What to Consider When Getting Married

When you get married, you're risking having your heart broken, but you're also risking your financial assets.  Your lawyer can't prevent the broken heart, but if you want to minimize the financial risk, you need a premarital or prenuptial agreement – a "prenup."

The requirements for a prenup are deceptively simple.  Per Illinois statute, "A premarital agreement must be in writing and signed by both parties.  It is enforceable without consideration."  The difficulty comes in the enforcement section of the statute.

A premarital agreement is not enforceable if a  spouse proves that he did not execute the agreement voluntarily.  Many times a person who is trying to avoid the consequences of a prenup will claim that he did not sign the agreement voluntarily.  A simple refusal to marry a person if he does not sign a prenup does not make the agreement involuntary.  However, consider the case where a man and a woman are getting married.  She is young, maybe 22.  The invitations have gone out.  She has her dress.  She's made large deposits toward the reception.  The week before the wedding, the groom demands a prenup.  If the bride refuses, she is faced with heartbreak, the embarrassment of calling off the wedding, financial losses, etc.  Such a situation could be determined to result in an involuntary execution of a prenup.  Therefore, it is always best to negotiate and sign a prenup well before the wedding date and to sign a ratification agreement after the wedding to further prove your spouse signed voluntarily.

"A premarital agreement is [also] not enforceable if the party against whom enforcement is sought proves that:

the agreement was unconscionable when it was executed and, before execution of the agreement, that party:  (i) was not provided a fair and reasonable disclosure of the property or financial obligations of the other party;  (ii)  did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and (iii)  did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.

The issue of unconscionability is a gray area.  A judge, not a jury, determines if an agreement is unconscionable.  Although the statute says the agreement must be unconscionable when it is executed, in reality the courts often look to whether or not an agreement in unconscionable at the time of the divorce.  For example, assume husband and wife both come into a marriage with few or no assets, have equal levels of education, and sign a prenup that says they will never share any property – everything he ever earns or acquires is his and everything she ever earns or acquires is hers.  At the time the agreement is signed, it appears to be equal.  However, if the husband turns out to be Bill Gates, is it unconscionable at the time of the divorce to award the wife none of his assets or income?  Most people would answer yes.

Issues of support are further complicated.  A prenup cannot waive or determine child support.  A parent cannot waive child support on behalf of a child, and the amount of support is determined by the courts.

Regarding alimony (also called maintenance or spousal support), it can be waived in a prenup, but in addition to the issue of unconscionability, there is a standard of "undue hardship."  "If a provision of a premarital agreement modifies or eliminates spousal support and that modification or elimination causes one party to the agreement undue hardship in light of circumstances not reasonably foreseeable at the time of the execution of the agreement, a court, notwithstanding the terms of the agreement, may require the other party to provide support to the extent necessary to avoid such hardship."  Again, the issue of "not reasonably foreseeable at the time" is a gray one.

Illinois recently changed the laws regarding maintenance.  There is now a set formula based on the income of both parties and the length of the marriage.  However, it is still up to the judge to decide if maintenance should be paid at all.

In light of these gray areas and changes in circumstances, no prenup can be guaranteed to work at all times, but there are measures you can take to increase the likelihood of enforcement.  First and foremost, each person must be represented by his or her own lawyer.  The lawyers cannot be in the same firm.  The wife's lawyer should not have ever represented the husband and vice-versa.  In addition, the wife's lawyer should not be in the husband's golfing foursome and vice-versa.  One way to try to invalidate a prenup is to say that you did not understand what you were signing.  If your future husband is represented by a independent lawyer who explains the prenup to him and negotiates changes to it, it is hard for your husband to argue that he did not know what he was signing.

Second, the agreement should be "fair."  Although it is legal to say "nothing of mine will ever be yours," such agreements are more difficult to enforce.  Instead, reasonable provisions should be made in the event of death or divorce.  Death time provisions can often be handled through the purchase of life insurance.  In addition, a prenup can provide for separate and joint property.  For example, it can say that all of wife's "family property" and the income from the property is hers alone, but that any other income or assets she acquires after the marriage are marital property.

Third, you must disclose all of your assets, liabilities and income to your future spouse in negotiating the agreement.  Your future spouse cannot be determined to have waived her interest in assets that you did not disclose to her.

So, negotiate the agreement early on, have independent lawyers, provide full disclosure, and be reasonable.  Then your agreement will have the best chances of being enforced.

Once you are married, the legalities aren't quite over.  First, whether you have a premarital agreement or not, everything you own before you marry remains your "non-marital" property in a divorce and cannot be given to your spouse.  However, you will need to prove that you owned the property before you were married.  Keep records that show what you owned before you were married, and do not mix your non-marital property with marital property.  For example, if you have a non-marital bank account, do not deposit your paychecks into that account after you are married.  Likewise, do not add your spouse's name to the property, or he or she will now own half of the property.

Second, if you haven't had your estate planning documents prepared before you're married, you should have them prepared now, especially if you have children from a previous relationship.  If you are married and have children (whether with your spouse or from a previous relationship) and you die, half of your property will pass to your spouse and half to your children.  If that is not what you want, you need a will to provide otherwise.

You should also have powers of attorney for health care and property.  If you are unable to make your own decisions due to an accident, illness, or otherwise, you spouse can make medical decisions for you under Illinois law (although it is easier with a health care power of attorney), but he cannot make financial decisions for you.  If you have not signed a power of attorney and you become disabled, your spouse will need to go to court to be appointed your guardian.

Third, you should update your beneficiary designations.  Do you have an IRA?  When you opened it, were you single and maybe named your parents as the beneficiaries?  If you want your spouse to receive the IRA if you die, you need to name him as the beneficiary.  Check all retirement plans, life insurance polices, annuities, and any other assets you own that have a named beneficiary.

You should also review your life insurance.  What will happen to your spouse if you die?  Will he be forced to sell your home because he cannot afford it without your income?  Should you increase your life insurance?  Should your spouse?

If you own a home together, you may want to retitle it after you are married.  In Illinois, a married couple can own their primary residence as tenants by the entirety.  Tenants by the entirety means that you own the property equally and that the home will automatically pass to the surviving spouse upon the death of the first spouse.  It has one additional significant advantage.  Under Illinois law, if a home is held as tenants by the entirety, a creditor cannot force the sale of the home to pay a debt of just one spouse.

For example, assume that husband and wife own their home as tenants by the entirety and that husband has a gambling problem or is in a car accident or is a doctor who is sued for malpractice, and that a creditor obtains a judgement against husband.  That creditor cannot force the home to be sold to pay the husband's debt.  A creditor can only force the home to be sold to pay a debt if both husband and wife are liable on the debt.  For example, if husband and wife jointly borrow money, then the home can be used to satisfy that debt.  (The one major exception for creditors is, as always, the Internal Revenue Service.)

So, enjoy your engagement, your wedding and your honeymoon, but don't forget to take care of legal matters.  If a prenup, will or power of attorney becomes necessary, you'll be glad you did.