Published in the Monday November 2, 2020 edition of the Chicago Daily Law Bulletin
Michael C. Craven, J.D., L.L.M. and C.P.A. is a partner at Harrison LLP. His practice focuses on complex divorce and family law litigation, mediation, and collaborative law cases. He can be reached at mcraven@harrisonheld.com.
For my colleagues who do not practice family law, I would advise you to pay attention when your clients may need a prenuptial agreement and then be proactive for them. Understanding when your client may benefit from a prenup, identifying that need and helping your client find the right family law attorney will strengthen your current and future client relationships. I find that the attorneys practicing estate planning, real estate and corporate law often have, and sometimes miss, the opportunity to recommend prenuptial agreements to their clients. Of course, having basic knowledge about prenups is very useful for all attorneys.
Oftentimes life cycle events trigger the need for different types of legal services. Someone entering marriage may seek out an estate planning attorney to create their first will or a new one, or that person may purchase a home to share with their new spouse after they get married. These situations, among many others, create the ability for you to add value for your client by pointing out the need to consider a prenuptial agreement.
When Should you Consider Referring a Client for a Prenup?
• Estate planning: When there are obligations imposed by a divorce decree benefiting a former spouse or children from a prior relationship.
• Real estate law: When representing unmarried buyers who intend to marry, making sure that premarital funds are not invested in the property in a manner that inadvertently creates the conversion of those monies into a marital asset.
• Corporate and business law: Protecting a business owner’s interest in a company created prior to the marriage from claims of the spouse to be.
The Purpose of Prenups
Clients inquiring about prenuptial agreements often ask me similar questions. What can these agreements do for me? Do I really need one? From a big picture perspective, I have three goals for my prenuptial agreements:
1. Providing for a known result or process, such as a specific settlement amount or formula.
2. Limiting or removing a court’s discretionary power; and
3. Limiting or removing the desire to litigate a divorce case or estate issue.
The Procedure After a Prenuptial Agreement Referral
When referred a potential prenup client, the first step is generally a conversation I, and often the referring attorney, have with the client. During that conversation, I gather information, explain what a prenup can and cannot do, and determine the client’s needs. Based upon what I learn, I determine the need for an agreement and the salient terms.
Common Prenup Clientele
Two categories of couples tend to benefit the most from prenuptial agreements:
• Where one or both people have financial obligations (typically from a previous marriage).
• Where one or both people have accumulated wealth or expect a large inheritance.
Traditionally, prenuptial agreements were most common in two types of situations. First, in second marriages or situations where at least one of the parties already had a child. Second, for couples in which one party had a disproportionate amount of wealth as compared to the other. These fact patterns continue to be a big driver for prenuptial agreements. In both cases, one party may seek to assure compliance or the ability to meet preexisting financial obligations, familial obligations such as supporting aging parents or other family with special needs, assuring continuity in family businesses, or the desire to pass on wealth to the next generation or charity.
In recent years, I have seen a new demographic added to my clientele. Many of these clients are younger, never married, without children and free of prior obligations. This group often accumulated wealth at a young age due to a business transaction or inheritance. Often, the motivation is the urging of parents or grandparents who are concerned about the wealth they intend to pass on to their family.
Common Prenup Terms
Prenuptial agreements typically outline terms for cases of death and divorce. Below are common examples. In many cases, clients opt for protection in only some of the areas that can be covered in agreements.
• Requiring waivers for all property acquired prior to marriage and income thereon.
• Protecting any gift or inheritance acquired during the marriage.
• In Illinois, marital property is divided equitably. An agreement can state what that division is or ignore the concept and set a specified division such as 50/50 or a specified dollar amount (which may be variable based upon the length of marriage).
• Protecting an existing business from all spousal/martial claims. This is especially important for closely held businesses.
• Setting rights to a home that one party already owns, and that will serve as the marital residence.
• Setting maintenance (alimony) amounts or providing for its express waiver.
• Setting or eliminating the right of a party attorney fees and litigation costs.
• Terms regarding a party’s death often attempt to balance the need or desire to pass property to one’s children from a prior relationship while also assuring financial stability to a new spouse who may survive the party wanting the prenup.
What Prenups Cannot Do
Prenuptial agreements in Illinois cannot predetermine issues about parenting. Agreeing on these rights and obligations must be done at the time of divorce. Illinois courts are not willing to cede its authority and responsibility to determine the best interests of children. Thus, prenups cannot determine any of the following:
• Decision-making rights (custody)
• Parenting time (visitation schedules)
• Responsibility for financial obligations (such as child support or college education funds)
Addressing the Emotional Response to Prenups
Bringing up the concept of a prenup may be uncomfortable for both attorney and client. However, forms of prenuptial agreements have been around throughout history. Many ancient religions include marriage contracts that provide predetermined terms if the marriage is terminated by means other than death. Nevertheless, many couples view prenups as unromantic or unnecessary. This is especially common when the parents of the couple initiate the conversation. Traditional or not — romantic or not — the bottom line is that marriage becomes complicated if it unravels. If many cases the stress and uncertainty of resolving a marital dispute in a lengthy and costly court battle can be avoided with a well-prepared prenuptial agreement. If you can assist your client in avoiding these problems, you will have provided your client with a valuable service.
