Insights on Wisconsin Prenuptial Agreements

What is a Prenuptial Agreement?

The classic definition of a "prenuptial agreement" is a contract between two people, to be in effect during marriage. In Wisconsin, the governing statute for "prenuptial agreement" is found at Wis. Stat. 767.255. While I would suggest that this statute is not well drafted, it does provide some general guidance and important basic conceptions regarding prenuptial agreements.
First, in order for a prenuptial agreement to be valid, it must be "in writing and signed by both parties." In many states, prenuptial agreements may be oral or unwritten (although there are certainly enforceability issues that are likely to arise). Not so with a Wisconsin prenuptial agreement.
Second, the statute contains a list of certain topics that can be covered under a prenuptial agreement , but this list is not all-inclusive. A prenuptial agreement may address disposition of property and/or debts, spousal support obligations, rights to appointment to fiduciary positions, waiver of rights of election, rights to life insurance proceeds, rights to control or management of property, rights to income of property, rights to reimbursement, and rights to health insurance benefits.
Third, the statute sets forth several provisions which will make a prenuptial agreement either voidable or unenforceable. Essentially, a prenuptial agreement may be deemed to be voidable if either party was under duress, there was a lack of adequate disclosure, a lack of capacity, or if either party did not have a reasonable opportunity to either get legal advice and/or fully read the agreement.

Requirements Under Wisconsin Law

In the State of Wisconsin, there are different laws and requirements than other states for the creation of a valid prenuptial agreement. A prenuptial agreement must be written, signed, separate and voluntary from the marriage. The parties must resort to considering and executing the prenuptial agreement in good faith by examining their general circumstances and the specific agreements as they apply to both parties. In order for an agreement to pass muster as a valid prenuptial agreement, both parties must have full financial disclosure of assets and liabilities. Although one party may choose to forego the legal representation of an attorney, it is suggested that both parties should confidentially discuss the terms of the agreement with their respective attorneys prior to signing the prenuptial agreement. Hidden assets are frequently excluded from a prenuptial agreement. When present, this can create a significant inequity among spousal support and assets after the dissolution of the marriage. The signers should each have at least seven days to evaluate the prenuptial agreement between the time it is drafted and the date of signing.

Advantages of a Prenup

Prenuptial agreements can provide a number of benefits to engaged couples who may be wondering if they should take the necessary steps to enter into one. However, here we are going to only touch on three benefits that we commonly observe in these agreements.
The first benefit is that they can act as a protection against significant changes in future income. Future changes to income are impossible to predict and can include receiving an inheritance, receiving lottery winnings or simple changes in career trajectory. Through the proper drafting of a prenuptial agreement, greater income may not impact a divorce settlement.
Secondly, prenuptial agreements can protect assets from being classified as marital property. In Wisconsin, any and all property that either spouse obtains during a marriage is generally regarded as marital property under state law. The future value of all marital property is also included when determining what each spouse can receive should the marriage end in divorce. However, with a prenuptial agreement, it is possible to make certain assets non-marital in nature and therefore less vulnerable in a divorce.
The third benefit that we want you to know about is that a prenuptial agreement has the ability to reduce uncertainty and stress within the context of a marriage. A couple that enters into a prenuptial agreement can enjoy the peace of mind that comes with knowing that they do not have to worry that their assets may be at risk.

Common Myths

Common Misconceptions surround this area of Wisconsin Family Law. First, many people seem to think that prenups are unfair or one sided. Remember these agreements are contract and should be fair, to the parties themselves as well as any children. Courts invalidate agreements that were oppressive or found that a spouse was not truthful. Next, there is the misconception that prenups are only for the rich and famous. Prenups are a good idea for any person entering into a marriage who has some assets whether they are real estate, a business or investments. Also, remember a prenup can protect more than just assets or property, it can determine alimony or spousal support, specifically state that one spouse will not receive support thus freeing them of the burden of supporting another with whom a marriage or civil union failed. Finally, many people think a prenup can only be completed before marriage. Wisconsin law actually permits an individual to enter into a post-marital agreement if a spouse passes away and no marital agreements exist. It is important to have this discussion with a family law attorney so that your rights and assets can be protected.

Limitations of Prenups

The limitations of a prenuptial agreement in Wisconsin is also an important consideration for each party. All of the prior points made above focused on the rights and interests of the parties and/or their families in the future. However, a careful family law or estate planning attorney would never recommend a prenuptial agreement where they did not also consider the underlying potential limitations of the document itself.
A few of the concerns we have in every prenuptial agreement we prepare is regarding the spouses’ ability to get a divorce and the ideas of freedom to marry. Courts in Wisconsin are unlikely to uphold a contractual provision that entirely limits a spouse’s access to their right to get a divorce. In fact, one of the policy underpinnings of the entire divorce scheme in Wisconsin, is that a divorce cannot be denied to a person under certain circumstances. This means that even if it was very clear that both parties wanted to stay married for a certain period of time, if either party files for divorce, the divorce will almost certainly be granted.
Another provision that courts are unlikely to uphold in a prenuptial agreement is provisions that limit the spouses’ respectively rights of co-ownership to property solely titled in the name of the other at the time of death. Under Wisconsin law assets owned solely by one of the spouses are not considered marital assets that are subject to division by the court during the divorce. This means that it is unlikely that such a provision would be enforced to allow the named spouse to inherit the entire asset free of any claims by the other spouse. This is because the spouse’s right to inherit property from their spouse cannot be eliminated by a prenuptial agreement contrary to Wisconsin law. Therefore , a provision in the agreement that says, "whoever of the parties shall die first, the survivor shall be entitled to the entire estate of the deceased spouse, of whatsoever sort and nature, including one-half (½) thereof which is the property of the deceased as defined by Wisconsin law" is unlikely to be upheld by the courts.
Another limitation comes with respect to a prenuptial agreement’s attempted treatment of marital waste. Although a party to a prenuptial agreement could agree to assume the risks and share the benefits of his/her spouse’s financial decisions during the marriage, at the time of divorce a party would be entitled to his/her share of marital property even if the property did not appreciate. This would be true even if the property was wasted or lost by the other spouse during the marriage. The right to equitable division of marital assets cannot be altered under Wisconsin law by entering into a prenuptial agreement.
With respect to estate planning, a couple must also consider whether to amend their estate plans if heart disease or a mortal illness appears within one year prior to execution of the agreement so that the prenuptial agreement will not supersede existing estate plans.

Steps to Creating Your Prenup

An agreement under the "marriage envelope" in which the parties agree to give up their respective rights is not valid in Wisconsin. However, in the absence of fraud, duress, or mistake, it is legally enforceable.
The process of drafting a prenuptial agreement usually commences with the collection of basic information from the parties. At the outset, the parties should each provide financial information to the other and may very well agree upon further disclosures. Obtaining full disclosure early on may serve to head off any subsequent claims of nondisclosure. This information is critical in negotiating terms to be included in the marital agreement. It is always prudent to seek the advice of independent counsel prior to entering into such a contract. Indeed, an attorney may be required and/or he may aid in the process by providing full disclosure of finances, thus eliminating reliance of the party on the income or disclosures from the other.
When drafting such an agreement, an attorney must remember that the law requires:

The parties must be required to make a complete and frank disclosure of their assets and liabilities;
The agreement must be made voluntarily and contain no evidence of coercion or duress;
Each party must be represented by independent counsel of their own choosing before signing the agreement; and
The agreement must be conscionable (must be inherently fair in the circumstances).

Changing or Cancelling a Prenup

In Wisconsin, prenuptial agreements can be modified or nullified through a court proceeding or by mutual agreement of the parties. The process and grounds for doing so depend on several factors.
The Family Code Comment to the Uniform Premarital Agreement Act (Chapter 766 of the Wisconsin Statutes) provides a good starting point. It notes that, "The proposed section would make clear, however, that the parties are free to amend their premarital agreement after the marriage. They may do so in the manner appropriate for an ordinary contract, whether or not they comply with the formal requirements for a premarital agreement."
This seems fairly simple. Under Wisconsin law, a contract may be modified by the mutual agreement of the parties. A prenuptial agreement is really just a type of contract that is made prior to a marriage , so why wouldn’t the same principal be applied after the marriage?
Here are a couple of the more commonly used provisions under which a prenup might be changed or nullified in Wisconsin:

Failure of the parties to Revised Uniform Statutory Notice to provide full disclosure to one another.
An agreement that was unconscionable when it was drafted and became much more unilateral than originally intended over time.
A challenge under Wisconsin law that the other party failed to provide for the financial needs of the spouse or children.

Most divorces in Wisconsin involve the careful review of the marital and non-marital assets of parties to determine which are subject to division during a divorce and which will not. Much of this analysis depends upon whether the assets were acquired before or after the parties were married. Prenups are sometimes used to address this situation.
If you are unsure whether your nuptial agreement is enforceable after the marriage ends or there has been a significant change in circumstances for one or both parties, consult with Wisconsin Counsel.