Prenuptial agreements, also known as prenups, are not usually a popular topic of conversation. Most people associate prenups with divorce. These agreements, however, can be useful in estate planning as well.
There are some common situations where a couple might sign a prenuptial agreement. They might do so if one person is significantly wealthier than the other or–the opposite–if one person is entering the marriage with large amounts of debt. In the latter case, the couple usually agrees that the spouse not in debt will not be responsible for paying back the other’s loans.
Prenuptial agreements are also popular in second marriages, particularly where one or both spouses has children from a prior marriage. In that case, a couple may be concerned about a potential divorce, but also about what would happen to his or her property at death.
A husband or wife can agree in a prenuptial agreement to waive his or her right to what is called an “elective share.” This is the share of the deceased spouse’s property to which a surviving spouse is entitled. Most states, including Pennsylvania, have an “elective share” statute that guarantees a widow or widower a certain share of the deceased spouse’s property, regardless of what that person’s Will says.
Under Pennsylvania’s elective share statute, the surviving spouse has a right to one-third of the deceased spouse’s property. For example, if a wife survives her husband, she has a right to one-third of his property that passes by will or intestacy, property he gave to her during marriage that he still controlled at his death, survivorship rights to a beneficiary (not the wife) of an annuity contract from which the husband received payments, and gifts, to the extent they exceed $3,000, that the husband gave to others during the year before his death. The elective share can also include one-third of certain trusts created by the deceased spouse. Taking an elective share is usually only necessary if the deceased spouse had a Will that leaves most of the spouse’s property to others–if there is no Will, the surviving spouse will receive an “intestate share,” which is described here.
Sometimes spouses will want to waive their right to the elective share. This is the case if one spouse already has enough wealth without the other’s property, in second marriages, or if the spouses plan to provide for each other through other means, such as life insurance. In fact, if a spouse asserts her right to her elective share, Pennsylvania law treats that as a disclaimer, or refusal, of other benefits such as life insurance to which she would otherwise be entitled.
The most common form of waiver occurs in a prenuptial agreement. It is a good idea for each spouse to have a separate lawyer when entering into a prenuptial agreement. It is also possible for spouses to waive their rights to an elective share after they are married, in a postnuptial agreement.