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3 times when prenups make sense

Legal Matters: Drafting and negotiating a prenuptial or postnuptial agreement can be stressful, but there are situations when these legal contracts are recommended.

May 12, 2023

3 Min Read
closeup of hands as man signs contract
LEGAL DOCUMENTS: A prenuptial agreement is a contract between future spouses that dictates how all or some of the couple’s property will be divided in the event of divorce or death. A postnuptial agreement is similar but is signed after a couple is already married. Richard Drury/Getty Images

by Tim Halbach

Negotiating and drafting prenuptial agreements can be difficult, but there is a time and place for them.

A prenuptial agreement is a contract between future spouses that dictates how all or some of the couple’s property will be divided in the event of divorce or death. Doing this takes the uncertainty out of how assets are to be divided in the event of divorce. In the case of a second marriage, a prenup makes sure the assets are distributed where a spouse wants them to go upon his or her death — such as to his or her kids, rather than to the spouse.

There are generally three situations where prenuptial agreements are recommended. The first is in the case of a marriage later in life. For example, if each spouse already has their own assets and investments and wants to make it clear that in the event of divorce or death, his assets are his, and her assets are hers, they should do a prenup. Also, if there is no prenup and a husband dies and has kids that are not his wife’s, assets that the deceased husband thought would go to his kids may, because of Wisconsin’s marital property law, go to his wife.

A second scenario where a prenup is recommended is when one spouse owns considerably more assets at the time of marriage than the other spouse. A prenuptial agreement should address how much the spouse with fewer assets would receive at divorce or death.

The third situation is when one spouse is going to become an owner in a business such as a farm. Perhaps the farm is owned entirely by his parents at the time of his marriage. However, if things go well, everyone expects that son to become an owner in the farm. If the son is a large owner in the farm at the time of divorce, having the farm make a payment equal to one-half the value of the son’s ownership interest could set the farm back considerably.

What is a postnuptial agreement?

Someone who is already married can do a postnuptial agreement. This may happen in a situation where a son goes to college, gets a job, gets married and then later comes back to work on the farm. Later, the parents may want to start transferring him ownership but are worried that if he gets divorced, the farm will have to buy out his wife. A postnuptial agreement covers the same topics as a premarital agreement.

To be legally enforceable, each spouse should have their own attorney review the postnup or prenup; the spouses must make full financial disclosure to each other; and it should be signed well before the wedding — ideally, at least two months prior.

The agreement has to be fair, though two attorneys and the couple can have four different opinions as to what is fair. Thus, drafting and negotiating prenups or postnups can be difficult and stressful.

Halbach is a partner in the agricultural law firm of Twohig, Rietbrock, Schneider and Halbach. Call him at 920-849-4999.

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