Postnuptial Agreements And Estate Planning

Postnuptial Agreements And Estate Planning

June 04, 2020

In many areas of the law, one factual scenario can give rise to multiple legal fields. Today we will discuss one such situation: where family law converges with estate planning. Before we do that, however, let’s lay some groundwork.

What Is A Postnuptial Agreement?

At its roots, a postnuptial agreement is simply a contract between spouses that specifies how assets, debts, financial support, inheritances, insurance policies, retirement accounts, and other similar matters will be handled if the parties are later divorced or deceased. With this basic definition in mind, let’s move on.

When Would I Want A Postnuptial Agreement?

There are many instances in which a postnuptial agreement is advisable, including those involving blended families. A “blended family” occurs when two individuals get remarried and one or both spouses have children from a previous marriage (parent and step-parent live with children and step-children). The reason many blended families find value and comfort in postnuptial agreements is that some of the assets of one of the spouses may have been distributed or transferred to the spouse by means of a divorce decree or upon the death of the ex-spouse. In these situations, many families believe it to be fairer to give these assets to the ex-spouse’s children only, and not to the new spouse or step-children (since those assets have roots with the ex-spouse). Confused? Me too. Let’s look at an example:

In 2001, when everyone else was “Fallin” (Alicia Keys), Jake got married to his high school sweetheart, Sarah. Jake and Sarah were married for 10 years and had two children together. Unfortunately, Jake died in a random gorilla attack a few weeks after his 10th anniversary (sorry Jake). While Sarah was certainly devastated, she allowed herself to find love again, and 10 years after Jake’s death, Sarah remarried Ash. Now, Sarah still has two kids (Avery, and Millo) who are both over 18. Ash has one child but was never married.

Upon Jake’s death, as the surviving spouse, Sarah inherited all of Jake’s assets under Jake’s will. The idea behind Jake’s will is that he wanted all of his assets to go to his surviving wife and then to their children upon the wife’s death. Now, how does this plan change when a new spouse enters the picture?

Under North Dakota law, a person, as a surviving spouse, is automatically entitled to a portion of the deceased spouse’s estate simply because they were married. This is referred to as an “elective share.” Essentially, legislators did not want a person to have the ability to completely disinherit the other spouse upon death. Under this law then, Sarah has no ability to ensure that assets that used to belong to Jake go entirely to Sarah and Jake’s children. Instead, even if Sarah’s will states otherwise, Ash is entitled to a certain share of Sarah’s estate. Now that we can see the potential issue, how do we fix it?

Postnuptial Agreement And Estate Planning

Let’s use all the same players we discussed before. Sarah and Ash understand and desire to honor Jake’s wishes that his assets only go to his family. In addition, Ash wants to ensure his assets only go to his child upon his death.

This is where the postnuptial agreement comes into play. With a postnuptial agreement, the married couple can outline what their respective estate plans will look like (who will be in charge of their estates, who will receive property, how debt will be paid). In the postnuptial agreement, Sarah and Ash can agree that certain property of each will go directly to their surviving biological children. In short, a postnuptial agreement paired with an estate plan allows a prior inheritance or estate plan to remain intact when a new marriage occurs.

If you need assistance with an estate plan or postnuptial agreement, please contact us!