As I emphasized in a prior posting, the prenuptial agreement has gotten some bad press because it has been portrayed in celebrity divorces as a way to shield assets from one’s spouse in the event of a divorce. As a result, many couples shy away from prenups because they see them as signs that the couple is already planning for a divorce even before they are married. But a prenuptial agreement can be just the opposite: a foundational element for long-term marriage stability. In this post, we will look at how incorporating into a prenup an agreement to draft Wills makes sense to protect the couple’s estate, family, and wishes. Having such a provision in a prenup can bring great peace of mind.
Domestic Relations Law (DRL) 236[B](3) is the statute that controls prenuptial agreements in New York. The statute states that a prenuptial agreement may include (1) a contract to make a testamentary provision of any kind, or a waiver of any right to elect against the provisions of a will. We will examine in detail what this provision means to you.
A prenup may include a provision to make a Will (this is called a contractual Will) or, in some cases, not to revoke a Will. In New York, a contractual Will must contain an express statement in the Will that its provisions are intended to constitute a contract between the parties. Contractual Wills may be revoked by an agreement of the parties.
Having a Will is not only a good idea, it is a loving act. According to a 2007 article in Forbes, a survey done by Harris Interactive found that 55% of the general population had no Will. If you die without a Will (i.e., intestate) in New York, New York State has a default plan for your estate, but you may not like the plan. New York’s Estates, Powers and Trusts Law (EPTL) § 4-1.1 governs the distribution of estates from persons who die without a valid Will. This chart summarizes the law:
As you begin to have a frank conversation about how you want your estate distributed in the event of your death or the death of your spouse after marriage, it is a good idea to begin by having each of you fill out a family tree, like this one provided by New York State. You will want to update this family tree yearly, and you will want to bring it with you for your attorney during your yearly visit to review your Will and estate planning. And if you have not done so already, you will want to have a frank discussion about any known congenital diseases that are present on your family tree. By being honest and open about your family tree issues with each other, you will build invaluable bonds of trust that will support your marriage when the difficult times come.
Each of you may also want your Will to reflect a gift to a favorite charity or non-profit organization, like a college or university. That charitable gift will have to be expressed in your Will. Likewise, there may be heirlooms or other family memorabilia that you would like kept in your family of origin. Your Will is the place where you will want those exclusions made known.
The prenup is the place where you can agree to include in your Will an added provision specific to your future spouse after the marriage takes place. For instance, you might include a bequest to your spouses’s alma mater creating a scholarship fund in his or her name. When the gift is one of tangible property, during your yearly review with your attorney you will want to make sure that the promised item still exists as part of your estate. If the item has been lost or destroyed, the gift is said to adeem. But this situation can be easily rectified by modifying the prenup as we discussed in a prior post.
The statute also says that either party can waive any right to elect against any provision of a Will. Here the statute is referring to the elective share statute (EPTL § 5-1.1-A). The elective share statute protects against disinheritance by either spouse by giving the surviving spouse a minimum share of the decedent’s estate. In New York, the elective share amounts to the greater of 50K or 1/3 of the net estate after the payment of debts, but before the payment of estate taxes. In a prenup, either party can waive their right to the elective share. One reason to exercise this waiver might be to protect children from a prior marriage. Whether to waive an elective share in a prenup is a decision that must be made carefully and with full disclosure of the salient facts, including full financial disclosures.
One advantage of drafting a prenup is that it encourages financial disclosures before marriage. It will also encourage discussions about the emotional aspects of money (saving and spending habits, attitudes concerning debt, and issues surrounding dependency, control and self-image). Each party should fill out a personal statement of net worth, such as this example by the Small Business Administration. Getting into the habit of talking about financial issues before and during the marriage will go a long way in building trust in the relationship.
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