Prenuptial & Postnuptial Agreements
updated 21 December 2018
by Wes Cowell
Prenuptial agreements are flexible and enforceable just like any other kind of contract. They used to be a good fit for only a few marrying couples -- usually just the very wealthy or those with a prior family. A 2019 change in Illinois' property division law, however, now makes prenups a good idea for just about everyone. Prenups ensure predictabilityby identifying and dictate the disposal of property (including premarital purchases and wedding gifts), define alimony payments, protect family-owned businesses, and limit possible future divorce litigation.
History: Before 1 January 1990, the validity of prenuptial agreements was determined by Illinois common law, which said that
". . . a premarital agreement that governed property and maintenance rights was "valid and enforceable as long as three conditions are met: (1) the agreement does not create an unforeseen condition of penury due to one spouse's lack of property or employability; (2) the parties entered into the agreement with full knowledge, free of fraud, duress, or coercion; and (3) the agreement is fair and reasonable."
Kranzler v. Kranzler, 2018 IL App (1st) 171169 (Ill. App., 2018) citing Berger v. Berger, 357 Ill. App. 3d 651, 656 (2005).
The Uniform Premarital Agreement Act was adopted by Illinois, effective 1 January 1990, and applied to all prenuptial agreements executed on or after that date. Under the Premarital Agreement Act, a premarital agreement was to be held invalid and unenforceable if the party challenging it proved that
"(1) he or she did not execute the agreement voluntarily; or (2) the agreement was unconscionable when it was executed and, before execution of the agreement, the party was not provided a fair and reasonable disclosure of the other's property, did not waive the right to such disclosure in writing, and did not have (and could not reasonably have had) an adequate knowledge of the other's property."
Kranzler v. Kranzler (In re Marriage of Kranzler), 2018 IL App (1st) 171169 (Ill. App., 2018), citing Heinrich, 2014 IL App (2d) 121333, ¶ 49 (citing 750 ILCS 10/7(a) (West 2012)).
First Marriages: When couples plan for marriage, they often buy things to feather their nest . . . sometimes they even buy the nest, itself. They also receive gifts -- everything from cars and houses to cups and saucers. If those items are purchased before the couple says "I do," however, they're presumed to be non-marital property. The divorce law says:
Disposition of property and debts.
(a) For purposes of this Act, "marital property means all property, including debts and other obligations, acquired by either spouse subsequent to the marriage . . . .
. . .
Property acquired prior to a marriage that would otherwise be non-marital property shall not be deemed to be marital property solely because the property was acquired in contemplation of the marriage.
750 ILCS 5/503
This makes prenups important for just about everyone. With a simple prenuptial agreement, a couple can agree that property acquired prior to the marriage is marital (or non-marital) property and how it should (or should not) be divided in the event of a divorce or legal separation.
Prenuptial agreements can be simple, straightforward, and polite. They are not offensive documents and they do not insult your betrothed nor the institution of marriage. They're a smart option. The alternative, in the event of a divorce (that's a 50/50 proposition, these days), could lead to a lot of squabbling in court and some hefty attorney's fees.
A lot of Debt: Some first-time fiances / ees come into a marriage with a fair amount of debt -- whether from student loans, credit cards, back taxes, or what have you. That's all non-marital debt. After the marriage, they're going to pay those loans down with marital money. If there is a divorce, the marital estate has a right to be reimbursed for the marital money paid against the non-marital debt. A prenuptial (or post-nuptial) agreement is an excellent way to memorialize the amount of debt to be paid and to help the couple realize the financial implications of the marriage.
Second and Later Marriages: Prenups are a good idea for folks with kids from a prior family. One court put it this way:
Today, divorce is a commonplace fact of life . . . As a result there is a concurrent increase in second and third marriages – often of mature people with substantial means and separate families from earlier marriages. The conflicts that naturally inhere in such relationships make the litigation that follows even more uncertain, unpleasant, and costly. Consequently, people with previous “bad luck” with domestic life may not be willing to risk marriage again without the ability to safeguard their financial interests. In other words, without the ability to order their own affairs as they wish, many people may simply forgo marriage for more ‘informal’ relationships. Prenuptial agreements, on the other hand, provide such people with the opportunity to ensure predictability, plan their future with more security, and, most importantly, decide their own destiny.
Brooks v. Brooks, 733 P.2d 1044, 1050 (Alaska, 1987)
Marital Property Basics: Illinois’ divorce laws define “marital property,” but spouses (before or after the marriage) may agree to a different definition. They may identify certain properties as marital or non-marital. They may agree that one spouse’s pre-marital homestead be considered to be marital property; or that any businesses created during the marriage be considered the entrepreneurial spouse's non-marital property. The spouses agree to a specific division of property (say, 50/50) or to the allocation of a particular item (“the wife shall receive a new, full-size, automobile and cash equal to four-year’s tuition at Harvard University). Likewise, they may agree on maintenance (alimony) payments (both amount and duration) and lump sum payments (“if we divorce within five years of the date of marriage, the husband shall pay to wife one million dollars; if we divorce after five but within ten years of marriage, the husband shall pay to wife five million dollars”).
Effective Date of Prenups: Illinois law (750 ILCS 10/5) says that prenuptial agreements become effective upon marriage.
Covering Wedding Expenses: Illinois used to have a "breach of promise to marry" law that allowed jilted spouses to recover damages for expenditures made and debt incurred for the wedding. That law was abolished in 2016. Many couples try to include in prenuptial agreements "who-pays-what-if-the-wedding-is-called-off" language. That's a mistake -- the prenuptial agreement never takes effect if the wedding doesn't happen. If you sign a prenuptial agreement, but the marriage is called off, the prenup has no effect. If you're worried about being stuck with a lot of debt if the wedding is called off (like, for the invites, the church, the hall, the food and drink, the band, insurance, etc., etc.) you need a "wedding contract" -- a prenuptial agreement won't help you because it will never become effective. Allocating costs and debts from a broken engagement requires a wedding contract.
Illinois law does not require that a fiancé/ée consult with an attorney or that an attorney Legal Representation:In re: Estate of Gigele, 64 Ill.App.3d 136, 20 Ill.Dec. 935, 380 N.E.2d 1144 (1st Dist., 1978) the wife was not informed of her right to consult an attorney, she had not read the instrument, it was not explained to her, her husband told her it was for her protection, and she had no knowledge of her husband’s finances.approve a prenuptial agreement for the agreement to be valid. Nevertheless, when asked to invalidate an agreement, courts routinely consider whether the disadvantaged spouse had adequate legal representation during the negotiation of the agreement. Courts are far more willing to find “duress” – and invalidate a prenuptial agreement – where a fiancé/ée lacked legal representation and where the fiancé/ée was not informed of his or her right to consult an attorney prior to signing the agreement. For example, in
Duress and Coercion: Illinois law says that to be valid, a prenuptial agreement must be signed voluntarily by both parties. A signature obtained by duress or coercion will invalidate a prenuptial agreement. In 1962 the Illinois Supreme Court defined duress as “a condition where one is induced by a wrongful act or threat of another to make a contract under circumstances which deprive [the individual] of the exercise of free will.” Kaplan v. Kaplan, 25 Ill.2d 181, 185, 182 N.E.2d 706, 708 (1962). The bar is not set low. In Kaplan, the bride-to-be threatened to expose the groom’s adulterous affair – and that was insufficient to prove his “duress.” Kaplan v. Kaplan, 25 Ill.2d 181, 185, 182 N.E.2d 706, 708 (1962). In another case, the court refused to find coercion where the groom adamantly demanded a prenup and made a prenuptial agreement a precondition to marriage. In re: Marriage of Barnes, 324 Ill.App.3d 514, 258 Ill.Dec. 139, 755 N.E.2d 522 (4th Dist., 2001).
Unconscionability: Gross unfairness (“unconscionability”) of a prenuptial agreement is not enough to invalidate it. Other factors (see below) must be present in addition to the alleged unconscionability in order to set aside a prenuptial agreement. Unconscionability has been defined as “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party . . . . A contract is unconscionable when it is improvident, totally one sided or oppressive.” In re: Marriage of Gurin, 212 Ill.App.3d 806, 815, 156 Ill.Dec. 877, 84, 571 N.E.2d 857, 864 (1st Dist., 1991).
When asked to consider the “conscionability” of a prenuptial agreement the court considers the circumstances that existed when the agreement was signed; not circumstances that may have arisen since the agreement was executed. For the court, the question is “regardless of how the agreement looks or works at the time of divorce, was it unconscionable when executed?”
Besides oppressiveness or one-sidedness, to invalidate a prenuptial agreement on grounds of unconscionability, a spouse must also prove that he or she:
did not receive a fair and reasonable disclosure of the property or financial obligations of the fiancé/ée,
did not voluntarily waive the right to disclosure, and
lacked an adequate knowledge of the fiancé’s assets or obligations.
In other words, if the court concludes that the agreement was conscionable at the time it was executed, the requirements about disclosure are not considered. If, however, the divorce court concludes that the prenuptial agreement was unconscionable when signed, it will still be enforceable if either financial disclosure was made, financial disclosure was waived, or the challenging spouse knew the finances even without financial disclosure.
Concealment of Assets: An otherwise valid prenuptial agreement may be rendered void if one of the parties conceals assets during the negotiation of the agreement. One of the purposes of the agreement is to get out on the table the respective financial circumstances of the spouses-to-be. Where one spouse conceals assets, the lack of disclosure prevents the disadvantaged spouse from making an informed decision when deciding whether or not to enter into the agreement – and that fact undermines the validity of the agreement. The Illinois Supreme Court has said: “specific knowledge is required before a prospective wife can intelligently choose to take a small sum in payment for a release of her rights and interests in her prospective husband’s property.” Watson v. Watson, 5 Ill.2d 526, 126 N.E.2d 220 (1955).
If the agreement calls for the payment of maintenance that is largely disproportionate to the value of the payor’s estate, the court will presume that assets were concealed and the paying spouse will have to prove that full disclosure was made during the negotiations. In re: Marriage of Drag, 326 Ill.App.3d 1051, 762 N.E.2d 1111 (3d Dist., 2002). Failure to meet that burden will invalidate the prenuptial agreement.
Waiver of Disclosure of Assets: When trying to put together a prenuptial agreement, the big bugaboo most folks want to avoid is disclosing their financial standing. People who are interested in prenuptial agreements are usually also interested in keeping their finances private . . . even from their betrothed. No problem, says Illinois law (750 ILCS 10/7(a)(2)(ii)): the parties may waive the required disclosure of assets. That waiver, however, must be in writing.
Waiver of Spousal Rights in Retirement Benefits: All qualified retirement plans are regulated by the Employment Retirement Income Security Act of 1974 (“ERISA”). The federal law requires that benefits be payable in either a “qualified and joint survivor annuity” or a “qualified pre-retirement annuity.” Those forms of benefit may be waived, but only with spousal consent; and spousal consent is effective only if certain requirements are met. A spousal waiver must:
be in writing;
must designate a beneficiary or a form of benefits that may not be changed without spousal consent or expressly permits changes in designations without further spousal consent;
acknowledge the effect of the waiver;
be witnessed by a plan representative or notary public;
be made within the applicable election period.
When spousal rights in retirement benefits are waived in a prenuptial or postnuptial agreement, the waiver will not be effective – and will not be recognized or honored by the plan – if the waiver fails to follow the requirements of ERISA. Failure to satisfy ERISA requirements – contrary to the terms of any prenuptial agreement -- will cause the spousal share of the plans at issue to be awarded to either the divorced spouse of the participant or the participant’s surviving second spouse.
Perhaps the most frequent mistake is to have a soon-to-be-spouse sign a prenuptial agreement and the spousal waiver. The waiver will be found to be ineffective as it was not signed by a "spouse;" because it was signed prior to the marriage -- when the "spouse" was not yet a spouse, but merely a betrothed. The proper way to achieve an effective spousal waiver of retirement benefits is to have the prenuptial agreement signed prior to the marriage and the spousal waiver executed after the marriage.
Amendments: Prenuptial agreements may be amended, but any amendment must be in writing and signed by both parties. Amendments do not require consideration to be valid.
Revocation: Prenuptial agreements may be revoked, but any revocation must be in writing and signed by both parties. Revocations do not require consideration to be valid.
Confidentiality of Puterbaugh v. Puterbaugh, 327 Ill.App.3d 792, 764 N.E.2d 582 (3d Dist., 2002). prenuptial Agreements: Prenuptial agreements are not protected by the “marital privilege.” In one case, a former husband was forced to reveal to his former wife the terms of his prenuptial agreement with his second wife. Although prenuptial agreements “address intimate aspects of marriage, they are not protected under a right to privacy because their confidentiality is not a fundamental right necessary to the concept of ordered liberty.”
When a married couple with a pre- or post-nuptial agreement heads to divorce court, the first thing to do is seek a "declaratory judgment" on the validity of the agreement under Article 2 of the Code of Civil Procedure. A declaratory Declaratory Judgments:judgement operates just like a final judgment. A declaratory judgment may be sought if it will terminate at least some part of the divorce case. This can help shorten divorce cases and potentially shave off tens of thousands of dollars in litigation expenses.
Husband’s Breach of Contract Action Against Wife Regarding Postnuptial Agreement Dismissed with Sanctions
In Davis v. Davis, 2019 IL App (3d) 170744, 144 N.E.3d 649, 437 Ill.Dec. 537, the husband brought a breach-of-contract action against the wife, alleging that she breached the parties’ postnuptial agreement by challenging its validity and that he was damaged because he was required to expend funds to defend the validity of the postnuptial agreement. Under the terms of the postnuptial agreement, in the event of a divorce, the husband was required to pay all of his own legal fees and a portion of the wife’s legal fees. The wife filed a motion to dismiss, which the trial court granted. In his claim, which was brought separate and apart from the pending dissolution of marriage action, the husband attempted to distinguish between his legal fees and damages in a breach-of-contract complaint. However, the appellate court noted that the husband was essentially attempting to make the wife pay for his fees and costs associated with the defense of the validity of the postnuptial agreement. The appellate court upheld the dismissal of the breach-of-contract action. The contract claim and the dissolution of marriage action involved the same parties, were based on substantially the same facts, and arose from the same occurrence. Because there was another action pending with the same parties and the same cause, dismissal was proper. The court further noted that dissolution proceedings are designed to dispose of all matters connected with the dissolution of a marriage. The appellate court also imposed sanctions on the husband and called his contact action a “dubious complaint” and the appeal a “meritless appeal” and required him to pay all of the wife’s fees and costs incurred in connection with the breach-of-contract action. 2019 IL App (3d) 170744 at ¶23. His action unnecessarily extended the proceedings between the parties.
Unfairness and Undermining the Marital Vows: Prenuptial agreements, by definition, beget unfairness. This is so because, in a divorce, “fair” is what a judge says it is when a judge says it; that is, at the end of a divorce case. Any result that differs from what a judge would order is, at least to a divorce lawyer, technically unfair. To the extent a prenuptial agreement obtains a result different from what a divorce court would award, the result is unfair. Still, “one man’s unfairness may be another’s justice;” and as long as the husband and wife are satisfied, who else could care?
Also to be considered, however -- especially for those entering into marriage for the first time -- is the fact that prenuptial agreements can often undermine the very vows of the marriage. Protected by a solid agreement, one spouse may breach the marriage vows knowing that, even if the breach is discovered, the aggrieved spouse will face the dilemma of either accepting the breach, condoning the betrayal, and preserving the marriage – or accepting the possibly costly and punishing terms of the prenuptial agreement and ending the marriage.