USA – MINNESOTA Trends and Developments Contributed by: Lisa Spencer and Sarah Hewitt, Henson Efron
• requiring signing at least seven days before the date of marriage in order for an agreement to be presumed enforceable, putting the burden of proof on the party challenging the agreement; • for agreements signed less than seven days before the marriage, putting the burden of proof on the party seeking to enforce the agreement; and • allowing the marriage itself to serve as sufficient “consideration” for the terms of the prenuptial agreement. Agreements may be deemed unenforceable if they include provisions that violate law or public policy. For example, all 50 states agree that a prenuptial agree - ment may not determine custody arrangements or limit child support obligations. But not all issues are so clear-cut. A provision found to violate public policy in one state might be strictly enforced in the state next door. “Infidelity” clauses that penalise a spouse for conduct during the marriage are currently enforced by some states, but have been held unenforceable in a growing number of states. If a court finds all or a portion of a prenuptial agree - ment to be unenforceable, then some or all of the rights waived by the spouses would be reinstated. Thoughtful planning and drafting help avoid that cir - cumstance. Should you sign a prenup? Regardless of your state of residence, you should consider creating a prenuptial agreement if any of the following apply: • you own or expect to inherit significant wealth; • you own a business; • you co-own a business with partners and need to protect their interests, as well as think about suc - cession planning for the business; • you own unique property such as copyrights or other intellectual property; or • you have children from a previous relationship and need to protect assets you have earmarked for them. A prenuptial agreement can be an effective tool for protecting hard-earned premarital wealth, particularly for closely held business owners seeking to protect
their business, family and partners. By “carving out” business interests from division in a divorce or distri - bution upon death, business owners can marry with - out running the risk of making their spouse a future partner. A prenuptial agreement can also be an important ele - ment to business succession planning. In the event of a business owner’s death, it is important to have a plan for their ownership interest, especially if the busi - ness is owned with family members or other partners. Prenuptial agreements also overlap with estate and tax planning. Prenuptial agreements can be a useful tool for protecting wealth as people further along in life marry or remarry. About 66% of divorced Americans go on to remarry, and many have children from earlier relationships. Parents wishing to protect their estate for those children, while still providing for their spouse, have options available. For example, the new spouse may waive their rights to inherit; and in turn, the parent may create a trust that would provide annual income to their new spouse, with the underlying assets ulti - mately awarded to the children, thereby also achieving • full disclosure of assets, liabilities and income; • acknowledgements that one or both parties waive certain rights in the event of death or divorce; • agreements as to what each spouse will receive, in lieu of the rights waived; and • an express list of intentions, eg, if one party co- owns a business with siblings and intends that ownership should stay in the family, it is important that the other party acknowledges this intention. Steps to creating a premarital agreement include: • Plan ahead. Some states require that prenuptial agreements be signed at least a certain number of days before the wedding. Even in states without express deadlines for signing, an agreement signed too close to the wedding creates the risk of a future challenge to enforceability. Planning ahead will help advantageous tax treatment. What goes into a prenup? Prenuptial agreements typically contain:
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