June 27, 2019

I have created a couple of trusts in accordance with Iowa Code 633.238.1(d)(2) for the purpose of ensuring certain assets are not available for spousal elective share upon death.  I have not used this type of trust for divorce protection, but it might be worth exploring whether this type of trust would make sense in your situation. 

In a cover letter to clients for whom I have prepared this type of trust, I provide the following written instruction:

We have created a limited purpose Revocable Trust for you because you and Spouse did not sign a Prenuptial Agreement prior to your marriage.  Since there is no Prenuptial Agreement in place, Iowa law affords Spouse certain rights as your surviving spouse, including the right to claim a 1/3 share of your probate and trust assets at the time of your death.  If a spousal share is claimed, the spousal share would include 1/3 of the _______ (description of asset at issue) which is not consistent with your wishes.  If Spouse is competent to manage his/her own affairs at the time of your death, I am confident s/he would honor your wishes to have the _______ (description of asset at issue) pass to your children.  However, if Spouse is no longer competent and someone else is managing his/her affairs, the agreement you and Spouse have reached might not be followed.

We have taken advantage of a recent change in Iowa law that allows you to prepare a limited purpose Revocable Trust.  This limited purpose Revocable Trust is designed to eliminate Spouse’s right to claim a 1/3 spousal share of the assets owned by the Revocable Trust.  As Iowa law now stands, if Spouse signs a waiver as to each and every asset you transfer into the limited purpose Revocable Trust, then Spouse has no ability to claim a 1/3 spousal share of those Trust assets at the time of your death.  However, if any assets are transferred into the limited purpose Revocable Trust and Spouse does not sign a waiver as to each and every asset, the protections disappear and Spouse would once again have the ability to claim a 1/3 spousal share of the Trust assets. 

To provide the greatest probability that your revocable trust assets will be shielded from the 1/3 spousal share at the time of your death, you must ensure that every asset transferred to the trust (whether now or in the future) is accompanied by a very precise written waiver from Spouse.  For this reason, you should not transfer ownership of any bank accounts, retirement accounts, or tangible personal property to the trust at this time.  Please consult with us before any assets are transferred into the Revocable Trust so that the appropriate waiver can be prepared.

ISBA Family Law Manual has great discussion of the matter on p. 289 through p. 292.  Sounds like it’s possible to have an enforceable agreement that is at least considered by the court but it cannot have been entered into for reasons that are against public policy nor can the result of the agreement itself be against public policy. 

Language in In re Marriage of Cooper, 769 N.W.2d 582, 586 (Iowa 2009):

“[this is not a situation] where the parties let go of the acrimonious past, agreed to continue their marriage, and chose to structure their financial relationship in the event of a future divorce with full disclosure and the assistance of independent counsel.”  (distinguishing from facts of case, specifically that the agreement was based on husband’s fidelity to wife)

The implication is that such an agreement could be considered if:

1. It is not based on acrimonious topics;
2. The parties agree to continue the marriage;
3. They choose to structure their financial relationship in case of divorce;
4. There is full disclosure of finances between parties; and
5. Both sides have independent counsel.

You can, but it’s not necessarily enforceable.  The court can consider it as a factor under 598.21, but it’s not binding and has whatever weight the judge wants to give it.

769 N.W.2d 582 – Marriage of Cooper.

Is there ANY way for a married Iowa couple to enter into an enforceable post nuptial agreement? The intent is to protect some business ventures of one of the spouses. All children are grown adults, so no issue there and there will not be any determination of spousal support that normally seems to invalidate most post nuptial agreements. ANY words of wisdom?

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