Effect of Marital Agreement on Entitlement to Probate Estate
When it comes to estate planning, multiple factors can influence the distribution of the estate, besides a trust document or a will. One such device is a martial agreement made between spouses prior to their marriage. The marital agreement can change the distribution of the estate if the agreement addresses the surviving spouse’s rights to the estate in the event of a death. The Second District recently decided a case involving a marital agreement and a subsequent claim against the estate for additional money allegedly pursuant to the agreement.
In Northern Trust v. Shaw, the surviving spouse, Natalia Shaw, sued the estate of her deceased husband for money allegedly due to her under their marital agreement (also known as a prenuptial agreement). Mrs. Shaw and her husband Andrew were married in February 2009. Before they were married, Mr. and Mrs. Shaw executed a marital agreement that provided for the disposition of their assets in the event of their deaths. Under the agreement, Mrs. Shaw waived her rights to Mr. Shaw’s estate except for a few items: (1) $500,000 from Mr. Shaw’s estate, (2) any testamentary gifts made by Mr. Shaw during the marriage, (3) any retirement and pension benefits in which Mrs. Shaw was named the beneficiary, and (4) a life estate interest in any principle residence owned by Mr. Shaw.
Mr. Shaw died in September 2012, and pursuant to the agreement Mrs. Shaw received: (1) assets Mr. Shaw had gifted to her in a tangible personal property list, (2) $480,000 from Mr. Shaw’s IRA as she was listed as a beneficiary, and (3) $108,977 as her share from the life estate interest. Natalia also filed a claim in the probate proceedings of Mr. Shaw’s estate seeking $500,000. Northern Trust Company, the personal representative of Mr. Shaw’s estate, objected to the claim. Based on the objection, Mrs. Shaw filed a complaint in the circuit court alleging a breach of contract. Northern Trust argued that Mrs. Shaw was barred from receiving the $500,000 she was claiming because she had already received over $500,000 from Mr. Shaw’s estate, as defined in the agreement. Mrs. Shaw asserted that she was entitled to receive $500,000 under the agreement, on top of the assets she had already received. The trial court ruled that Mrs. Shaw was entitled to the additional $500,000 to be paid from the estate.
The portion of the agreement at issue is Paragraph 12, which provides:
- … Future Wife shall receive from Future Husband the sum of $500,000.00 from the estate of Future Husband.
- … For purposes of this Agreement, estate is defined to include either party’s probate estate, any living trust created by the party, as well as life insurance, individual retirement accounts, qualified and nonqualified deferred compensation plans and other assets that may pass by beneficiary designation outside of will or trust documents….
The District Court looked at the plain language of Paragraph 12 and concluded that both the money from Mr. Shaw’s IRA and the testamentary gifts from the personal property list were part of the estate as defined in the agreement. The Court concluded that because Mrs. Shaw had been given these assets, the provision in Paragraph 12(a) had been satisfied. The Court stated that interpreting the agreement to allow Mrs. Shaw to recover an additional $500,000 would go against the expressed intent of the parties.
This article provides an example of how marital agreements can effect estate distribution. Those interested in learning more about how these types of agreements can effect estate planning, should not hesitate to contact the attorneys of Chepenik Trushin LLP, who are ready, willing, and able to assist with your estate planning and probate litigation needs.