When you hear ‘prenuptial agreement’, it may conjure images of family lawyers in anticipation of a contentious divorce. Prenuptial agreements are powerful contracts that also impact estate planning.
A prenuptial agreement is a legally binding contract that determines the division of premarital assets but also includes various other agreements between the parties who are soon to be married. Most of the terms relating to the prenuptial agreement involve the full disclosure of finances and the division of assets upon separation or death. Other terms contained in a prenuptial agreement may govern the relationship itself such as lifestyle clauses.
Any contract should be worded with very clear and specific terms in order to be enforceable. Using precise language, objective measurements and avoiding ambiguity or overreaching require the expertise of experienced attorneys.
Another very important aspect of a prenuptial agreement is that it helps to identify premarital property - whether it is a stock portfolio, a family business or real estate each spouse enters the marriage possessing. The premarital agreement can specify not only the type of asset but its valuation as of that date. Without a prenuptial agreement spelling out premarital assets it can be difficult to determine which assets were premarital and which assets were acquired after the marriage during a later estate administration upon the death of a spouse.
A will dictates the distribution of that spouse’s assets to any designated beneficiaries upon passing away. Many people view prenuptial agreements as something created only with divorce in mind, and may not see the connection between a prenuptial agreement and a will. A prenuptial agreement does determine how premarital property will be divided in the case of a divorce, it also dictates how premarital property will be divided in the case of the death of one of the spouses. Because the prenuptial agreement allows the parties to enter into a contract that extends beyond the legal reach of a will, a prenuptial agreement can make a subsequent will stronger. Prenuptial agreements and wills can be used to reinforce one another, or in some situations one must take precedence over the other.
A prenuptial agreement may spell out what happens to assets upon the death of a spouse. A common term found in many prenuptial agreements is that of a spouse waving a right to an elective share. In Maryland, a spouse cannot disinherit the other spouse completely. Each spouse is entitled to an elective share of the estate. But if the parties execute a prenuptial agreement and the spouses waive their rights to the elective share, the Maryland state law requiring that elective share no longer applies, as long as the prenuptial agreement is legally valid. The terms of the prenuptial agreement trumped the general rule of law regarding spousal inheritance.
If you have a premarital agreement in place or are thinking about creating one, contact the estate planning attorneys at Stouffer Legal in the Greater Baltimore area to ensure that any terms in your premarital agreement line up with your overall estate planning goals. Contact us today for a consultation. You can schedule an appointment with Stouffer Legal in the Greater Baltimore area by calling us at (443) 470-3599or emailing us at office@stoufflerlegal.com.
