Prenuptial agreements, or prenups, have a historically “bad” reputation. Many people have preconceived notions of prenups based on pop culture and tabloids. Often, prenups are associated with a traditionally wealthy spouse trying to shield money and assets from the other spouse, in the event of divorce. Or they are thought of in the context of marriages where there is a large age gap between the parties, with one party being characterized as a “gold digger.” Prenups can have the reputation of being forced upon parties by outside pressure from parents or grandparents, to protect family wealth or family business interests.
However, as parties marry later in life, each coming into the marriage with a higher financial stake and more worldly experience, prenups can serve to promote matrimonial harmony around finances. They can be viewed as more of an “insurance policy,” by predetermining the allocation of assets and spousal support if divorce occurs, rather than as a “dirty word” with negative connotations.While it can be awkward to discuss the demise of your marriage while planning your wedding, a carefully drafted prenup can save time, unnecessary drama and tens of thousands of dollars in attorneys’ fees, in the event of divorce. A prenup allows the parties to make their own decisions about division of their assets and property, rather than leaving those determinations to the Court. A prenup allows the parties to make those determinations at a time when they are more likely to be calm and level-headed, rather than waiting until contentious divorce proceedings are already under way.
A prenup is a contract entered into by two parties in contemplation of their marriage. The prenup must be in writing and signed by both parties.Oral promises between the parties will not be enforced by the Court at the time of divorce.Only a written prenup will be enforced.The prenup becomes effective upon the marriage. If the marriage never occurs, the terms of the prenup are not enforceable if the parties split up.A prenup can be used to protect separate property that a party enters the marriage with, including real property owned prior to the marriage, retirement benefits accrued before the marriage, interests in family businesses and inheritances received.
The parties to a prenup can negotiate the disposition of property in the event of divorce.They can also agree to modify or eliminate maintenance, or alimony/spousal support, that would be determined pursuant to statute in the event of divorce.Parties can agree to terms regarding payment of attorneys’ fees in a divorce and parties can agree to waive the right to a contribution hearing with respect to payment of attorneys’ fees.
Parties cannot use a prenup to predetermine child support or to determine allocation of parental responsibilities.
For a prenup to be enforceable, each party should make a full disclosure of their assets, income and debts to the other party. Both parties should have their own attorney to negotiate for them and to protect their individual interests. Having attorneys can also help to ease the awkward conversations between the parties, letting the attorneys haggle over substantive issues like property divisions and waivers of spousal support, allowing the parties to focus on the happier and more “fun” wedding planning and pre-wedding activities and celebrations.
In recent years, there has been an increase in prenups as millennials reach their late 20s and 30s. Millennials are marrying later in life than their Gen X counterparts.By marrying later in life, millennials are more likely to have accumulated wealth and assets before marriage. Millennials are more likely than generations before them to enter a relationship already owning real estate and having amassed substantial retirement assets, having been in the workforce for a longer period of time, prior to marrying. Millennials are creating their own business startups and want to make sure investments and business interests are protected in the event of divorce. Some business operating agreements will mandate that business owners sign a prenup before marriage, to ensure future spouses of the owners cannot make a claim to any portion of the business, during divorce proceedings. Additionally, millennial women are more likely to continue working after having children, rather than foregoing careers to raise children, as had been more common with previous generations.
Couples can also can use prenups to agree on who will be responsible for certain debts if divorce occurs. For instance, millennials may use prenups to agree that in the event of divorce, student loan debt will be the sole responsibility and obligation of the party who took out the student loan. Further, because so many millennials grew up in homes with divorced parents, they have seen firsthand, the emotional and financial toll divorce can take on a family.Accordingly, they are more amenable to and interested in, resolving many of the contentious matters of a divorce, before getting married. They are more inclined to take steps to enter into a mutual agreement on how matters will be handled in the event of divorce.
The legalization of same-sex marriage also creates an increasing need for prenups.Many same-sex couples have had lengthy relationships and cohabitated for many years before being able to legally marry.In Illinois, the length of the marriage plays a substantial role in determinations of spousal support and property divisions by the Court. This can be detrimental to a same-sex spouse entitled to support.Same-sex couples can use a prenup to adjust for the difference between the length of their legal marriage and the length of their relationship, drafting the agreement to make division of assets and liabilities and determination of spousal support, based on the length that their marriage would have been, had they been able to legally marry. They can also agree to have the Court consider the full length of their relationship rather solely the length of their marriage in making determinations on property and support.
Besides setting out the financial terms for a divorce, a prenup can also be used to determine the rights of a spouse after the death of the other. A prenup can be drafted to reflect that a spouse will be entitled to a certain percentage of the deceased spouses estate, or entitled to certain assets, in exchange for the surviving spouse waiving any rights to contest the Will of the deceased party or take a statutory elective share of the estate. A prenup can serve as the initial framework for an estate plan if there are certain assets one spouse wants their family to retain in the event their death, rather than passing to the other spouse.This can also be particularly important in the event of a second marriage, where a party wants to leave certain assets to children from a prior marriage and ensure the surviving spouse will not challenge the Will after their death. Each party should have a fully executed estate plan (including a Will and/or Trust and Powers of Attorney for Finances and Health Care) that reflects the agreement in the prenup.
As prenups have become more common among millennials, same-sex couples and individuals marrying multiple times, they have begun to lose their negative stigma and instead are coming to be seen as responsible way to plan for future uncertainty.Prenup is no longer a “dirty word.”