If you mention “estate planning” to most people, you’ll likely get either a blank stare or some notion of wills or even living wills. Even if someone has a will or an estate plan, they probably don’t think of prenuptial agreements as playing any role in their plan. However, a prenuptial agreement, also known as a premarital agreement or simply a “prenup,” is a key part of some estate plans, especially if you’re marrying for a second time and already have children from a previous marriage. Let’s look at why these agreements can be a vital estate planning tool.
Spouses can use prenuptial agreements to determine what kind of property each will receive if they ever divorce. These agreements can cover any property the couple owns regardless of when they obtained it. Also, married couples in some states, though not Minnesota or North Dakota, share what is known as “community property.” This means that each spouse has a 50 percent share in the other’s property. That is, unless you have a prenuptial agreement that states otherwise. When one spouse dies, the other spouse is entitled to 50 percent of the community property as well.
If you’re getting married, a prenup gives you much more leeway when you make your estate plan and choose inheritances. For example, spouses who have been previously married and have children from another marriage typically want to retain at least some of their property to leave to their children. With a prenuptial agreement, both spouses can choose what property they have the right to distribute as an inheritance if they should subsequently divorce.