A prenuptial agreement is a kind of contract entered into by two people with upcoming nuptials. The agreement often addresses property rights prior to entering into marriage. While prenuptial agreements can accomplish much more than people might first consider, one often understated, but potentially highly important, benefit of a prenuptial agreement can be what it is able to accomplish in the context of estate planning. Here, we will discuss how and why you could use a prenuptial agreement as an estate planning tool.
Using a Prenuptial Agreement as an Estate Planning Tool
When considering employing a prenuptial agreement as an estate planning tool, waivers are possibly the most important thing to keep in mind. Waivers in a prenuptial agreement are essential indications that the prospective spouses are giving up certain rights by signing the agreement. California has two waivers of great significance that can be included in a prenuptial agreement. The first is the waiver of community property rights. The second is the waiver of the spouse’s statutory share.
The waiver of community property rights is a common feature of many prenuptial agreements. The effect of the waiver of community property rights is that the spouses agree that no community property rights will attach to property acquired during the marriage. This is a significant deviation from marital property rights as most things earned or purchased during a marriage become community property and, thus, are considered as jointly held property with each spouse holding an interest in the property.
The waiver of community property rights can have a profound impact on a spouse’s right to inherit from the estate of his or her deceased spouse. Should a community property waiver be included in an executed prenuptial agreement, the surviving spouse would only automatically receive a portion of the separate property if there was no will.
The other important waiver that can be included in a prenuptial agreement and have a profound impact for estate planning purposes is the waiver of a spouse’s waiver of the right to a statutory, or “elective” share. The statutory share is the amount that a surviving spouse can elect to receive in the event that the deceased spouse either intentionally or unintentionally disinherited. Under California law, the surviving spouse has the right to an elective share of one-half of any community property in addition to one-half of any property deemed to be quasi-community. This could be a significant inheritance depending on how many other surviving relatives, including children, there are. A waiver of the statutory share means that the surviving spouse does not have the ability to assert the right to the elective share.
These waivers, when combined, can work to disinherit a spouse or work to ensure that the surviving spouse receives only a minimal inheritance. There may be a variety of reasons why a person would want to accomplish this. One such reason may be to free up assets to pass on to surviving children.
Estate Planning Attorneys
To learn more about the estate planning tools you can put in place to accomplish your goals, talk to the knowledgeable estate planning attorneys at OC Wills & Trusts. Contact us today.