Preventative Measures
When oil tycoon J. Howard Marshall died at 90, a slew of lawsuits erupted between his widow – 27-year-old former Playmate Anna Nichole Smith – and his children from a previous marriage. This litigation continued years after his death.
The amount of money at stake my be much higher, but this story is not unlike many others. With people living longer, there has been an increase in second marriages. In fact studies show that almost half of all weddings in this country are not first-time marriages.
If you fall into this category, you can take some very important steps to ensure this does not happen to you or your family.
Prenuptial Agreements
In California, the law guarantees surviving spouses a percentage of their deceased spouses estate, regardless the terms of the estate planning documents. Assets are categorized in two ways – community property (assets earned or acquired during marriage) or separate property (assets acquired before or during marriage via inheritance or using separate property assets). Prenups are simply contracts between spouses that, in short, define what stuff is whose (i.e. they characterize the individual assets). For example, a surviving spouse might claim an asset is community property but the children from a prior marriage claim it’s the decedent’s separate property, they could look to a prenup to determine how the assets is characterized and eliminate a court battle.
Life Insurance
In addition to dividing the estate, prenups can establish separate financial obligations. One typical example is life insurance designed to compensate the surviving spouse for giving up what would otherwise be their share of the community property. If you are unable to keep up with the insurance premiums, the prenup can say that the surviving spouse is entitled to an equivalent sum from the estate. This way both sides win and a costly court battle is avoided.
Contact me for more information of pre and post nuptial agreements. Although I make it sound simple, California has various steps that must be followed to ensure that the prenup is fair for both sides.
