This document discusses prenuptial and postnuptial agreements. It notes that prenuptial agreements are better than postnuptial agreements at protecting family farm assets. The document outlines the requirements for valid prenuptial agreements, such as being in writing and signed by both parties with independent legal counsel. It also discusses how prenuptial agreements can restrict a spouse's rights to a surviving spouse's allowance, inheritance, or marital property in the event of divorce or death. The document cautions that these agreements only work if planned ahead of time and used together with other legal devices.
1. Protecting the
family farm
Pre- and Post-Nuptial from the
outlaws
Agreements
In-laws
Unintended
consequences
March 7, 2013
Presenter: Miriam Robeson, Attorney
2. What are Pre/Post-Nuptial Agreements?
Agreements specifically in anticipation of (or resolution of) a
marriage “contract.”
Also called “Pre-Marital Agreement” or “Ante -Nuptial
Agreement”
Post-Nuptial Agreements are contracts that happen after
marriage
Much more limited – only enforceable under certain conditions
Purpose – provide for distribution of assets upon divorce or at
death
Helpful in second marriages, too
3. Starting Point - Estates
Estates – 1 st or 2 nd (or more) marriages
Indiana Code 29-1-4-1 – a surviving spouse is entitled to a
$25,000 “spousal allowance”
Indiana Code 29-1-3-1 – a surviving spouse can “take against
the Will” up to ½ the net property (personal and real estate)
2 nd spouses can take up to 1/3 the personal and ¼ the real
property
This is true regardless of what you put in a Last Will &
Testament
4. Starting Point - Divorce
Divorce
Indiana Code 31-15-7-5 says that an equal division of marital
property is “just and reasonable”
This is a “rebuttable presumption,” but can be expensive and
unpredictable to overcome
Divorce can be catastrophic to a farm family, where the
primary asset is land – a divorce might require that the land
be sold or mortgaged to pay the “departing spouse”
5. Post-Nuptial Agreements
Two Types
Reconciliation Agreement – Intended to preserve marriage
Flansburg v Flansburg, 581 NE2nd 430, 433 (Ind Ct App 1991) – valid pre-
nuptial agreements must be enforced as written.
Applies in situations where the parties seek reconciliation after Court
intervention (divorce or separation pending)
“Adequate Consideration” is deemed to be the reconciliation of a marriage
that would have otherwise dissolved
Dissolution Settlement – Agreement made when parties are
contemplation divorce with no attempt to reconcile
Enforceable per the discretion of the Court
This means that the terms can be changed by the Court
Do not rely on Post-Nuptial Agreements to preserve the Farm!
6. Pre-Nuptial Agreements
Requirements
1. Must be in writing
2. Signed by both parties
3. Each party must have independent legal counsel
May be amended or revoked by mutual agreement of
the parties
“Consideration” (quid-pro-quo or “something for
something”) not required
7. Elements of Pre-Nuptial Agreements
Introduction – Recitations
Description of property owned by the parties
Terms and events of disposition of property
Schedule of Husband’s property
Schedule of Wife’s property
Disclosures must be full and accurate and the
parties must understand the agreement
“Potential inheritance” need not be disclosed, but
“already-inherited” property must be disclosed
8. Rights Covered in
Pre-Nuptial Agreements
“Rights and obligations of each of the parties in any
property of either of them or both of them whenever
and wherever acquired or located” IC 31 -11-3-5
Includes rights with respect to:
Buy, sell, use, exchange, encumber, etc.
Disposition of property upon separation, dissolution or
death
Modification or elimination of spousal maintenance
(Indiana does not have “alimony”)
Making estate planning documents (Wills, Trusts)
Ownership rights with respect to life insurance
CANNOT – affect child support obligations
9. Enforcement of Pre-Nuptial Agreements
Comes at termination of marriage (death/divorce)
Dissolution – controls distribution and division of
property
Estate Administration – Become a waiver of
statutory elements (spousal allowance/taking
against the Will)
10. Failure of Pre-Nuptial Agreements
When is Pre-Nuptial Agreement Unenforceable?
Not voluntary (spouse or wedding day held “hostage” to
the Agreement, or spouse otherwise feels “compelled” to
sign the document)
Unconscionable “offends a sense of justice”
Example: Spouse agrees to give up all right to any assets in
the marriage, with the effect of reduction to poverty
If the marriage is void (then, other common law rights
may apply
11. Failure of Pre-Nuptial Agreements
When can a Pre-Nuptial Agreement FAIL?
If the Farm Spouse voluntarily (or carelessly) violates the
terms of the Agreement
Example – Farm Spouse transfers stock assets into
spouse name – the Pre-Nuptial Agreement “fails” to the
extent of that gift.
Example – Farm Spouse specifically “bequeaths” farm
ownership to spouse in Last Will & Testament – the PNA
“fails” to the extent of that gift.
Make sure your children understand this! Last Will &
Testament should support the Pre-Nuptial Agreement
12. Other factors affecting farm property
rights in the marital relationship
“Tenants in Common” versus “Joint tenants with
rights of survivorship” versus “husband and wife”
Restrictions in Transfer in Operating Agreements
(LLC)
Buy-Sell Agreements (Corporations, LLCs)
Assets in Trust (versus outright ownership)
13. Joint Ownership with Children
Real Estate Assets held in joint ownership with
children are especially vulnerable
Can be claimed by creditors (and divorcing spouse) to
the extent of ownership
Can be “tied up” by a court proceeding or bankruptcy
involving the co-owner child
Creditors (or spouse) might require “partition” of real
estate and you may lose that real estate out of the
farm
14. Restricting Access to Assets
Put Real Estate in an entity (LLC or Corp)
Operational Documents restrict transfer -
To Trust – Ancestors/Descendants – Spouse (?)
Involuntary transfers (to creditors or divorcing
spouses) result in “piece of the action” but no
voting
Buy-Sell Agreements
Restricts transfer to certain conditions, controls
price, and controls “control”
Makes the asset of limited value to creditors (and
spouses)
15. Restricting Access to Assets
Trusts
Allows access to income
Provides protection against creditors (and spouses)
Beneficiary does not “own” assets
Can be “tiered” with LLC to severely limit access to the
farm by creditors (and spouses)
Issue – These devices only work when you plan
ahead! Once the creditor (or spouse) claims the
asset, it is too late!
16. Case Study – Goodacre Family
Family structure
Parents
Three children
Two married, one engaged to be married
Issue
If willing to sign Pre-Nuptial Agreement
Be sure it fully discloses farm interest
Be sure prospective spouse understands it
Be sure prospective spouse has independent counsel (you
can pay for it)
17. Case Study – Goodacre Family
Issue
If Prospective Spouse is NOT willing to sign Pre-Nuptial
Agreement
Cannot force the issue
Avoid co-ownership of assets with the child who marries that
spouse
Use alternate devices to get “value” to child
Buy-Sell Agreement, Trusts, Restriction on Transfer
“Skip” to next generation (which skips the current generation
of problems – could create a whole new set of problems in
20 years)
18. Summary – Pre/Post Nuptial
Agreements
Pre-Nuptial Agreements work better than Post -Nuptial
Agreements
Requires GOOD COMMUNICATION to child and prospective
spouse
Works best if used hand -in-hand with other devices (Entity
Ownership, Buy -Sell Agreements, Trusts, and Last Will &
Testament!)
May not be available if -
Prospective spouse does not consent
Spouse is already married (barn door – horse)
19. Thank you for
QUESTIONS? your kind
attention
Contact information:
Miriam Robeson
Email: MiriamRobeson@lawlatte.com
Website: Lawlatte.com