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.

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.

In today’s world, prenuptial agreements are increasingly common, as people are waiting until they are older to get married for the first time, which also means that they are likely to have accumulated significant assets before they are married. Nobody wants to think about the prospect of divorce, especially before you are even married, but a prenuptial agreement can be greatly beneficial if you and your spouse do eventually decide to call it quits. A prenuptial agreement can help you and your spouse determine the majority of your financial and property division issues with little resistance. Even though a prenuptial agreement is a legal contract, it is not set in stone and can be challenged if you believe the agreement is unfair in some way.

Challenging Your Prenup

As a legally-binding agreement, a prenuptial agreement is also legally enforceable. This means that you must abide by the terms of your prenuptial agreement unless the agreement or portions of the agreement are invalidated. If you feel as if your prenuptial agreement is invalid or unfair, you have the right to ask the court to hear your case. The judge will not simply invalidate a prenuptial agreement because you do not like the terms of the agreement anymore. You must prove that there is a legitimate reason for the invalidation of a section or the entire agreement. Common reasons that a judge may invalidate a prenuptial agreement include:

• The agreement was disproportionately favorable toward one spouse.

Many people are familiar with prenuptial agreements—or prenups—and the pros and cons associated with them. However, what most do not know is that they can actually be quite complex and address much more than standard asset division. They are also not as ironclad as popular culture paints them to be. It is imperative that before you enter into a prenuptial agreement, you have a good understanding of exactly how they work.

What to Include and Leave Out

Among the primary reasons that couples choose to enter into a prenup are to protect one spouse from the consequences of the other’s debt, or to ensure that provisions are made for the children of a previous marriage. Inheritance laws in most states do not differentiate between the children of a current marriage or a previous relationship, so if there was a promise to, for example, save a personal item for a child of one’s first marriage, it can be advantageous to note that in a prenup. Prenuptial agreements are legally binding, unless it can be proved that the agreement is unenforceable.

With this rationale for entering into a prenup, it is perhaps not surprising that prenuptial agreements, at their most basic, are about money. The provisions you include should almost exclusively deal with financial matters. A prenup is not the place to discuss future child custody or who should take the trash out every day. While asset division is usually thought to fall under the area of divorce law, earmarking certain items in a prenup is perfectly legal and will help to control the situation if there is a question of inheritance. It is also important to note that Illinois and the other states that have ratified the Uniform Premarital Agreement Act (UPAA) explicitly ban any provisions being made for child support in the event of divorce, but they do permit most provisions regarding spousal support to stand.