Do You Need a Prenuptial Agreement in Your Estate Plan?
Most people think of a prenuptial agreement as something to do in case of divorce, and for that reason, such agreements may be looked upon unfavorably by people who are unfamiliar with them. In reality, a prenuptial agreement can be useful even for couples who plan to be (and are) together until death parts them. Do you need a prenuptial agreement in your estate plan?
That's right, in your estate plan. A prenuptial agreement can be used, among other things, to determine how your assets will be distributed upon your death. This is of particular interest to couples who have children from a previous marriage or relationship whom they want to inherit some of their assets.
Prenuptial Agreements and Estate Planning in Community Property States
New Mexico is a community property state. In a community property state, each spouse has the right to an equal one-half share in all property and income acquired during the marriage, no matter who earned it. In other words, those assets are property of the "community." Certain property is considered separate, such as property that either spouse owned before the marriage, gifts to either spouse, and inheritances received by either spouse during the marriage.
When it comes to estate planning, you get to decide what you want to do with your one-half share of the community property. As to your spouse's share, you don't get to dispose of any part of it unless they agree to that, which a prenuptial agreement allows them to do. Put another way, a valid prenuptial agreement supersedes state community property laws.
A prenuptial agreement, or prenup, can help provide clarity when it comes to the details of what will be divided. A prenup can specify, say, that the family business you started and for which your adult children work will be considered wholly separate, even if it grew significantly during the marriage. Or it can state that both you and your spouse choose to treat your respective retirement accounts as separate, even if the bulk of the funds in those accounts was deposited during the marriage and would otherwise be community property under the law.
It may seem strange to be thinking about your death and your estate when you're on the verge of one of the happiest days of your life. But including a prenuptial agreement in your estate plan can provide reassurance and peace of mind that allow you to enjoy your marriage, knowing that the people you love are provided for and will be less likely to have a dispute over your estate.
If you decide to have a prenuptial agreement, you will want to make sure it is enforceable, both in the event of a divorce and in the event of your death. You need the help of an experienced attorney to make sure that your prenup complies with state law and will be valid. A valid New Mexico prenuptial or premarital agreement must be in writing and signed voluntarily by both spouses before the marriage. Both parties should make a full and fair disclosure of their assets before signing (or sign a written waiver of this disclosure), and the agreement should not be grossly unfair at the time it was signed.
If your future spouse is the one who floated the idea of a prenuptial agreement, or presented you with one for your signature, you shouldn't assume that divorce is in their plans. But you should have the agreement reviewed by your own attorney before you sign it to make sure you understand all your rights and obligations before you commit.
A Prenup Isn't a Substitute for an Estate Plan
As useful as a prenuptial agreement can be, it is no substitute for an actual estate plan. Think of it as a helpful supplement. Your prenup can clarify which property can be disposed of through your estate plan. Your estate plan, consisting of a will, trust, and other documents, actually disposes of it.
Furthermore, there are things that a prenup cannot do. If you have young children, you cannot name a guardian for them in your prenup. You need a last will and testament for that. A prenup also cannot arrange for someone to step into your shoes and make financial or health decisions for you if you become incapacitated; that's why you have powers of attorney.
You can view a prenuptial agreement as one more tool in the kit that helps you provide for your loved ones in the future and gives you all peace of mind in the present. If you have questions about New Mexico prenuptial agreements, or how they fit into your estate plan, we invite you to contact our law office to schedule a consultation.
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