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Consider Estate Issues When Drafting Prenups

A couple of years after my mother died, Dad married a good woman I’ll call Laura, and they entered a prenuptial agreement. Their attorneys did a good job overall, but failed to address one matter.

Laura and Dad’s scenario is common: one spouse-to-be sells a house and moves into the other’s home. That was Laura. The prenup allows Laura to live in Dad’s house for as long as she wants to after his death. When she dies or moves elsewhere, however, the property goes to my sister, my brother, and me.

So far, so good.

The agreement makes Laura responsible for real-estate taxes on the house. But the prenup also states that she must pay the cost of “minor repairs (under fifty dollars).” About major repairs, however, the document is silent. That seems to imply Laura is not responsible for those—but then who is? Dad’s three children? We never signed anything, so how can we be bound? We can’t be, and besides, what if we lacked the funds when the repairs were needed?

“Fortunately,” the furnace had to be replaced soon after Dad’s funeral (good thing he never saw the bill!). This gave me a chance to show my understanding that Dad would have wanted me to take care of the problem, so I paid the bill from the estate checking account. That was one big future problem taken care of right away. Then, as executor, I decided to set aside funds in short-term CDs earmarked for additional repair work.

But what might have happened otherwise? What if something big had gone wrong after I wrote checks to my brother, sister, and myself to distribute the liquid portion of the estate? One possibility would be for Laura to pay the repair costs out of her own pocket, then place a lien for that amount on the house. That way, she or her children would recover her expenses when the house was eventually sold.

Meanwhile, it’s clear from the prenup that no one had foreseen this issue. So if you are drafting such an agreement yourself, remember that a lack of foresight and planning today will invite conflict later.

From “AARP Crash Course in Estate Planning: The Essential Guide to Wills, Trusts and Your Personal Legacy,” by Michael T. Palermo, JD, CFP, 2005, pp. 88-89.

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