Protecting the                                       family farm          Pre- and Post-Nuptial          from the         ...
What are Pre/Post-Nuptial Agreements? Agreements specifically in anticipation of (or resolution of) a  marriage “contract...
Starting Point - Estates Estates – 1 st or 2 nd (or more) marriages Indiana Code 29-1-4-1 – a surviving spouse is entitl...
Starting Point - Divorce Divorce Indiana Code 31-15-7-5 says that an equal division of marital  property is “just and re...
Post-Nuptial Agreements Two Types   Reconciliation Agreement – Intended to preserve marriage     Flansburg v Flansburg,...
Pre-Nuptial Agreements Requirements 1. Must be in writing 2. Signed by both parties 3. Each party must have independent l...
Elements of Pre-Nuptial Agreements Introduction – Recitations Description of property owned by the parties Terms and ev...
Rights Covered in            Pre-Nuptial Agreements “Rights and obligations of each of the parties in any  property of ei...
Enforcement of Pre-Nuptial Agreements Comes at termination of marriage (death/divorce) Dissolution – controls distributi...
Failure of Pre-Nuptial Agreements When is Pre-Nuptial Agreement Unenforceable?   Not voluntary (spouse or wedding day he...
Failure of Pre-Nuptial Agreements When can a Pre-Nuptial Agreement FAIL?   If the Farm Spouse voluntarily (or carelessly...
Other factors affecting farm property    rights in the marital relationship “Tenants in Common” versus “Joint tenants wit...
Joint Ownership with Children Real Estate Assets held in joint ownership with  children are especially vulnerable    Can...
Restricting Access to Assets Put Real Estate in an entity (LLC or Corp)   Operational Documents restrict transfer -    ...
Restricting Access to Assets Trusts   Allows access to income   Provides protection against creditors (and spouses)   ...
Case Study – Goodacre Family Family structure   Parents   Three children     Two married, one engaged to be married I...
Case Study – Goodacre Family Issue   If Prospective Spouse is NOT willing to sign Pre-Nuptial    Agreement     Cannot f...
Summary – Pre/Post Nuptial               Agreements Pre-Nuptial Agreements work better than Post -Nuptial  Agreements Re...
Thank you for                         QUESTIONS?     your kind                                        attentionContact inf...
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2013 pre and post-nuptial agreements

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2013 pre and post-nuptial agreements

  1. 1. Protecting the family farm Pre- and Post-Nuptial from the outlaws Agreements In-laws Unintended consequencesMarch 7, 2013Presenter: Miriam Robeson, Attorney
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 19. Thank you for QUESTIONS? your kind attentionContact information:Miriam RobesonEmail: MiriamRobeson@lawlatte.comWebsite: Lawlatte.com
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