Owning a business can be both lucrative and deeply rewarding. However, as any business owner can tell you, it is not easy. Whether you are an entrepreneur running a startup or a business owner with decades of experience, getting married can change things. Anyone who plans to wed should understand how marriage and divorce can impact their business. One way to protect your business is through a prenuptial agreement.

A Prenup Can Protect the Business in the Event of Death or Divorce

No one gets married thinking that the marriage will end in divorce. The idea is unromantic at best and offensive at worst. However, statistics show that 40-50 percent of marriages do ultimately end up in divorce. Planning for this possibility is reasonable even if your relationship is thriving. Furthermore, prenuptial agreements can be beneficial even if a couple stays together until one of the spouses passes away.

You can use a prenuptial agreement or premarital agreement to classify certain property as marital property belonging to both spouses and certain property as non-marital property belonging to only one spouse. Without a prenup, business assets and income can become entangled with personal assets and income. This can make dividing assets during divorce much more complicated and contentious than it would otherwise be.

Prenuptial agreements are useful for any type of couple. Individuals may use a prenuptial agreement to protect assets, such as a small business, in the event of divorce. Individuals who choose to sacrifice career advancement to stay home with children may use a prenup to ensure they will have access to spousal support if the marriage ends. Older couples who are getting married for the second or third time may have children from a previous relationship and choose to use a prenuptial agreement for inheritance reasons. The possibilities are nearly endless. However, prenuptial agreements may be completely worthless if they are not drafted properly.  

Prenuptial Agreements Must Be Drafted Correctly

You and your soon-to-be spouse may trust each other to simply make plans verbally. They may assume that they do not need a formal agreement. However, prenuptial agreements must be in writing and signed by both parties to be enforceable. The parties must be of sound mind and fully agree to the terms of the prenup.

Ambiguity Regarding Finances Can Invalidate a Prenuptial Agreement

When an engaged couple wants to protect their financial interests before entering into a marriage, they may decide to draft a prenuptial agreement. The first step in this process is for both parties to fully disclose their assets and liabilities. They will need to list income as well as property like retirement accounts or investments. Student loans and other liabilities should also be fully disclosed.

For many married couples, a prenuptial agreement can provide a sense of security, ensuring that they will be able to avoid uncertainty and minimize conflict in the case of a divorce. By using a prenup to make decisions about issues such as property division and spousal maintenance ahead of time, spouses can protect their financial interests and make sure they will each be able to move forward successfully following the end of their relationship. However, there are some cases where a prenuptial agreement may be challenged by one party. While these challenges may be based on a variety of factors, one common reason a spouse may believe that a prenup should not be enforced is that it is unfair. By understanding when this type of challenge may be made, spouses can determine the best ways to approach these situations.

Unconscionability of Prenuptial Agreements

A prenuptial agreement may favor either party in certain ways, such as by granting one spouse a majority of the couple’s marital assets. Unfairness on its own is usually not a sufficient reason to challenge an agreement. A prenup will generally be enforceable unless it is “unconscionable,” or grossly unfair to one party. For example, if an agreement states that one spouse will maintain ownership of 95 percent of the assets the couple owns, it may be considered unconscionable because it would create a situation where the other spouse would most likely struggle to support themselves.

To successfully challenge a prenuptial agreement based on unconscionability, a person will also need to show that they did not have adequate knowledge of the other spouse’s financial resources before signing the agreement. Most of the time, when creating a prenup, a couple will provide each other with a full disclosure of their finances, including all sources of income, information about the assets they own, and any other issues that affect their financial resources. The parties may also waive their right to receive this type of disclosure. In general, a spouse cannot challenge a prenup based on unconscionability if they received a fair and reasonable disclosure from the other spouse or waived their right to a disclosure in writing. However, a prenup may be challenged if some of a spouse’s assets were not fully disclosed or if the other spouse did not have adequate knowledge of their partner’s income and assets.

When a couple is planning to get married, divorce is probably the last thing on their mind. When preparing for a life together as partners, a couple usually will not want to think about the possibility of their relationship ending. However, considering this issue can not only help a couple prepare for this unpleasant possibility, but it can also help them identify and address issues that may become a concern in their relationship in the future. After discussing these matters, a couple may find that creating a prenuptial agreement would be a good idea.

Reasons to Sign a Prenup

When creating a prenuptial agreement, or prenup, a couple will make decisions about how certain issues will be handled if their marriage ends, including through divorce, legal separation, or the death of a spouse. This can ensure that they will both have the financial resources they need in such cases, while also allowing them to minimize disputes during the divorce process. A prenup can be beneficial in many situations, including when:

• One or both partners have significant assets - While assets owned by one partner before getting married will be separate property that will not need to be divided between the spouses during a divorce, it can be easy for marital assets and separate assets to be commingled. For example, one partner may own a house, but the couple may expect to live together in the house, and they may both contribute to mortgage payments or improvements to the house during their marriage. A prenup can specify that certain assets will remain the separate property of one spouse and will not be divided in the case of divorce.

A prenuptial agreement (prenup) is a premarital contract regarding a couple’s property and assets, including how they will be handled in the event of a divorce. To be legally enforceable in our state, a prenuptial agreement must conform to the legal requirements contained in the Illinois Uniform Premarital Agreement Act. Even a seemingly small error could render a premarital agreement unenforceable. Here, our family law attorneys highlight four of the most common reasons why prenups are deemed invalid in Illinois.

No Formalized, Written Agreement

In some circumstances, you do not necessarily need a written agreement to have a valid contract. An oral contract is sometimes enforceable in Illinois. However, an informal or oral prenuptial agreement is never valid in Illinois. Under state law, a prenup must be “in writing and signed by both parties.” An informal pre-marriage “deal” is simply not enforceable. Only written and formalized prenuptial agreements will be enforced by state courts.

Prenup Contains Invalid Provisions

Not only does a prenuptial agreement have to be formal, but the contents must comply with strict state rules and regulations. There are only certain things that can be addressed within a prenup. If an agreement contains invalid provisions, the whole thing might be thrown out by a court. As a simple example, you cannot negotiate terms for child custody or child visitation within a prenup. In addition, you cannot pre-determine child support obligations.