Our central Iowa clients are surprised when I tell them that pre-marital agreements are allowed in Iowa but post-marital agreements are not. The Iowa Legislature is considering legislation this year authorizing post-marital agreements in Iowa. The ban on post-marital agreements goes back to the early 1900’s. In the early 1900’s, a woman upon marriage was simply presumed to be merged into her husband and become one with him. Contrary to the laws of most states, in Iowa it is impossible for a husband and wife to contract with each other after marriage. The Iowa Supreme Court has upheld the ban on numerous occasions including a decision in 2014 in which the Court upheld a post-marital agreement entered into in the state of Florida which allows such agreements, and also acknowledged that such agreement is not allowed under Iowa law. The Court went on to state that some question the logic of a legal distinction between pre-marital and post-marital agreements.
Prenuptial a/k/a pre-marital agreements are frequently used for second marriages where each party has their own children from their previous marriage. Without such an Agreement, a surviving spouse in such a situation could elect to take against the other spouse’s will which leaves everything to his or her children, and receive one-third of the estate. Likewise, there are a number of situations in which post-marital agreements can be used in the state of Iowa. For example, a married couple may have as their primary asset a large IRA account which arose from one of the spouse’s 401k plan from a lifetime of employment. It is not unusual for an owner of a 401k plan to roll the plan into an IRA account at retirement. The IRA account will pass to the designated beneficiary on death. If the spouse with the IRA fails to designate the other spouse as the beneficiary, the assets will pass to the designated beneficiary unless the surviving spouse can prove fraud which is difficult. The surviving spouse can elect to take against the will but the fact that the IRA passes by designation of beneficiary means that the surviving spouse’s one-third will not include the assets in the IRA account. The fact that more and more married couples hold the majority of their wealth in retirement accounts that pass by designation of beneficiary clauses, have made the problem much worse than it was in the past. A post marital agreement if allowed in Iowa, can be used to protect the other spouse from being disinherited. The Probate & Trust Law Section of the Iowa Bar supports the use of post-marital agreements in Iowa.
The Family Law Section of the Iowa Bar has objected to post-martial agreements in the past. The Family Law Section does not believe that the benefit of being able to do estate planning after marriage through the use of a post-marital agreement outweighs the risk of fraud and duress. The Family Law Section’s concern is that one spouse may not have equal leverage and be taken advantage of and that such agreements would be binding in the event the parties move to dissolve their marriage in the future. The Family Law Section is willing to consider a middle ground where the post-marital agreements are valid under Iowa law for all purposes other than that if the parties move to dissolve their marriage in the future.
It will be interesting to see how the Legislature will address the conflicting interests. I will keep you updated if any legislation is passed and becomes law.
By: James D. Beatty