Dear Michael: My wife died years ago and I have been remarried for twenty-seven years. When we married, we had a prenuptial agreement regarding the ownership of our property. Does this agreement still stand up today even though we've been married so long? In addition, I would like to make certain my spouse has adequate income – my health isn't the greatest – in the event of my death without leaving her so much of the assets that her kids will end up with more than my kids of my estate? I'm not worried about a divorce. I just worry I've got things handled in case my wife outlives me. – Love, Round Two.
Dear Love: Regarding the prenuptial agreement from twenty-seven years ago, you'll have to go dig it out and take a look at what was excluded from any divorce or rights waived upon in the original document.
Normally, there is a specific page on the last page or pages listing all of the assets each spouse disclaimed in the event of a divorce or a death. Once you have that in hand, and I hope it wasn't a 'generic description' we can do some additional questions to see how this agreement stands up today.
The most common mistake people make, with maintaining a prenuptial agreement, is setting up a joint checking account. For convenience and ease, many people set up such an account after a marriage. In a prenuptial agreement, the problem isn't the account – it's what expenses you may have paid from this account.
In other words, have you paid any land taxes on land that was waived in your prenup? Any insurance paid upon the property? Any expenses paid for the care and maintenance of the property? These are all considered to be costs of ownership, and if these costs were paid from a joint account, many widows or widowers (or their estates) would claim that if they paid the costs of taxes, insurance, upkeep or other parts of ownership, then they are entitled to the assets. This might occur even though this spouse's name never appeared on any of the checks written, any of the deposits, or any other reason than it was a 'joint account'. When you spend from any 'joint' account, you are spending both or your money.
Many people also set up other instruments to pass property to their children and bypass a spouse. You can set up Payment on Death on checking, savings, etc., you can have beneficiary designations on life insurance proceeds or annuities, retirement plans and pensions…..however, if these items were not mentioned in your prenup agreement, your spouse, in most states, is entitled to claim one-third to one-half of these assets even though you've specifically not included her.
Most states still have marital laws that allow the surviving spouse to claim one-third to one-half of the decedent spouse's estate – regardless of your beneficiary designations.
You cannot set up a beneficiary designation that will supersede the codified law of any given state on assets acquired after the marriage or not included in the prenup agreement.
Remember, it might not be your actual spouse who is making the claim upon your death. Many times when one spouse dies, the other's health may decline and they need long-term care. Even though you may have died last year, Medicaid has the right to step in and make claim on your spouse's behalf the one-third to one-half right to the property passed to your children to pay for her long term care costs.
Medicaid rectified this problem back in the 1980's when it was not uncommon for one spouse in the nursing home to divorce his or her spouse so they would be indigent and would qualify for Medicaid benefits. Medicaid said 'not so fast' and began claiming for the spouse in the home, ostensibly on the behalf spouse needing care, to pay for their long-term care costs. The same is true if you bypass your spouse when you die because of their health issues. You'll need to hope your done and gone for five years before Medicaid will be out of the picture.
The other wild card may be the children of your second spouse who feel they have a legal claim to any of the assets. Let's say your wife becomes senile within a few years after your passing and names one of her children as power of attorney. Again, any assets not listed in the prenup are subject to scrutiny by the person acting in your spouse's behalf. It's maybe not moral – but unfortunately, it's legal to seek spousal assets in the event of a death.
One would believe after you've been married twenty-seven years, you trust your spouse completely. Remember, most problems don't come from a spouse after this period of time – they usually come from some source who is 'looking on behalf of your spouse' for assets.
In order to really protect these assets, you'll need a postnuptial agreement – which is the same as a prenuptial agreement – only after the marriage. Your wife can still waive her rights to any assets acquired before or during your marriage at any time – as long as she's competent. It's also a great way to find out just how strong your marriage really is – if the agreement comes sailing out of the house shortly before you yourself come sailing out, you might find problems you didn't know you had.