This post was written by my Sodoma Law colleagues, estate planning attorney David DuFault and board certified family law specialist and attorney Patra Sinner.
Given Hugh Hefner’s star status it is no wonder that rumors immediately began to swirl upon his death about what would happen to the fortune he amassed through the Playboy empire. There were rumblings that he may actually still be married to Kimberly Conrad, though he married Crystal Harris in 2012. There have also been references to an “iron-clad” pre-nuptial agreement preventing Harris from receiving any of Hef’s holdings. Further, rumors suggested that Harris was not named as a beneficiary under his Will.
These scenarios can impact even those who are not married to a publishing magnate. Understanding the interplay between marriage, marital contracts - such as prenuptial, postnuptial and separation agreements - and estate planning is important. Each of these documents can be determinative of how an estate is divided upon the death of one of the parties.
Suppose for example that the parties have separated, and are discussing a resolution regarding their finances and distribution of assets and debts when suddenly one of the spouses unexpectedly passes away. If the deceased spouse has left specific instructions in their estate planning, these documents can be controlling as it relates to the way the estate is divided. In addition to a Will, spouses can establish Trusts, change beneficiary elections on certain types of accounts and on insurance policies, and may make provisions such as the appointment of certain fiduciaries to oversee the administration of the estate and the distribution of their financial assets.
Depending on where the parties were in the process of their separation, some States will allow the surviving spouse to proceed with claims of equitable distribution between the surviving spouse and the decedent’s Estate. State laws vary as to what requirements must be met in order for an equitable distribution claim to survive the death of a spouse, and as well as the time limits within which such a claim may need to be filed. In some cases, the surviving spouse may also be able to seek a different distribution of the assets than what the deceased spouse outlined in their estate planning documents. If the surviving spouse is successful in pursuing an equitable distribution claim, their share of the assets would then be carved out of the marital estate directly to them, rather than passing through the deceased spouse’s estate. However, aside from State laws as to what options are available to a surviving spouse, marital contracts such a pre-nuptial agreement can also prevent or minimize the surviving spouse’s ability to pursue such a division of the estate.
Alternatively, all states have statutory provisions for spousal rights and elective shares. While these statutory provisions do provide some level of preferential treatment for a surviving spouse to receive distributions, those protections are limited. As a result, a surviving spouse who receives distributions through the deceased spouse’s estate could find that a significant portion of the estate may be subject to claims of third parties or creditors and/or subject to the specific terms of administration set out by the deceased spouse. For instance, a deceased spouse might have created a trust that limits the control the surviving spouse has of their inheritance as opposed to an outright bequest of property. This may not be ideal and allows little say for the surviving spouse as to when or how the assets are received.
In essence, a spouse can change their estate plan as often as they wish without consulting the other spouse or seeking their approval. In the event the spouses dies, the surviving spouse is left to sort through the various options of challenging the estate plan or seeking an alternate division through domestic statutes. Either option requires the surviving spouse to make quick decisions at a time when they are already facing a range of emotions from the death of a partner, even if the parties have separated or lived apart for a long period of time. Electing one or the other could prevent or at least cause some intersection between the two so that there is not a dual recovery. This can be an arduous process to maneuver, particularly if the death of the spouse is unexpected and the surviving spouse had no knowledge of the deceased spouse’s estate planning. While it may seem overwhelming, the help of an experienced attorney can help you navigate these documents during a tumultuous time.
So, what can we take away from Hef’s estate complications?
1. Be aware of your rights as a surviving spouse. This holds true for all married couples, whether facing a separation or still in a marriage.
2. Review all estate planning documents regularly, both your own and those of your spouse. In many situations, a married couple will employ the same attorney to prepare both parties’ documents. Any subsequent changes to those documents, if prepared by the same attorney, should be conveyed to both spouses.
3. Stay informed. Historically it was not uncommon for one spouse to make all decisions regarding financial or money matters, and this includes estate planning choices. As a spouse in any kind of relationship, it is important to know what assets make up your asset and what rights you have in those assets. For instance, qualified retirement plans provide a spouse with certain rights to be primary beneficiary. The old adage says what you don’t know can’t hurt you. This may not be the case when dealing with estate planning and financial matters.
4. Understand the terms of your prenuptial, postnuptial or separation agreement. It is very common for these documents to include waivers of certain rights available to a surviving spouse to participate in the estate of the deceased spouse. Make sure you understand exactly what it is that you are giving up and what rights, if any, you would still have in the event of your spouse’s death.
5. Address estate planning documents as part of your domestic situation. Most jurisdictions have statutory provisions that void estate planning provisions in favor of a former spouse, but such statutes typically require that the parties be divorced. Until the Judgment of Divorce is entered, the parties are still legally married. This can create havoc when the family of the deceased spouse learns that the survivor might still have rights.
Domestic law and estate planning are not always thought of as related practice areas, but the circumstances of Hugh Hefner’s death is a prime example of how interconnected those practices actually are. It is unlikely that Hef will be thought less of for leaving the bulk of his estate to his children. However, his marital circumstances might very well result in protracted litigation between his ex-wife, his current wife and his children. A well-thought out and implemented estate plan, addressing the circumstances of all the parties with an interest in his estate,could have avoided the costs, delays and entanglements of such litigation.
The Hefner estate illustrates the complexity of such circumstances and is intriguing because of the infamy and value associated with the Playboy empire. But these same circumstances apply and exist in cases across the country. Investigate your options and your rights now before it’s too late.