Why engaged couples should consider a prenuptial agreement.
Most of us have heard about prenuptial agreements when it comes to celebrities or aging millionaires marrying a younger partner. The main purpose of these agreements, at least for these parties, is to limit the amount of property and compensation the less wealthy party can receive in the event of divorce.
Most of the rest of us probably don’t think a prenup is meant for us. There are, however, other life factors that may weigh in favor of a prenup for you, and you should at least consider whether you need a prenup before getting married to avoid disputes down the road.
Why Get a Prenuptial Agreement?
A prenuptial marital property agreement is what it implies–a contract entered into before the marriage. Prenuptial agreements are typically recommended under these circumstances:
- One party has considerably more assets than the other
- One or both parties have children prior to the marriage
- One party has a family business he or she wishes to protect
- One party has significantly more debt than the other
In Wisconsin, if you do not have a valid prenuptial agreement, then the marital property is divided between the parties on the basis of equitable distribution. Property acquired or accumulated during the marriage is considered marital property. For the most part, Wisconsin divides the marital property equally between the parties but may award one party more in certain circumstances. With a prenuptial agreement, you are able to legally “opt out” of these laws.
Requirements for a Valid Prenuptial Agreement
For a prenuptial agreement to withstand court scrutiny, there are a number of factors that the court will examine in the event one party wishes to have it voided or nullified:
- Did the parties knowingly and voluntarily enter into the agreement, or was it signed under duress or undue pressure from the other?
- Did both parties fully disclose their financial affairs before signing it? In other words, did the parties realize what rights were being waived?
- Did both parties have separate legal representation?
- Did the parties have adequate time before the marriage to review and consider the agreement’s implications?
- Was the agreement fair at the time it was signed considering each party’s circumstances?
- Is the agreement fair at the time of the divorce given the respective financial condition of the parties? In other words, has there been a significant change in circumstances since the agreement was made?
What Can be Included in a Prenuptial Agreement?
Most prenuptial agreements provide for the division of property and debts, such as who gets the marital home or that the increased value of one party’s family business stays with that party upon divorce. But it can also include provisions for how expenses will be paid, distribution of estate upon death, requirements for life insurance, or other matters the parties agree to. It is probably best to leave trivial matters out of the contract, such as who feeds or walks the dog (unless such a matter is a sticking point for you!).
Spousal maintenance (i.e. alimony) may be modified or eliminated in a prenuptial contract. If the spouse who waived maintenance now objects, he or she has the burden of proving that it was inequitable. In considering whether to order maintenance, a court will consider ten factors, including, among other factors, the existence of the prenuptial agreement, the party’s earning capacity, the duration of the marriage, contributions the party made to the other spouse’s education or career advancement, and other facts that may lead the court to award some measure of maintenance, regardless of the waiver.
A prenuptial agreement cannot provide for the future custody, visitation, or child support payments. Inheritance and property rights of children from previous marriages or relationships should be considered.
Can a Prenuptial Agreement be Held Nonbinding?
If any of the requirements cited above are not met, then a court will likely rule that the agreement has no effect. A major factor in a court’s decision is the substantial change in one party’s financial circumstances. If one party is now unemployed, disabled, or otherwise now incapable of earning a living, even temporarily, then a court may look with disfavor on the agreement that severely limits the property that party would be receiving.
A court may also look at the reasonable expectations of the parties. For instance, one party may have had little idea that the other would significantly expand his or her business during the marriage and become incredibly wealthy. If the prenuptial agreement left the spouse substantially less than she would have otherwise been entitled to, a court may rule the agreement null and void.
Also, a court may rule that only a portion of the agreement’s provisions be upheld. For example, an agreement may provide that the marital home goes to one party who was to make all the mortgage payments solely from his or her income. However, if during the marriage the other party had to make significant contributions, then this provision would likely not be upheld.
If you are planning on getting married, you should discuss with an attorney if a prenuptial agreement is right for you. If you wish to have a prenuptial agreement, both you and your future spouse should be represented to ensure that all legal formalities are followed, and the agreement will be held to be valid. Proper planning and a legally enforceable agreement can help avoid costly disputes in the future.