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Marital Agreement Interpreted to Deny Spouse Additional Inheritance in Florida

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Can Boilerplate Language in A Marital Agreement Be Used To Deny An Inheritance?

Most lawyers use standard forms for agreements, at least some of the time.  These standard forms are useful so that lawyers do not have to re-draft language that usually remains the same in every agreement.  Such language, often referred to as “boilerplate,” often controls the outcome of disputes over the meaning of an agreement, whether or not the language was specifically tailored for the circumstances of the parties.  A recent Florida appellate decision shows the importance of boilerplate language in a marital agreement in resolving an estate dispute with a surviving spouse, and how marital agreements can influence inheritance rights

In Northern Trust v Shaw  (2nd DCA 2016), the surviving spouse, Shaw, sued the estate of her deceased husband for money promised to her under a prenuptial agreement.

The prenuptial agreement provided that Shaw was to receive $500,000 from Mr. Shaw’s estate, plus any testamentary gifts, plus any retirement and pension benefits for which Mrs. Shaw was named as a beneficiary, plus a life estate in any principal residence owned by Mr. Shaw.

Mrs. Shaw received an IRA worth $480,000 as a named beneficiary of the IRA (outside of the probate estate).  She received tangible personal property of about $100,000 from the estate, and $108,977 for her share of the life estate interest.

Mrs. Shaw sued the estate for $500,000, contending that the marital agreement entitled her to $500,000 plus any other benefits received. The trial court agreed with Mrs. Shaw and awarded her $500,000 from the estate.  In reversing, the appellate court parsed through the language of the marital agreement to determine that the $500,000 promised to Mrs. Shaw in the marital agreement had been satisfied via the IRA paid to her.

The Terms of The Marital Agreement

The language of the marital agreement read, in part, as follows:

12.a.  *** Future Wife shall receive from Future Husband the sum of $500,000.00 from the estate of Future Husband ***

12.b.  *** 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***

***Neither party intends by this Agreement to limit or restrict the right to give or to receive a testamentary gift from the other. Either of the parties may elect to make a gift to the other by will without invalidating this paragraph and may thereafter change or eliminate the gift by a codicil or another will without in any way affecting the continued effectiveness of this Agreement.***

In interpreting the interplay of this language, the court reasoned as follows:

Because these assets have been distributed to Mrs. Shaw and they total more than $500,000, the terms of section 12(a) have been satisfied. Mrs. Shaw is therefore not entitled to a separate $500,000 distribution under section 12. Interpreting section 12 as Mrs. Shaw suggests would allow her to recover the $500,000 distribution from Mr. Shaw’s “estate” twice. She would receive $500,000 from the portion of the “estate” including the IRA and tangible personal property plus an additional $500,000 from the probate portion of the estate. This construction does not comport with the parties’ expressed intent.  Because Mrs. Shaw has received at least $500,000 from Mr. Shaw’s IRA and the items on Mr. Shaw’s tangible personal property list, she is not entitled to an additional $500,000 distribution from Mr. Shaw’s “estate” under the plain language of section 12.

Could Better Drafting Have Resulted In The Spouse Receiving A Larger Inheritance?

Could better drafting of the marital agreement have eliminated this inheritance dispute?  If the spouses’ intent was to provide Mrs. Shaw a minimum distribution from all assets, whether probate or nonprobate assets, the language of the agreement could have simply said that “Mrs. Shaw is entitled to receive no less than $500,000 upon the death of Mr. Shaw, taking into account all property received upon the death of Mr. Shaw, including but not limited to bequests under will, bequests via any trust, pay on death designations and beneficiary designations.”

If their intent was to provide Mrs. Shaw a bequest of $500,000 from the probate estate, they should have limited the definition of the estate, contained in the boilerplate language of the agreement, to the probate estate.

When spouses are negotiating for death time benefits, in the absence of valuable items such as art or antiques, it would be unusual to include household property in computing the value of property received by the spouse.  Household furnishings and other personal property is typically given to the spouse above and apart from any monetary bequest contracted for under a marital agreement.  The court here counted against Mrs. Shaw the personal property that she received to deny the larger inheritance under the terms of the marital agreement.

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