Prenuptial Agreements Defined
A prenuptial agreement is a contract between two people that is made in contemplation of marriage. The Agreement sets forth the rights and obligations of each party in the event of death or divorce. Often, it will also contain certain provisions designed to encourage reconciliation.
In Illinois, a prenuptial agreement is effective upon entry of a judgment of dissolution of the marriage, unless the agreement provides otherwise. In addition, the agreement is enforceable without consideration, but if consideration is given by an executing party (such as a promise to marry) the consideration is sufficient to make the agreement enforceable.
In Illinois , the specific requirements for the execution, enforceability, or incorporation by reference of a prenuptial agreement are set forth in the body of the statute (750 ILCS 10/1).
Absence of these requirements or lack of execution is not enforceable — even assuming the parties may have a valid agreement within the four corners of the document as to what the contents are intended to achieve.
A prenuptial agreement cannot alter or adversely affect the right of custody of any child as determined by the Illinois Marriage and Dissolution of Marriage Act.
Illinois Requirements
The legal requirements for prenuptial agreements in Illinois are clearly defined in the Illinois Uniform Premarital Agreement Act. Under the law, a prenuptial agreement must be in writing and signed by the parties; provided, however, that an agreement made on or after the date of the solemnization of the marriage is not enforceable unless the agreement is proven to be enforceable under applicable principles of law pertaining to contracts.
As with all contracts, compliance with the Statute of Frauds is necessary, meaning that for an agreement to be legally binding, it must be in writing and signed by the parties. The agreement must also be entered into voluntarily, and with a full and fair disclosure of all assets and income from each party, which can be determined by completing a full asset information schedule and making it a part of the agreement. If each party does not have the opportunity to be represented by independent legal counsel at the time the agreement is made, there must be a provision in the agreement (called a waiver of representation) documenting that both parties had the opportunity to be represented by counsel, but chose not to do so. Even if a prenuptial agreement is supported by consideration, that is, something of value given to induce the parties to enter such an agreement, the courts require that the agreement not be unconscionable at the time of full, fair, and reasonable disclosure of the financial circumstances of each party; however, even if there is a full and fair disclosure if the party did not waive his or her rights to be represented by independent legal counsel, the agreement may be declared void and unenforceable.
Advantages of Having a Prenup
One of the most primary benefits of a prenuptial agreement is asset protection. In the event of a breakup or separation, there will be no ambiguity about who is entitled to the possession and use of certain items. While Illinois law provides for equitable distribution of marital assets, a prenuptial agreement allows couples to retain or redistribute their assets more freely.
Prenuptial agreements also provide protection in the event that one person in a marriage has significantly more debt than the other. Important financial considerations, such as business ownership and inheritance, will be addressed in the prenup.
Another benefit of a well prepared prenuptial agreement is clarity. Disagreements about finances are one of the most common causes of divorce. As such, a contract between spouses that clearly defines debt payment as well as asset distribution can be paramount in avoiding financial arguments.
Common Myths
Common Misconceptions are not uncommon. One of the most common misconceptions about prenups in Illinois is that they are only for the wealthy or those with high-net-worth individuals. However, it could be argued that lower to middle class individuals have more to protect than the wealthy. We all have pensions and real estate and the more assets you have, the more you have to lose if you don’t. Considering the state of divorce and the amount of money that goes through the divorce system (even in a lower middle class case) have many people looking to get future protection.
Another common misconception about prenups in Illinois is that they are negative and show a lack of trust in your partner. The truth is quite the contrary. It is simply planning for the unexpected but that plan should include even what if things go great. Secondly, the most positive thing you can do for your spouse is have a prenuptial agreement since most of the problems between spouses come when there is no order in the event of a death or separation. You should always make plans for when things are good but also when things get bad. It’s called insurance.
Another misconception we hear through the grapevine is that prenups are only legal after the wedding. The truth is, entering into a prenuptial agreement before your wedding is a way to avoid sitting at a table with your attorney on your honeymoon discussing the unforeseeable at that time and yours and your partner’s future. Now there are such things as post-nuptial agreements which are artfully done in the event the parties already got married and then were unsure of what was going to happen if they divorced. But the cost of a prenup now is much more valuable than a post-nup.
Limitations of Prenups
There are limitations to the agreements. Prenuptial agreements cannot be used to waive or give up the right to receive child support, they cannot allocate parenting time or decision making responsibility or waive the right to receive or pay spousal support in the event of a divorce that would result in a de facto divorce, i.e., how long the parties are married is contingent upon their remaining married to each other.
In addition, an agreement is not valid unless both parties have a full and fair understanding of the value of the marital and non-marital estate . Both parties must have submitted disclosures as to their assets, income and debts, irregardless of whether a party waived the right to receive disclosures. If one party had substantially greater assets, the party with the greater assets may not be able to waive the full and fair understanding of the property and income. It is recommended that parties with a large disparity in the amount of assets not waive the full and fair understanding of the property and income.
How to Get a Prenup
The right first step is to meet with a knowledgeable and experienced lawyer to discuss the matter. If the attorney meets with both parties together despite not knowing each other, they will not be charged for that initial meeting and a lot of the concerns about either confidentiality or feelings of hostility will be allayed.
Next, once there is information provided to both of you and you both are ready to proceed, you would retain the services of an attorney to help you draft the agreement. That attorney would have the obligation not only to draft the agreement to your stated desires, but also to tell you their opinion as an experienced family law practitioner whether what you are requesting passes the smell test and is not enforceable in the event of a divorce.
Following that, you would make sure that the agreement provides full disclosure in specific terms to make sure that there is a complete understanding by both sides of all the assets and income of both of you and what will be the division when a termination of the marriage decree comes into effect. This is usually done by exchanging financial affidavits making sure that all account numbers are attached to the financial affidavit, all deeds and titles are attached and any text that is relevant to the agreement is attached.
Then your attorney and his or her paralegal would take your instructions regarding provisions within the agreement and draft it in the language that you mutually – husband and wife – have agreed upon.
I hope this has helped you get the ball rolling!
Examples, Cases and Things to Know
In Illinois, we have some limited case law on the enforceability of prenups and what combinations of circumstances will and will not lead to an enforceable prenup. While it is important to note that this is only limited case law on the issue and beyond that, each case is necessarily different from the next, some cases are colorable examples.
In the recent case of In re Marriage of Piche, the husband contended in his post judgment portion of the litigation that the prenup at issue was unenforceable because the wife hid the value of her assets and did not disclose all of the premarital income she received from her various businesses. He further claimed that the prenup did not comply with the good faith requirement under the Illinois Uniform Premarital Agreement Act, 750 ILCS 10/1 et seq. ("IUPAA").
In Piche, in 1999, the parties executed a premarital agreement in which they agreed the agreement would be governed by the UPAA. The agreement affirmed their right to "impose a constructive trust" upon any and all assets that any party obtained after the marriage that he or she had prior to the marriage. Thereafter, husband suspended enforcement of the agreement for 7 years during which time, the parties acted in a manner consistent with the agreement, such as filing joint tax returns whereby each individual represented in each return that neither individual had assets other than those acquired during the marriage. However, when the parties divorced, at the trial court level, the husband was awarded 100% of the assets of the business which were subject to the constructive trust in each party’s name .
The appellate court held that the trial court’s award was correct because it enforced the constructive trust created by the terms of the prenup, but that in doing so, it subverted the express intent of the parties and the policy concerns behind premarital agreements therefore, remanding the case to the trial court to do it again.
In In re Marriage of Pape, No. 2-05-0585 (IL App. Ct. 2d 2006), the appellate court held that a spouse’s failure to disclose premarital assets during the negotiation of a prenup constituted fraud. Here we see that one fo the circumstances described above occurred. Husband’s father testified that he would not have consented to the marriage but for wife’s representations regarding the prenup which representations "unquestionably" induced him to pay for the wedding. Being induced to pay for the wedding is certainly a factor that may be considered where but for the representation of the proponent spouse, the marriage would not have occurred.
While a broad stroke is being painted here, the following combination of circumstances found in the case law can be a winning formula for a finding of unenforceability: the properties at issue are identified in the prenup; the prenup violates the UPAA; the proponent spouse lied about the properties in order to induce the non-proponent spouse to enter into the prenup; the non-proponent spouse does not have independent legal representation; the non-proponent spouse does not read the prenup; the non-proponent spouse assumed the prenup contained only a waiver of rights to spousal support in exchange for the proponent’s waiver of rights in the estate of the non-proponent spouse; and the non-proponent spouse is an alcoholic and the proponent spouse took advantage of that fact.
We’ll look again at the current state of the law in Illinois and maybe even get to the issue of enforceability of post-nups after divorce later this week.