Prenups and Estate Plans: How Does One Affect the Other?

At first glance, prenups and estate plans don’t have much in common. One protects property in the event of a divorce and the other details arrangements after someone’s death. But what happens when someone dies with both? What if the documents conflict with each other? 

This post answers common questions about prenups and estate plans, including how they are similar, how they differ, and how they can work together to protect property and minimize conflict.

What Is a Prenup?

Often called a prenup, a prenuptial agreement is signed by two people before marriage. It details each partner’s property and specifies what will happen to it in a divorce. This property can include personal items like vehicles and appliances, real estate like houses and land, and assets in bank accounts, investments, and retirement funds.

Prenuptial agreements often cover the following:

  • Which assets each party brings into a marriage
  • How to manage finances during the marriage
  • How to divide assets and debts in a divorce
  • Who agrees to (or waives) alimony payments

Without a prenup, state law dictates who receives which assets and who is responsible for which debts. With a prenup, your agreement usually takes precedence — as long as it is not grossly unfair to either party. If it is too one-sided, a judge may rule that it is not enforceable.

What Is an Estate Plan?

An estate plan helps people manage their affairs in the event they become incapacitated or die. Wills are vital estate planning tools, but others include trusts, powers of attorney, and life insurance policies. Wills typically specify the following:

  • Who will receive what property and when
  • Who will serve as legal guardian to minor children
  • Who will take care of pets
  • Who will manage the estate

Without a valid will, the distribution of property follows state laws of intestate succession. This usually means that the deceased person’s closest relatives receive the bulk of the estate.

How Are They Similar?

When properly prepared, prenups and estate plans have the following in common:

  • They can protect assets from default distribution following state laws
  • They can help prevent emotionally and financially costly disagreements
  • They can make executing your wishes easier
  • They are legally binding (although both can be challenged in court, which makes proper planning essential)

How Do They Differ?

While prenups and estate plans can work together, there are differences between them. 

  • Timing: Prenups go into effect after a divorce, while estate plans go into effect after death or incapacitation. However, prenups can contain a “death clause” which keeps the agreement in effect even if one partner passes away.
  • Coverage: Prenups are contracts between two individuals, while estate plans can divide assets among other family members, charitable organizations, and other beneficiaries.
  • Content: Prenups typically protect pre-marriage property, while estate plans can help safeguard marital assets. In addition, prenups can’t address certain matters that estate plans can (like guardianship).
  • Area of law: Family law governs prenups while probate law governs wills and estate plans.

How Do Prenups and Estate Plans Work Together?

To execute your wishes, prevent family conflict, and protect your assets, your prenup and estate plan must align with each other. If there are discrepancies, it can create confusion, require court intervention, and result in legal delays.

Prenups can work with estate plans to do the following:

  • Protect the inheritance rights of children from previous marriages. If you want children from previous relationships to receive the majority of your assets, a prenup can solidify their rights. It can also help protect their inheritance from future lawsuits against a surviving spouse.
  • Detail the inheritance rights of each surviving spouse. You can specify who receives what upon your death, which can be crucial if either of you owns significant premarital property, expects a large inheritance from your family of origin, or has interests in a business.
  • Disinherit a spouse altogether.  Whether due to estrangement or to avoid estate taxes, spouses may choose to disinherit each other. You cannot disinherit a spouse with only a will, but a prenup allows them to waive their portion of your estate. 

The more an estate plan and prenup align, the easier and quicker it will be to execute the decedent’s wishes for their surviving beneficiaries.

Call Today for Estate Planning Help in North Carolina

If you have more questions about prenups and estate plans, contact David E. Anderson, PLLC. We can help with all your estate needs, from creating trusts to writing a valid will. Contact us today to schedule a consultation with an experienced estate planning attorney.

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