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Having A Prenuptial Agreement May Save Your Marriage

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marriage.jpgPrenuptial agreements are contracts entered into by a couple before marriage to address financial matters that may arise during the marriage, and in the event of divorce or death.  While most of us may think of “prenuptials” as relating to divorce, they are actually a great estate planning tool as well.

Prenuptials can help couples start off with a feeling of security and the added benefit of having an open approach to their finances.  Wisconsin is a community property state, and in Wisconsin, these agreements are also called “premarital agreements” or “marital property agreements.”

The predominant reason why we as attorneys raise the subject of prenuptial agreements with our clients are second marriages.  Client in their 40s or 50s typically have assets that they are bringing into a marriage, or children from a prior marriage. 

Without a prenuptial agreement, should an individual die, it's quite possible that their children could be excluded from their parent’s assets.  Also, one party may have continuing financial obligations to children or a former spouse under a prior divorce decree.  One of the key ways to protect those children and a current spouse is a prenuptial agreement. 

The possibility of divorce is, of course, a prominent reason for a prenuptial agreement.  Some of the other circumstances where parties need a prenuptial agreement are:

  • If one party is coming into the marriage with a home and investments, the agreement can spell out whether those assets will be kept separate or how they'd be taken into account in the event of a death or divorce.
  • Couples may have fewer assets to split than they have debts. If one party has significant obligations, an agreement can keep the debts separate too.
  • Earning more or less than your spouse generally isn't an issue while you're married, because there's a presumption that both people share and share alike. But in the event of a divorce, a prenuptial agreement can set terms and conditions on the amount and duration of maintenance the higher-wage earner pays or the lower-wage earner receives.   In some circumstances, the agreement may specify how the parties will contribute to the payment of common expenses during the marriage.
  • If one or both parties have a small business, a prenuptial agreement is warranted. It protects the business' assets and protects the non-owner spouse from potential business liabilities.
  • An inheritance isn't considered community property, even in community-property states. If you know you are going to come into some money or other inheritance assets, be prepared for questions and complications. Why? Because the heir needs to prevent the assets from being commingled with  marital assets to keep his or her ownership intact. It's relatively easy to do this if you inherit cash, stocks or bonds. But the situation quickly becomes complicated if you inherit an interest in a home that you subsequently live in. A prenuptial agreement can spell out how you maintain your separate interest in that home, even if you both contribute to the mortgage.

There are limitations to prenuptial agreements.  Prenuptial agreements cannot deal with custody and placement of children (this includes things such as in what religion to raise the children, their schooling, etc.) and child support. 

Also, a divorce court is permitted to invalidate provisions of an agreement that are unjust at the time of divorce.  This could occur in long term marriages if there is a great disparity between spouses’ incomes and no or little maintenance (alimony) being paid, or if a provision for division of property leaves a dependent spouse with nothing.  It is important that an agreement be fair at the time of divorce as well as at the time of marriage. 

Because a prenuptial agreement will almost certainly alter a spouse’s rights under the law, in order for an agreement to be enforceable:

  • The agreement must be in writing.
  • The agreement must be executed voluntarily, and both parties must have the opportunity to consult with independent counsel.
  • The agreement must make full and fair disclosure of all financial information.
  • The agreement must be fair at the time of marriage and at the time is is enforced.

A prenuptial agreements is a type of insurance for both parties when contemplating marriage.   The process sometimes involves awkward communications between an engaged couple, but those conversations may prevent the financial misunderstandings that lead to divorce.

Our attorneys have many years of experience in laws regarding prenuptials in Wisconsin.  Planning weddings and a lifetime together is stressful enough, so we approach each case in a thoughtful and sensitive manner.  If you or a family member are considering marriage, take the time to speak with us.  We are here to help start your marriage on solid financial footing.