In this case the Appellate Division had to consider whether the spouse of a decedent was entitled to certain assets in his estate in light of the provisions of the couple’s prenuptial agreement. Upon the death of the husband, a dispute developed between the executor of the decedent’s estate and the decedent’s surviving spouse. The question was based on the terms of the couple’s prenuptial agreement.
The language of the prenuptial agreement was that the wife was entitled to liquid assets in the amount of $3,500,000, “reduced by the amounts of four (4) mortgages … and any accounts that pass to [the wife] by operation of law.” The executor’s position was that the $3,500,000 payment to the wife was to be reduced by the mortgages as well as by entire value of the money in the joint accounts to which she would be entitled. As a result, the wife should not receive any assets from the joint accounts. On the other hand, the wife’s interpretation of the agreement was that since under the law she would be entitled to 50% of the joint accounts, that the $3,500,000 payment should be reduced by the amount of the 4 mortgages and only 50% of the value of the joint accounts. Under the wife’s interpretation, she would receive more, as the base amount of $3,500,000 would be reduced by the mortgages and reduced by only half of the value of the joint accounts.
The differing interpretations of the terms of the prenuptial agreement formed the basis for estate litigation before the Surrogate’s Court. The Surrogate’s Court sided with the wife, granting her motion for summary judgement. The executor appealed.
When it comes to figuring out what the parties intended with a prenuptial agreement or any contract, typically, the court looks at only the text of the agreement and does not look to outside evidence, referred to as extrinsic evidence. In this case, because the agreement is ambiguous and both interpretations of the agreement were reasonable, the court decided that it was appropriate to review extrinsic evidence to figure out what the parties intended when they drafted the agreement. Of course, testimony from the two parties of the agreement would be ideal. In this case that was not possible since the husband was deceased. In support of his position, the extrinsic evidence submitted by the executor included a transcript of the deposition testimony of the wife’s former attorney. Based on the extrinsic evidence, the Appellate Division ruled in favor of the executor. Under the terms of the prenuptial agreement, the wife was entitled to a payment in the amount of $3,500,000 reduced by the amounts of the 4 subject mortgages and the full value of the funds in the joint accounts.
While a last will and testament is the document used to direct how an executor should manage a testator’s estate and distribute its assets, other documents may also inform how the executor is to do his or her job. While prenuptial agreements are used to specify how assets are to be divided upon divorce, they are also used to specify how assets are to be distributed upon death. Thus, while a will may specify details about asset distribution, an executor must interpret the will and make distribution decisions in light of the instructions found in the prenuptial agreement. Similarly, if the decedent passed away intestate, but the decedent and the surviving spouse had a prenuptial agreement, the estate administrator would be required to follow the terms of the prenuptial agreement to the extent it included provisions related to the distribution of property.