James and Roberta recently married, the second time for each. James has three adult children from his previous marriage, and Roberta has two adult children from hers. When they arrived at my office to discuss updating their estate plans, James and Roberta verbalized some very specific and defined goals.
“We keep our finances separate,” Roberta told me, “and we want to keep it that way. So no matter who dies first, then that person’s estate will immediately go to his or her children.”
It was apparent from their financial statements that they didn’t need each other’s money to survive during retirement.
“So what you want,” I asked, “is to keep your estates forever separate? So James’s will one day goes to James’s three children and Roberta’s will one day goes to Roberta’s two children?”
“Exactly!” they both affirmed.
“Do you have a nuptial agreement that affirms this understanding?” I asked.
“No we don’t, nor do we want one,” James replied. “We trust one another and didn’t want to throw water on our relationship by engaging lawyers to argue over a document that contemplates divorce.”
“I understand those feelings,” I began. “But you need to know that a nuptial agreement doesn’t necessarily need to address divorce issues. A nuptial agreement, however, might also be crucial to protect your estate planning intent and to make sure that what you want to have happen in your estate actually happens.”
“What do you mean?” Roberta asked.
“As married persons, when one of you dies, the other has certain rights conferred by the law in the other’s assets. If, for example, you haven’t updated your estate plan between the time of your marriage and the time of your death, then the surviving spouse is entitled to an ‘intestate share’ of your estate. In other words, there is a presumption that the decedent spouse would have left the surviving spouse a portion of his or her estate equal to what he or she would have received had the spouse died without a will. This may occur even if that presumption is untrue and can be rebutted by testimony. Under Florida law, that would mean that the survivor of you would be entitled to fifty percent of the deceased spouse’s estate, even if the will doesn’t provide the surviving spouse anything.”
“What happens if your plan has been updated? We are working now to update our estate plans, so we each plan to sign a new will which is obviously after our marriage.” James asked.
“Just because you have updated your estate plan doesn’t end it. The surviving spouse still has an ‘elective share’ available which would roughly give him or her thirty percent of the deceased spouse’s estate, even if the surviving spouse is excluded in the will.” I answered. “A nuptial agreement waiving these rights is the only legal way to foreclose this possibility.”
“It sounds like the survivor of us would actually have to do something proactive to take from the other’s estate,” Roberta pointed out. “And we trust each other not to do that. So is a nuptial agreement really necessary?”
“Not if the survivor of you doesn’t make the election,” I confirmed. “But imagine a scenario where the survivor of you has dementia and that spouse’s adult child who holds a durable power of attorney makes the election on behalf of their parent. The adult child would have a vested interest to do so since he or she would inherit more.”
“Well I would tell my children not to make that election,” James said. “But I see where the trust that Roberta and I have with each other sometimes might not be enough.”
“I haven’t even discussed the Florida homestead issue,” I continued. “The home is in James’s name,” I said, “so where would Roberta reside if James predeceases her?”
“I want my will to give a life estate to Roberta and then at her death the house would go to my children. They’d probably sell it and divide the proceeds.”
“Unfortunately without a nuptial agreement waiving Florida’s ‘descent and devise’ rules that provision in your will would be considered invalid,” I counseled.
“Really? I can’t do what I want with my home?” James asked.
“What would happen when your will contains an invalid devise is one of two things. Roberta could elect to take one-half of the residence as her own as tenants in common with your children, or she could take the life estate.”
“So it could work out as we want?” Roberta asked.
“It could, but there are no guarantees. If you both didn’t want James’s children involved in decisions regarding the home before you both were deceased, having a nuptial agreement would go a long way to solving that problem. Many married couples also want more flexibility than Florida law provides, such as giving the surviving spouse the right to sell the home and move to a different home.”
So one can see that a nuptial agreement may actually serve to ensure a married couple’s wishes are carried out without having to rely on the goodwill of other family members. A nuptial agreement need not even contemplate divorce but instead could be used as a useful estate planning tool.
©2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.