Prenuptial agreements have grown in popularity in recent years, and according to family law attorneys, especially in the past year. A lot of what is behind the increase is the fact that people are marrying later in life and bringing more assets to marriage that they wish to protect in the event of divorce.
In addition to protecting assets from divorce, more couples are using prenups as a way to protect their assets from becoming part of their estate after they die. When an individual dies without such protection, their assets could end up going where they do not want them to go. A prenuptial agreement can avoid this possibility in the same way a will can. For this reason, some have suggested that prenuptial agreements may be the “new wills.”
Calling prenuptial agreements the new wills is misleading, though, because such agreements cannot substitute for good estate planning. Estate planning covers a wide range of issues, including gifting, estate taxation, long-term care planning, special needs planning, and health care decision-making. There is no way a prenuptial agreement could address all estate planning issues adequately. Most people use prenups simply as a way to protect their assets from becoming marital property so that they avoid the chopping block in the event of divorce.
That said, there can be some overlap between a prenuptial agreement and estate planning documents. Those who use prenups should be sure to coordinate these agreements with any wills and trusts that already exist. Without doing so, the prenuptial agreement could be determined to trump a will or as the basis for a will contest. These can be expensive and time-consuming, and it is important try to avoid them wherever possible.
Source: Wall Street Journal, “Prenups and Estate Planning,” Liz Moyer, November 15, 2013.