The number of couples considering a prenup – or prenuptial agreement – in advance of marriage is on the rise. This is not just true for wealthy individuals or older couples with children from previous marriages. Prenups are becoming increasingly popular among pragmatic, younger couples – especially millennials.
What is a Prenuptial Agreement (aka Prenup)?
A prenup is a legal contract negotiated in advance of marriage that addresses the treatment of assets and debts during the marriage and the division of assets and debts in the event of divorce. It is a form of financial planning used to set expectations during the marriage and also to dictate how financial issues will be resolved if the marriage ends.
Why Would a Couple Create a Prenup in Wisconsin?
There are a number of reasons why younger couples are more likely to consider a prenup:
• More Assets At Marriage. Younger couples are more likely than their parents were to delay marriage until they are financially secure. As a result, they are bringing more assets (such as a house, retirement accounts, etc.) to the marriage.
• Higher Student Loan Debt. They are also more likely to have substantial student loan debt. In the absence of a prenup, one spouse may be saddled with half of their ex-spouse’s student loan debt following a divorce.
• Divorced Parents. Younger couples are more likely than their parents to have had divorced parents. This may make them more aware of the unfortunate realities of divorce and the advisability of having a financial plan in place if divorce occurs.
Whatever the reason, it is clear that any stigma surrounding prenups is not the same as it once was.
Ultimately, couples will likely benefit from considering a prenup as an option regardless of whether they decide it’s the right choice for them. The following blog post provides four pieces of advice for Wisconsin couples to consider when deciding whether or not to obtain a prenup.
1. Understand Wisconsin’s Marital Property Act.
In Wisconsin, if there is no prenup, the parties’ income, assets and debts are subject to the Marital Property Act (Wis. Stats. ch. 766). Put simply, the Marital Property Act causes all income, assets and debts to become equally, jointly owned following marriage. This includes everything that existed prior to the date of marriage and everything accumulated after the date of marriage. In the event of divorce, a court will determine how to divide the marital assets and debts. There is a presumption that the marital assets and debts will be divided equally (50/50) between the parties.
A prenup is an agreement to essentially “opt out” of the application of the Marital Property Act to some or all of the parties’ assets and debts. The parties can agree to classify certain property as individual property that is separate from the rest of the marital estate. The parties can agree that, if there is a divorce, individual property will be awarded solely to that individual and only marital property will be divided equally between the spouses.
A prenup can also address other financial issues, such as whether one spouse may request spousal support from the other.
2. Engage your partner in an honest and realistic discussion regarding finances.
Whether or not to obtain a prenup may not be a romantic discussion for couples who are planning to wed. However, it is certainly a practical discussion, and some couples find the prenup process to be helpful in terms of organizing finances in advance of marriage.
For a prenup to be enforceable, both parties first need to make a full and complete disclosure of their assets and debts to the other party. This is to ensure that both parties are fully-informed before entering into the contract. As part of this financial review, the parties can discuss in detail how finances are to be handled during the marriage. For example, “Will we have a joint checking account for household expenses? How much should we set aside from our paychecks for retirement savings? What is our monthly budget?” Etc. All good topics to discuss before marriage.
3. Plan your prenup well in advance.
If you and your partner plan to get a prenup, it is important to start the process early. Last-minute prenuptial agreements are not only poorly executed, but they are often unenforceable.
For a prenup to be enforceable, a court must be satisfied that both parties were fully informed before they entered into the contract and that they entered into the contract voluntarily without “undue influence” or pressure. For example, if one person provides the other with a prenup on the eve of their wedding and states that he or she will not proceed with the marriage unless the prenup is signed – a court would likely find that the person was under duress when signing the contract and as a result the prenup is unenforceable.
The process takes time, and the farther in advance you and your partner prepare the prenup agreement, the better.
4. Seek legal representation from an experienced family law attorney.
Another way to clearly demonstrate that both parties were fully informed before entering into the prenup is for both parties to have their own attorney. A family law attorney can review and explain the prenup in detail with their client and negotiate modifications to the contract to better protect their client’s interests. Even if the couple is in complete agreement regarding the terms of the prenup, independent counsel is an important marker of a binding, enforceable contract.
Additionally, there are endless possibilities for the content of a prenup. The provisions of a prenup may be typical (i.e., waiving spousal support for either party) or they may be unusual (i.e., deciding who will keep a pet if the parties separate). An attorney will be able to draft the prenup to fit the couple’s unique circumstances and will be able to make recommendations for provisions not previously considered. Further, because a prenup will substantially alter each spouse’s property rights in the event of divorce, it is generally advisable for both parties to have attorneys when entering into a prenup.
For consultation regarding this topic or any others, consider contacting one of family law attorneys at Hawks Quindel, S.C. in our Madison or Milwaukee offices.