The role of a premarital agreement in estate planning
A premarital agreement, also known as a prenuptial agreement or prenup, can play an important role in estate planning. While you may think of a premarital agreement as a contract created in anticipation of divorce, and not much else, it can actually be a valuable estate planning tool in such instances as second marriages in which either or both parties have their own assets or wish to protect the interests of children from a prior relationship.
When contemplating a premarital agreement, it is important to understand the effect of the agreement on the rights of a surviving spouse and the need to create documents that work in concert to achieve the intended estate planning result. In the estate planning context, the most common and significant way a premarital agreement can impact estate planning involves waiver of the surviving spouse’s elective share right. Under Montana law, one spouse cannot fully disinherit the other without the other’s consent. The surviving spouse has the option of taking what is bequeathed or devised to him or her under the other spouse’s will or trust, or choosing to claim against the deceased spouse’s estate his or her statutory elective share. In Montana, spouse who chooses to claim the elective share is entitled to 1/2 of the “augmented estate.” However, a spouse can waive the right to the elective share in a premarital agreement, provided that the agreement was entered into voluntarily upon full disclosure.
As referenced above, one instance in which spouses might choose to include such a provision in a premarital agreement would be when they entered into marriage later in life, after each had accumulated property their or one or both already had children. In that case, each might agree to waive the elective share in order to preserve their respective estates for their descendants. This allows couples to establish certainty with respect to how their property will be handled in the event of death or divorce, placing into effect a plan that reflects their values or ideals.
Jon
