When you think of prenuptial agreements, your first thought may be about a high profile divorce between millionaires or celebrities. Controlling what happens when a marriage breaks down is only half of what prenups (called premarital agreements under Florida law) can do. They also direct what happens when one spouse dies during the marriage. Find out who benefits from premarital agreements and why you may want to sign one before your wedding day.
Weddings and marriages have a variety of religious, personal, and community meanings. From a legal perspective, a marriage is essentially a contract between two adults to support one another and build a financial nest-egg together – the marital property. When marriages end, through divorce or the death of a spouse, the Florida family and probate laws set out default assumptions that control the dissolution of that family business.
Marital agreements – commonly called prenuptial (before marriage) and postnuptial (after marriage) agreements are the contracts that control the domestic partnership arrangements of marriage and change those default assumptions under the law. The primary way this is done is by carving out property and assets from the marital estate, designating them as separate, non-marital property.
What each spouse does with his or her non-marital assets in their estate plan is up to them. They may leave those assets to their spouse in a Will if they so choose, but they can also leave those assets to someone else, essentially disinheriting their spouse to the extent of the prenuptial agreement.
Couldn’t a spouse simply write a Will disinheriting their wife or husband? Generally you can use a Will to direct that your money and property will be distributed however you like after you die (with certain limits). A living trust can give you even more control about who receives what money and property, and when.
However, all of those estate planning options depend on your surviving spouse agreeing to go along with your estate plan. If your spouse isn’t happy about being disinherited they can exercise their spousal election and opt out of your entire estate plan. Instead, your spouse may go to the Florida probate court and take their 30% legal share off the top of your probated estate or trust administration. In calculating a spousal elective share, the court will consider:
The family home raises additional considerations. The Florida homestead exemption says that your primary residence (up to an ½ acre inside city limits and 160 acres outside city limits) passes automatically to your heirs or surviving spouse after you die. This is designed to protect your family from becoming homeless if creditors look to settle their accounts after your death. However, if your spouse so chooses, they can lay claim to a home left to a third party in your Will, even if they were not on the title while you were alive.
A properly drafted and signed marital agreement changes these default rules for the couple who signs it. Enforceability depends on certain formalities and legal technicalities, but when these requirements are met, each spouse may agree to waive their right to enforce the elective share and homestead exemption after the other spouse’s death. By pairing a marital agreement with a comprehensive estate plan, you can ensure that your assets go to your intended beneficiaries even when relations sour during the probate process.
Most couples assume the best when they are preparing for marriage. However, as more couples wait to marry, have children from prior relationships, or bring substantial assets into the marriage, they may prefer to protect themselves and their families in case the worst happens. Common beneficiaries of premarital agreements are:
One of the most common uses of premarital agreements is to ensure that the children from your first marriage will not be left out of your inheritance after your second marriage. These prenups prevent your surviving spouse from disinheriting their step-children after you pass away and shield your sons and daughters from the strained relationships so common between half-siblings. By carving out non-marital assets and waiving the spousal elective share of those assets, you can be certain that your children receive at least that much when you pass away.
Another common use of a prenuptial agreement is to be certain a family business or closely held company does not pass to a spouse without the skills to manage it. Business succession planning requires careful attention to successors’ skills and entrepreneurial interests. However, a sudden death or unhappy spouse can put the future of your business, and your family’s financial interests in the company in danger.
Often, the partnership agreements or bylaws of your company will contain rules about what happens when an involuntary sale happens because of death or divorce. These are designed to shield the remaining shareholders’ interests and control over the company. They direct that when a transfer of ownership happens, the business partners must be given an option to buy those shares, often at a reduced price. A successful business can often be the single most valuable asset in a person’s estate. If your spouse exercises his or her election, it could force a sale and cut your beneficiaries out of the business entirely. A premarital agreement can work with the language of your company’s foundational documents to make sure your family’s interest in the company survives your death.
If you are a business owner or entering into a blended family, a premarital agreement may be an important part of your estate plan. It can protect your children and shield your family’s business interests by waiving a spouse’s elective share and homestead rights. That way you can be sure your estate administration goes according to plan after your death.
At Harrison Estate Law, P.A., our experienced estate and probate team know how to use marital agreements to insulate your estate planning goals. We can help you protect your children, provide for your spouse your way, and ensure your family business stays in the family. Preserve your family’s assets and provide for everyone who is important to you. Contact us online or call 352-559-9828 to get help today.