A prenuptial agreement is nothing more than a contract that specifies how certain matters will be handled and decided if the parties’ marriage later fails (or a spouse dies). The most common scenario where prenups are used occurs when one spouse has significantly more assets. The prenup typically protects these assets brought into the marriage from being divided with the other spouse in the event of a divorce (or death). These agreements are allowed under by statute in Indiana and are generally enforceable unless they try to specify terms related to children that may be born between the parties. However, because prenups are contracts, and there is the constitutional right to contract, some parties often contract for far more than may realize and cause an unaware spouse significant hardship in the future in divorce or on death. This blog covers the three biggest “no-no’s” for prenups.
A somewhat common provision in a prenup is that in the event of a divorce, neither party may seek an award of attorney’s fees from the other by the trial court. The Indiana Divorce Act (and Paternity Act) allows for a court to award a party legal fees and expenses to further cases for several reasons. The most common reason is a disparity or difference in incomes. The spouse who earns significantly more may be ordered to pay fees. If there is a prenup that contracts away the right to seek fees from the court, it can create a great hardship for the financially inferior spouse to fund divorce litigation, such as a dispute over child custody or other matters not covered by the prenup. This creates a scenario where the more financially able spouse can outspend and potentially out lawyer the other spouse. This is not fair or right, but just the way it is. The several attorney’s fee provisions of the Divorce Act are there for a reason and you should think long and hard about entering into a prenup that contracts this right away. Ask yourself if you could afford such litigation? If not, you have your answer. Don’t do it.
A second, but not as common provision in prenups, is one that contracts away the right to spousal maintenance. Indiana is not an alimony state where one divorcing spouse can be ordered to pay the other “alimony” for a long duration. Under Indiana’s divorce law, a court can order a spouse to pay the other “rehab” maintenance to get a vocational certificate or work skills to be self-supporting. This type of maintenance can only be ordered for up to three years. The other type of maintenance is for a disability. Thus, a spouse who becomes disabled during the marriage can be awarded disability maintenance for the duration of the disability, even for his or her life. Contracting this away by a prenup removes (or potentially removes, as there are arguments these provisions are not enforceable because they violate public policy) the very safety net the legislature enacted for you in passing divorce laws. In most cases, unless each party is wealthy, this provision of a prenup is dubious at best and should be avoided.
The third provision sometimes found in prenups is one that wipes out Indiana estate law and a spouse’s right to obtain money from a spouse upon his or her death. Normally, a spouse, even one who does not have children with her or her partner, can “take against the will” and received monies from property solely owned by the other through Indiana’s estate law where there is a will. This right also exists where the party dies intestate (without a will) This is a complex area, but it is nevertheless possible to contract away this right too by a prenup with such provisions. Ironically, at least in the case of divorce and custody dispute or need to seek maintenance, the provision against an award of attorney’s fees make any potential challenge that much more difficult. Who would pay the attorney’s fees to make the challenge you need or want to make—you!
The takeaway from this blog is that prenups can be simple tools to protect assets a spouse brings into marriage, or, much more with far-reaching implications in the event the marriage ends, for the lesser-empowered spouse, by his or her partner’s divorce or death. Clearly, prenups are good tools to be considered and used in some cases to pre-decide the future and minimize costs and conflict on death or divorce. However, they can be much, much more, and, frankly, train-wreck your future. Know this and contemplate and enter a prenup after consultation with experienced counsel. Or you may pay the price, literally. This blog was written by attorneys at Dixon & Moseley, P.C. who handle domestic cases of all types, including prenuptial agreements, throughout the State of Indiana. This blog is not intended as legal advice or a solicitation for services. It is an advertisement.