Beware Your Beneficiaries: What Your Prenuptial Agreement Doesn’t Fix

Chantale Suttle • October 19, 2022
An outdoor family gathering with multiple generations.

Signed your prenuptial or postnuptial agreement? Is the ink dry? That's a step in the right direction, but you still have not completely covered your assets properly.
 
Your prenuptial or postnuptial agreement prepared you for one of the worst-case scenarios in your lives as a couple: divorce. To an extent, your prenup/postnup agreement performed some 
estate planning duties. However, this prenuptial or postnuptial agreement alone is not sufficient to ensure the proper disposal of assets. 
 
You still need a will to dispose of your assets according to your wishes. In addition, you must name - and update regularly - the 
beneficiaries of your life insurance policy, your pension plan, your retirement program, and so on. 
 
For example, John and Linda, both previously married and divorced, signed a prenuptial agreement before they married and altered their will accordingly. However, neither spouse updated certain assets to include the new spouse's name as the beneficiary. If John or Linda dies, the surviving spouse could be in for a rough ride of challenges and unnecessary litigation and so could the children of either marriage. 
 
Take the same scenario with a twist: John and Linda remain married for seven years. They divorce, and in time, John remarries Abby; however, he never removes Linda's name as the beneficiary of his pension plan and his life insurance policy. John wrongly assumed that the divorce automatically negated Linda's status as beneficiary. John should have checked the impact of federal and his state’s law on his assets and the status of his beneficiaries.
 
Divorce may not automatically nullify the status of any listed beneficiary on your 
assets
 
A will cannot automatically change a beneficiary. 
 
A prenuptial or postnuptial agreement does not remove or institute beneficiaries simply by virtue of being signed and drafted. 
 
Your best move is to avoid ambiguity: take the initiative to contact the administrators of your assets that list a beneficiary. See for yourself that the proper person is designated. Even if your divorce decree includes a stipulation as to beneficiary status, you should still take the lead in your life affairs by contacting administrators for assets that list a beneficiary to check that the right people are listed. 
 
As you age, you may need to add the name of a different partner, a child, or another person. Schedule an “asset tune-up” once a year in the same way you review your annual credit report to check for mishaps.
 
In addition, you and your spouse may wish to provide an added layer of protection: consider executing an agreement that covers assets requiring a beneficiary. For example, you may create an agreement together to ensure that a spouse will remain named as the life insurance beneficiary during and after the marriage; that the insured will not change the value of the policy at any time unless permission is given in writing by the beneficiary; and that the insured will not surrender the policy for cash value unless permission is given in writing by the beneficiary. 
 
In terms of overall thoroughness, you and your spouse should check that your prenuptial or postnuptial agreement's terms mesh neatly with your listed beneficiaries, your wills, and any trusts if you have one or if you are the beneficiary. Remember that the most recently drafted document is normally the document that controls, which means if you execute your prenuptial agreement and later your spouse executes a will with a provision that conflicts with your prenup, you may have trouble ahead. You can avoid these obstacles through reviewing these major life documents yourselves and/or with an attorney.
 
 
Warning: All posts on this website and its partner website, the DADvocacy™ Law Firm, contain general information about legal matters for broad educational purposes only. This information is not legal advice and should not be treated as such. This blog post does not create any attorney-client relationship between the reader and JustPrenups.com or DADvocacy™ Law Firm.


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