What do you think of when you hear the words ‘prenuptial agreement’? Many people associate them with a lack of faith in a couple’s upcoming “I Dos”. While one objective is wealth protection in the event of divorce, there are a number of reasons why a couple might choose to sign a prenup. We recently chatted with local attorney, Carolyn Hegge, from Stroud, Willink & Howard, LLC to better understand the objectives of prenuptial agreements.
LMW: Tell us a little about yourself and Stroud, Willink & Howard.
Carolyn: I have been practicing law at Stroud, Willink & Howard, LLC since 1982. My practice focuses on estate planning and non-profit organizations. As an estate planning attorney, I assist clients with prenuptial agreements as well as other estate planning documents. Founded in 1892, Stroud, Willink & Howard, LLC, is a full service law firm that focuses on business law and estate planning. The firm has endured and prospered for more than 120 years because our goal always has been to fully understand our clients’ needs and objectives and deliver timely and efficient results to help our clients succeed, not just today but for generations to come.
LMW: What are the primary reasons couples choose to get a prenup?
Carolyn: Prenups are tailored to each couple’s unique circumstances, and it is easiest to answer this question by giving examples of the circumstances where prenups are commonly used.
- A. One or both spouses have children from a prior marriage or relationship and at least one of the spouses is not financially independent (i.e., lacks the means to support himself/herself).Objectives: Typically, the spouse with children from outside the marriage will have acquired some wealth prior to the contemplated marriage. The primary objective of the prenup in this situation is to ensure that some or all of this spouse’s wealth (and additional wealth the spouse accumulates during the marriage) is available to take care of his/her children from outside the marriage after his/her death. Without a marital property agreement, the children from outside the marriage are at risk of receiving nothing if their parent dies first. Another objective may be to provide for the surviving spouse’s support if he/she is not financially independent. Without a marital property agreement, the surviving spouse is at risk of being disinherited in favor of the predeceasing spouse’s children from outside the marriage.
- B. Both spouses financially independent (i.e., can support themselves without the other spouse’s help), no kids.Objectives: Typically, the main objective in this situation is to plan for divorce, with death planning being a secondary consideration. Also, if there is a possibility that the couple will have children in the future, the prenup should plan for children, too.
- C. Traditional marriage (i.e., one spouse will be the homemaker and the other spouse will be primarily responsible for earning a wage or salary) where the couple agrees with the basic philosophy of the Wisconsin Marital Property Act (i.e., marriage is a partnership and all income earned or received during marriage is owned 50/50 by the spouses regardless of which spouse “earned” it or received it) and all of the couple’s wealth will be acquired by reason of labor expended during the marriage.Objectives: The primary concern in this situation is the financial security of the surviving spouse and any children born of their marriage. However, in this scenario, the couple’s goals and objectives parallel the intent and purpose of the Wisconsin Marital Property Act so a marital property agreement probably is not necessary, although it would not hurt to have one.
- D. Retired couple where both spouses are financially independent, where one or both spouses has children from outside the marriage, and where the couple will not have children together.Objective: The primary objective in this situation is to protect each spouse’s wealth (i.e., make sure each spouse’s wealth remains his/her individual property after the marriage) so that each spouse can pass his/her wealth to his/her own children when he/she dies.
- E. One spouse has substantially more “wealth acquired outside the marriage” (i.e., assets acquired through inheritance or gift or brought to the marriage) than the other spouse.Objectives: Typically, the wealthier spouse will want to retain total control over the “wealth acquired outside the marriage” during the marriage and he/she will not want the other spouse to have any claim to the “wealth acquired outside the marriage” in the event of a divorce. Also, the wealthier spouse typically wants to have the option to give the “wealth acquired outside the marriage” to someone other than his/her spouse when he/she dies. If the spouse without “wealth acquired outside the marriage” is not financially independent, he/she may want the prenup to require the wealthier spouse to provide financial support to him/her if the spouses get divorced or after the wealthier spouse’s death if the wealthier spouse dies first.
LMW: What is the first step for a couple seeking a prenup?
Carolyn: The first step for a couple seeking a prenup is to consult with a lawyer. In order to ensure that the prenup will be enforceable, each party should retain their own lawyer.
LMW: What are the basics of a prenup?
Carolyn: The first step is for each party to meet with his/her own lawyer. The lawyer will discuss Wisconsin’s Marital Property Act with his/her client—the Wisconsin Marital Property Act controls the property rights of married persons in Wisconsin. The lawyer will also ask the client questions that will help identify the items that need to be covered in the prenup. One party’s attorney will be primarily responsible for drafting the prenup, and the other party’s attorney will review the draft of prenup and suggest changes. It can take several weeks for the parties and the lawyers to agree on the final terms and conditions of the prenup. The parties will also need to fully disclose their income, assets, and liabilities to each other in writing before they sign the prenup in order for the prenup to be enforceable.
LMW: What recommendation do you have for couples seeking a prenup?
Carolyn: Start working on your prenup as soon as possible. Negotiating a prenup is very stressful, and you do not want to be signing the prenup the day before your wedding or even the week before your wedding.
Disclaimer: The information in this article is provided for general informational purposes only and should not be considered tax or legal advice. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.
If you’d like to discuss personal circumstances regarding a prenuptial agreement, please feel free to contact Carolyn at Stroud, Willink & Howard, LLC.