Prenuptial agreements aren’t just for Hollywood marriages anymore. Farmers and ranchers – and their heirs — should probably be using them, too, says Carolyn Thompson, a Sioux Falls estate planning attorney.
“While it can be exciting to see heirs get married and expand the family tree, it can be devastating if the marriage doesn’t last or if an untimely death leaves the land or business open to an elective share claim (or worse yet if the land or business owner dies “intestate” without a will or trust),” she says. “In either scenario, the heir or family can be forced into a position of having to buy the family asset back from a surviving spouse.”
Clear provisions in a prenup can designate that all inherited property, or specific assets, are kept as separate property, which will help protect the asset from divorce or elective share claim, Thompson says.
“A prenuptial agreement does not preclude a spouse from leaving an asset to his or her spouse – it simply keeps that decision in the hands of the owner of the asset.”
Prenups are especially important in second marriages with children from a previous relationship. “A surviving spouse has a greater right to inherit, even more so than one’s own children,” Thompson says. “This is true regardless of what is set forth in an individual’s will or trust. Most states, including South Dakota, grant to surviving spouses a statutory right known as an elective share right. This right entitles a surviving spouse to a portion of the deceased spouse’s estate, even if it was designated by will or trust to go elsewhere,” she says.
“Generally, a prenuptial agreement will require both parties to waive this elective share right. Entering into a prenuptial agreement does not preclude an individual from leaving his or her spouse an inheritance, but it shifts the power to make that decision to the owner of the estate on his or her own terms, rather than to the surviving spouse. This protects children from a previous marriage who would otherwise have a lower priority to inherit.”