Premarital Agreements and Insurance
When most people think about premarital agreements, they think "divorce." However, as I indicated yesterday, these types of agreements usually apply to other scenarios as well, including (but not limited to) the death of a party during the marriage. With respect to death, the major concern of the parties may be that they would prefer to leave most (or all) of their property to someone other than their spouse (children of a prior marriage, siblings, parents, etc.). In Illinois, a surviving spouse has certain rights to a decedent's property, and most premarital agreements contain some type of waiver of these rights.
That being said, sometimes it is appropriate to include a provision in the premarital agreement, requiring one party (or both parties) to leave property to the other upon death. I have found that the easiest way to effectuate this gift upon death is through the use of life insurance, for a number of reasons:
-Life insurance rates are pretty reasonable;
-It's easy to monitor compliance with a requirement to keep life insurance in force (you can just ask your spouse for proof every year that he or she has paid the premium); and
-Life insurance is easy to collect upon a spouse's death -- it's a non-probate asset, and the proceeds can usually be obtained by presenting the decedent's death certificate and beneficiary forms to the insurance company. This means no waiting for a probate to be completed.
Life insurance can be especially important if the parties have (or plan to have) children together, and indeed the requirement to keep insurance in force can be made contingent on this fact. For instance, I recently drafted a premarital agreement requiring both parties to obtain life insurance on their lives until no child of theirs is under the age of 21.
