This is another in a series of blogs on the basics of estate planning. This week, we’ll look at prenuptial agreements.
Prenuptial agreements can alter the rights spouses have after the agreement is signed. For example, in a community property state, a valid prenuptial agreement could override the default community property laws. The agreement could say the income earned by each spouse is only that of the earning spouse, rather than the property of the community and owned one-half by each spouse. In a separate property state, the agreement could alter the right of election at death. In both types of states, the agreement could alter the rights upon divorce. It could alter the division of property upon divorce and the rights to any alimony.
The requirements for prenuptial agreements vary from state to state. But, the agreements should be with full disclosure of all assets and expectancies. Each party should be represented by separate counsel. The agreement should be done at least a month before the wedding.
This is all designed to strengthen the likelihood that the agreement will withstand a challenge. The challenge could come upon divorce when the spouse with less money claims they 1) did not understand what they agreed to, 2) that they did not have all the facts, 3) that the agreement was manifestly unfair to them in some way, or 4) that the agreement did not comply with the state requirements in some other way.
The challenge can also arise upon the death of the more affluent spouse. For example, when actor Alan Thicke died, it was revealed that he and his third wife and widow, Robin Thicke, had signed a prenuptial agreement which limited her community property and inheritance rights. Robin contends that the agreement is not valid and that much of his property was not his separate property but, rather, their community property. To learn more about the story, read here.
Prenuptial agreements are specialized agreements which demand a thorough knowledge of the state requirements. It typically is best to have the couple both seek separate counsel to prepare the agreement and for the estate planning attorney to not represent either party. This can be a good way for an estate planning attorney to develop a referral relationship with family law attorneys in their area.
In upcoming blogs, I’ll discuss more on the basics of estate planning.
Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Steve Hartnett
Latest posts by Steve Hartnett (see all)
- New Tax Proposals - February 12, 2019
- State Income Taxation of Nongrantor Trusts - February 5, 2019
- State Income Taxation - January 29, 2019
