Prenuptial Agreement Definition
What is a prenuptial agreement? Well, it’s an agreement between two people contemplating marriage made prior to marriage. And the general purpose is to define how a couple’s income, earnings, property, and assets will be handled in the event of divorce or death of the couple. While many people think of a prenuptial agreement as being strictly for people entering a marriage with significant wealth, and may see such a discussion as being a little taboo, prenuptial agreements are often used for several other reasons as well.
Some possible motivations behind a prenuptial agreement include:
It is important to note that a prenuptial agreement can be as elaborate or as simple as desired. Many people feel that they see the same information in prenuptial agreements across the board, but this is not always true . It is a great practice to see what will work best for you and your spouse and only invite in those issues that will serve your needs.
Often times we hear about prenuptial agreements from people who did not have any wealth coming into a marriage and after some increased wealth have gone through a divorce and received very small maintenance or large maintenance because one spouse stayed home and took care of the kids. Older couples who marry or re-marry may have great success utilizing a prenuptial agreement. As mentioned above, if a couple has children from a prior relationship, it is a good idea to define how property and expenses will be handled to best protect each party as well as their respective children.
Illinois Requirements
The Illinois Uniform Premarital Agreement Act (UPAA) governs the legal requirements for a prenuptial agreement in Illinois. There are several key transactional and formal elements that a prenuptial agreement must have in order to be valid, but perhaps the most important factor is timing. It is key that you follow the guidelines below so that a court does not invalidate your agreement.
Commit Lee’s 6th Edition, prenuptial agreements are premised on the idea that your marriage is not a partnership that must give way to the parties embracing a change of circumstance and that the courts must intervene to adjust property and spousal support if there is a decreased contribution from one of the parties. For a couple starting their lives together, a divorce is too overwhelming and should focus on the forward momentum of the new spouses rather than the question of whether or not a spouse gave up a right that she was entitled to.
Illinois has adopted the Uniform Premarital Agreement Act (UPAA) with the following provisions:
In this state, prior to a couple commencing their life as husband and wife, each party must fully disclose their assets, debts, and income. The requirement of full disclosure is crucial to a couple’s ability to alter the prospective rights of the parties in the event of a divorce. "Full and fair disclosure" means that a husband and wife must make a complete financial disclosure of all assets and liabilities.
In addition to full and fair disclosure, UPAA 7 provides that each party must voluntarily participate in the execution of the agreement; that the terms of the agreement are fair and reasonable after full disclosure; and that the agreement, particularly with regard to spousal support and waiver of property, is not unconscionable. Here, unconscionability refers to a level of reasonableness. If it can be shown that a spouse failed to receive the benefit of property that otherwise would have been theirs, either because of neglect or the consequence of waiver under a prenuptial agreement, that spouse can ask the court to find the agreement unconscionable.
Generally, the contents of a prenuptial agreement are limited to the fundamental issues of property and spousal support. With respect to the child-spouse relationship, the agreements can waive the right of spousal maintenance and/or divide property upon divorce. However, courts may not enforce provisions regarding child support, custody, or parenting time in a premarital agreement despite the fact that courts have a long history of accepting premarital agreements that include these issues. An agreement that has the effect of child support guidelines is acceptable and a court will not hold these provisions unconscionable, given the well-known fact that guidelines are not binding.
Benefits of a Prenuptial Agreement
A prenuptial contract or agreement allows you to define any property that would be considered marital and thus belong to both of you (to subject to equitable distribution or division) or non-marital property that would belong only to you once you are married. Also, if one of your own existing assets does not become marital but becomes martial due to its increased value as a result of a joint effort, you can also protect that increase from being divided by a prenuptial agreement. A buyout should also be considered (rather than a division of the increase in value) or an exchange of assets.
Debt liability is another big issue that bringing in a prenuptial agreement can address. Whether you have a mountain of student loan debt or mortgage or credit card debt, you can protect your spouse from having to pay. If one of you is expecting an inheritance or receives an inheritance during the marriage, the risk that the other will be responsible in whole or in part for the taxes or other expenses on that inheritance can be addressed through a prenuptial agreement.
Finally, you can clearly define what your rights are in regard to each other’s retirement and social security. You can designate if you were to die first as to what the survivor would receive in relation to your federal employee benefits, military benefits or pension benefits. You can specify what support or alimony should be paid or not be paid in the event of divorce. You can state a limit as to the length of time support or alimony will be paid or the amount of monthly or yearly support and maintenance key as to future planning.
Drawbacks
As beneficial as prenuptial agreements can be, there are limitations to their power. Illinois law (750 ILCS 10/1-20) provides that the following matters may not be subject to the terms of a prenuptial agreement:
- Offer or consent to sexual relations;
- Establishment or modification of a compulsion or financial obligation (such as a fee) for prosecuting or defending a divorce action or proceeding;
- Child support unless the child in question shall have reached majority (18 years of age) and enforcement is for a period of time after that; (parents cannot necessarily waive their right to receive child support or waive the child’s right to receive child support from a parent);
- Custody of children;
- Child visitation rights;
- Adoption rights, if non-consent to adoption would violate public policy in the state in which the child is domiciled.
Additionally, for any prenuptial agreement to be effectively enforceable in Illinois, full and fair disclosure of financial assets must be made at the time of the agreement (although concealment of assets does not automatically render the agreement void). Furthermore, generally under Illinois law, if a spousal support amount is agreed upon in a prenuptial agreement, it cannot be modified in the future. However, Illinois courts have found that a court may have discretion to modify such support amounts if there is a significant change in the future that would have been substantively relevant to an initial award of spousal support.
Perhaps the most important consideration in a prenuptial agreement, in terms of enforceability, is that the agreement must be entered into voluntarily and without coercion or duress from one party against another. In other words, no one "should" force his or her son or daughter to sign a prenuptial agreement or pressure a party into signing a prenuptial agreement. The person seeking to enforce the agreement after divorce has the burden of proving that the agreement was freely and voluntarily entered into.
Common Misunderstandings
Many people have misconceptions about prenuptial agreements stemming from popular culture. For instance, on the sitcom Friends, Rachel plays the "It’s Not You, It’s Me" card to wrangle a "get out of jail free" clause in her prenup.
In reality, a prenup cannot provide for support in the case of divorce—it can only address property division. So while you may agree in a prenup to give up your claim to your spouse’s professional baseball salary when you divorce, it is unlikely that this would be enforceable. The courts have almost universally struck down any provisions providing for post-divorce support under a prenup. Further, while a prenup can modify or waive maintenance obligations even for the sake of supporting a spouse in the future, those terms are not likely to be upheld if they would leave a spouse with no reasonable means of supporting herself during a divorce proceeding. Consequently, the "get out of jail free" clause from Friends is right, but the provision keeping you from all alimony payments is not.
Another common misconception is the thought that a prenup will usurp your right to make decisions about your children during divorce. This is a topic better left for a post-divorce agreement than a prenuptial one, as prenups typically only address property matters. According to the Illinois Marriage and Dissolution of Marriage Act, both parents are expected to cooperate to make major decisions about their children’s upbringing, including education and health care. Even if a judge were willing to amend a divorce agreement citing a prenup, it is likely that the judge would not uphold the prenup on grounds that it is not in the child’s best interests.
It is also a misconception that a prenup agreement allows you to keep 100% of your assets in the event of a divorce. In Illinois, marital property is defined as everything owned by either spouse with the exception of non-marital property acquired through gift or inheritance. Each spouse is entitled to half of the marital property during a divorce and if you have more than half the assets, you could end up having to pay your spouse for the one-half she is entitled to.
Perhaps the most common misconception about prenuptial agreements—and one with potentially, the biggest implications—is that the contract can be signed anywhere and anytime. Under the Illinois Marriage and Dissolution of Marriage Act, at least three things must happen before a prenuptial agreement is valid. First, one or both parties must share their financial situation with the other party. Second, the prenuptial agreement must be in writing and signed by the party to be charged. Finally, the prenuptial agreement must be executed (in other words, signed) at least seven days prior to a couple’s marriage.
If you fail to meet even one of these requirements, your prenuptial agreement is not valid. If the agreement is not valid, the court may find that no estate plan exists and apply entitlement to your assets using Illinois laws on intestacy.
What this means is that if you and your fiancé are thinking of signing a prenuptial agreement, it is important to enter into it as soon as you can. You will also want to work with an attorney who can help you ensure that you meet these important requirements.
Crafting an Equitable Contract
While divorced spouses might lament about prenuptial agreements containing complicated language that only prepares attorneys to litigate the case, a good pre-marital agreement is simple, clearly drafted and easy to understand. Even if the parties to the agreement don’t have complex financial statements of income, expenses and assets, the general outline of a good prenuptial agreement looks something like this:
- The agreement should contain all provisions required by 750 ILCS 10/2; and,
- The agreement should enumerate exactly what rights each spouse will have to their assets in the event of separation or divorce; and,
- The agreement should be in a plain, easy to read font (Arial 12 point is ideal); and,
- The agreement should have ample space between lines for handwritten notations.
Unlike a prenup, the best way to insure that a spousal support (alimony) award is held enforceable is to have the parties agree to the spousal support in a timely fashion and to comply with the statutory requirements of 750 ILCS 5/502. Having said that, while a Judge may strike a prenuptial agreement that is unfair against a payor spouse; a Judge may also modify the terms of a prenuptial agreement if the provisions within the agreement are unconscionable.
While many online legal forms do not consider certain statutory provisions, they usually do contain language allowing for modification and concerning the enforceability of the agreement in the event that one party shall become a ward of the State. However, while many online agreements are not fair, if parties elect to utilize an online prenuptial agreement, they should see out the advice of an attorney prior to executing the agreement.
For prenuptial agreements drafted by a lawyer (and let’s assume that each party was given ample time to review the agreement and consulted with an attorney of their choosing), a Judge will likely first determine if a prenuptial agreement is enforceable by default against the party objecting to the agreement . Rule 502 of the Illinois Marriage and Dissolution of Marriage Act (the "IL Divorce Act") contains statutes which are deemed conditions precedent to the enforcement of a pre-marital agreement at divorce.
A. To be enforceable, the agreement must:
a. Be in writing;
b. Signed voluntarily by the parties after being provided a reasonable period of time to analyze the document and consult with his/her own lawyer (note parties do not have to share assets or have their own counsel);
c. The party who will not be represented by independent counsel may have 5 days after the signing of the agreement to revoke the agreement.
d. Both parties will have assets which may be impacted by the agreement (in other words no arms-length parties can negotiate the agreement).
B. To be fair, the agreement must include:
a. Disclosure of assets;
b. Disclosure of income; and
c. The agreement must be conscionable as of the time of execution.
In the event that there is a dispute concerning the enforceability of a prenup, the Judge will likely review each of the requirements listed above. In the event that the Judge finds that all requirements were met, then the Judge will review the requirements to determine if the agreement is conscionable (fair) as it exists at that time.
A court will likely enforce even less than fair premarital agreements absent some overreaching or a lack of disclosure on the part of the self-interested spouse (i.e. a self-serving spouse may hide assets). On the other hand, if the Judge determines that the agreement is conscionable as of the time that the request for the agreement is made, the Judge may consider the parties changed circumstances as well. For example, a combination of pre-marital agreement and changed circumstances may have occurred to the extent that it would be unjust not to modify the pre-marital agreement as it existed at the time of the divorce.
While statutory provisions make it clear that pre-marital agreements (a.k.a. prenuptial agreements) can be fair at the time of divorce, there are no provisions to suggest that such agreements cannot be unfair.
Upholding a Prenuptial Agreement in Illinois
Several factors can affect the enforcement of prenuptial agreements in Illinois. In most situations, a prenuptial agreement will be enforced as long as both parties were represented by qualified legal counsel and both provided complete disclosure of their income and assets. However, there are several situations that could affect the enforceability of the agreement. These may include the following:
- (1) If either party conceals their assets at the time of the agreement or later during a divorce proceeding, the agreement may be denied enforcement. The underlying basis for any prenuptial agreement is full and fair disclosure. If either party fails to meet their disclosure obligations, this could result in the agreement being thrown out.
- (2) The agreement was unconscionable when signed. For an agreement to be valid, it must be conscionable. This generally means that the agreement is fair to both parties. If one person feels the agreement is unfair at the time he or she signed it, this could invalidate the contract.
- (3) The agreement was signed under undue influence. If one party threatened consequences if the other did not sign the agreement or made the other sign the agreement in front of friends or family that resulted in embarrassment, the contract may be deemed unenforceable. Influences such as these may have an impact on the ability of the parties to voluntarily consent to the agreement.
- (4) The provision under attack is illegal or violates public policy. This could include the waiver of a right to support (alimony) or the right to child support. A prenuptial agreement cannot override the court’s ability to grant child support or custody.
While a prenuptial agreement is more flexible than a postnuptial agreement that can only allow spouses to amend existing obligations, parties can still modify their agreement after it has been signed, but only with the same formalities as the initial agreement.
Prenups vs. Postnups
Prenuptial agreements and postnuptial agreements serve a similar purpose in protecting the marital assets that are owned by one spouse prior to marriage and earning during marriage from division upon divorce. However, there are important differences between the two.
In order for a prenuptial agreement to be enforceable in Illinois, it must be entered into prior to the parties getting married. Illinois courts generally are reluctant to enforce a post-marital agreement. Postnuptial agreements do not require court approval but may be awarded the same level of scrutiny as prenuptials. However, because they are generally entered into after the marriage has begun, courts often require a higher degree of disclosure and an independent review by counsel.
Without a prenuptial, many couples aren’t committed enough to reveal their financial secrets. Conversely, after living together for a period of time, a couple is often comfortable enough with each other that they openly share their full financial picture, thus enabling them to enter into a postnuptial agreement based on full financial disclosures.
Of course, there are many reasons a marital couple with or without children will opt for a postnuptial over a prenuptial.
Couples without children may want to secure their assets and now that they have convinced their future spouses to marry them, they may be more willing to enter into such an agreement.
If a couple is getting married for the second or subsequent time, they will most likely want a postnuptial agreement rather than a prenuptial, especially if they are both older and near retirement years.
Also, if the couple is in their late forties or fifties, it may simply be too late to obtain a pre-nuptial.
Key Takeaway
In conclusion, we have outlined the key components, requirements, benefits, and misconceptions of prenuptial agreements in Illinois. The information above has been garnered from our substantial marital law and litigation experience in the Chicago area.
Illinois gives broad freedom to couples to address and resolve issues regarding support, division of property and other matters subject to the Marriage Act as well as non-Matrimonial issues such as issues related to ownership and use of a family business . Full financial disclosure and an understanding of each party’s respective needs and interests are important components leading to the acceptance and enforceability of agreements through the court.
In the end, the ultimate purpose of a premarital agreement is avoidance of protracted litigation and emotional pain.