their utility, prenups can be a hard sell to a partner who thinks you are more focused on planning for divorce than the wedding. In addition, prenups require both parties to make (or waive) a disclosure of their finances and agree to the terms of the document. In short, it can be an uncomfortable and inconvenient process—and at the end of it, you should still have a separate estate plan.
For most people, the creation of a trust can accomplish the same goals as a prenuptial agreement, and more. In Michigan, assets conveyed through a trust, say, to one’s children, are not subject to a spouse’s elective share (the same is not true in all states). Assets that pass through a trust also need not go through probate, allowing the intended recipient to more quickly and seamlessly access their assets. In addition, trusts are less often subject to challenges in court than wills are.
The wisest course of action is typically to work with an experienced probate and estate planning attorney and convey your needs, such as to provide for a spouse, to protect the inheritance of children from a first marriage, to make sure a family business stays in the family, and so on. Your attorney can advise you as to the best way to achieve your goals.
