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The Potential Conflict Between a Prenuptial Agreement and Estate Planning

How does a prenuptial agreement affect your estate planning? A prenuptial agreement is a contract between intended spouses designed to settle any property disputes that may arise following divorce or the death of one spouse. In many cases, a prenuptial agreement may override state laws providing for certain spousal rights in the other’s estate. That’s why, as with any contract, it’s important for both spouses to fully understand any prenuptial agreement before they sign it. Failure to do so can result in costly litigation down the line.

Liu v. Wang

A recent decision by the California Court of Appeals addressed the interaction of prenuptial agreements and estate planning. Please note this case is discussed here simply to illustrate the types of issues involved and should not be construed as a definitive statement of California law on the subject. The case itself involves a wife’s challenge to a prenuptial agreement with her late husband.

Hui Chin Liu lived in China before she met Yen Wang, an American then living in Pennsylvania. Liu moved to the U.S. to be with Wang, and they married in 2006. Wang was a wealthy doctor then in his late 70s. Wang and Liu were both previously married, and Wang had two adult children also living in the United States.

Just before their February 2006 marriage, Wang asked Liu to sign a prenuptial agreement. Wang’s attorney drafted the agreement. Wang also selected and paid for an attorney to advise Liu. The final agreement was prepared and signed in both Mandarin (Liu’s native language) and English.

Under the agreement, if Wang died before Liu, she would receive a $100,000 distribution from his estate. In exchange, she waived any other right to inherit his property or make any claim against his estate under applicable law. To that end, Wang amended his will to leave a specific bequest of $100,000 to Liu, while leaving the remainder of his estate to a living trust created for the benefit of his children.

About two years after their marriage, Wang and Liu moved to California. Wang died in 2011. Wang’s son, Peter John Wang, filed a petition to probate his father’s will. Liu filed her own petition with the court seeking a “family allowance.” California law permits probate courts to order estates to pay such allowances to family members with a demonstrated financial need. Unfortunately for Liu, the prenuptial agreement preempted her right to such an allowance.
Liu therefore argued the prenuptial agreement was invalid. She argued she didn’t know what she was signing and that her attorney at the time didn’t fairly represent her interests because he was paid by her husband. The probate court rejected these arguments and upheld the prenuptial agreement. The Court of Appeals agreed with the probate court.

As the appeals court noted, even though this case involved a California estate, the prenuptial agreement is a contract governed under Pennsylvania law. And Liu simply failed to show the agreement was the product of “fraud, misrepresentation or duress,” which is the standard in Pennsylvania.

Think Before You Sign

It goes without saying that no person should ever sign a legal document, including a will or a prenuptial agreement, without reading it first and fully comprehending its terms. It’s equally important to understand how the laws of different states might interact with-or contradict-one another. If you’ve recently relocated to California, or you own property in multiple states, you should speak with an experienced estate planning attorney who can advise you of any necessary revisions to your will, trust or prenuptial documents. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.

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