Indiana Prenuptial Agreement Info

Congratulations on getting engaged at the crossroads of America! Before you walk down the aisle, consider this: Indiana will likely assume all of your property (whether acquired before, during, or after marriage) is marital property (i.e. split with your spouse upon divorce)… unless you have a prenup! Read on for all of the ins and outs of Indiana’s prenup laws. In Indiana, prenups are referred to as “premarital agreements” (but they mean the same thing!). A premarital agreement is a contract between prospective spouses in which they decide how they would like to handle their finances, including ownership of property and assets, during and/or after the marriage. While you sign the agreement prior to your wedding day, it doesn’t become valid until after the marriage is official. Indiana’s Premarital Agreement statute and case law tell us what we can and cannot include in a prenup. For example, you can include contractual provisions related to alimony and property division in your prenup. However, including terms related to child custody or support is a big no-no.

What to include in a valid Indiana Prenup

In order for your prenup to be valid and enforceable, you should consider the following:

• Must be in writing
• Terms cannot be unconscionable
• Both parties need to sign (HelloPrenup recommends initialing each page)
• The contract needs to be signed a reasonable amount of time before the wedding
• There should be full disclosure of assets and income (we recommend attaching a list of income and assets)
• It is highly recommended that both prospective spouses have their own attorney if they desire legal advice

What to exclude from your Indiana prenup

Inclusion of the following could compromise the validity and enforceability of your prenups:

• Terms involving child support
• Terms involving child custody
• Unconscionable terms
• Terms that violate public policy
• Terms eliminating or modifying spousal maintenance (AKA alimony) that cause extreme hardship

Another note: Prenups must be executed freely and voluntarily. That means no fraud, undue influence, deceit, or duress.

Unconscionability

So, we know that your prenup can’t be unconscionable… but what does that really mean? Let’s take a look at a real-life case for some explanation. Mr. and Mrs. Justus executed a prenup before their walk down the aisle. The prenup specified that if the couple were to divorce, Mr. Justus would pay his wife $500,000 plus $500 per week for as long as the divorce was pending. Sounds like a lot of money, right? Well, at the time, Mr. Justus was worth $31 million. Down the road, the couple decided to divorce. However, there was a little hiccup with the prenup. During the marriage, Mr. Justus went bankrupt. His net worth dropped from $31 million to $300,000 with an income of $50,000 per year. So, was Mr. Justus still on the hook for that $500,000 alimony payment? Nope! The court decided that enforcing the prenup would be unconscionable based on the change of financial circumstances. As a general rule, if a prenup would leave one spouse destitute, it is invalid. Justus v. Justus, 581 N.E.2d 1265 (Ind. Ct. App. 1991)

Indiana Divorce Law

The official term for divorce in Indiana is “dissolution of marriage”. Like the name suggests, this is the process of ending your marriage. If you are getting a divorce, you have a couple of options in Indiana. There are both fault and no-fault grounds for divorce. The “fault” grounds are very limited and must be specifically listed in the Indiana divorce statute. However, if you seek a no-fault divorce, this only requires you to tell the court that your marriage just isn’t working out; no other reason required. >>For the entire fine print, review Indiana Code Section 31-15-2-3

How to end a marriage in Indiana

Only one spouse is required to start the divorce process. In fact, the court can finalize the divorce even if one of the spouses refuses to participate. In that case, the court enters a “default judgment” which basically just acknowledges the spouse’s failure to participate in the proceedings and allows the case to progress. You have two options to end your marriage in Indiana: dissolution of marriage (i.e. divorce) or annulment. However, not just anyone can get an annulment. Annulments are only available if the marriage is void from the start (ex: one spouse is underage or was concurrently married to someone else). You can also seek “legal separation” but note that this doesn’t officially end your marriage. However, it does allow a court to enter child custody or support orders.

Residency requirements

Before you can file for divorce in Indiana, you must meet the residency requirements. That means you or your spouse must have been an Indiana resident for at least six months prior to filing.

Show me the money

Craig and Tammy entered into a prenup prior to getting married. Their prenup specified that any property owned prior to marriage, as well as any other property acquired in their own name, would be separate property. Unfortunately, the prenup made no mention of any financial disclosure by either of the spouses. The couple divorced after a few years. Craig wanted to enforce the prenup and keep all of his property separate. Tammy, on the other hand, argued that the prenup was not enforceable. Want to guess why? The lack of financial disclosure of course! Spoiler alert: the court sided with Craig. In Indiana, you are free to enter into (almost) any contractual relationship that you want as long as there is no fraud, undue influence, duress… you get the idea. If you want to enter into an agreement without knowing your spouse’s financial status, that is A-Ok by Indiana. But… HelloPrenup always recommends including a financial disclosure in your prenup. While it may not be mandatory, it is always better to be safe than sorry. Hunsberger v. Hunsberger, 653 N.E.2d 118 (Ind. App.1995)

Separate Property

Official term for property not considered part of the marital estate

Separate property is property, assets, liabilities, ect., that is not divided amongst the spouses during divorce. If you don’t have a prenup, all of your property, including property that you owned prior to the wedding, may be considered marital property. This is called the “one-pot theory” (i.e. both spouses’ property goes into one pot). If you want to ensure that your separate property stays separate (and out of the marital pot!), a prenup is the best way to accomplish that!

>For the entire fine print, review Indiana Code Section 31-15-7-4

Lessons Learned

Separate and marital property classifications aren’t so cut and dry (surprise, surprise). Take a recent Indiana prenup case as an example. William and Lora Lou married after signing a prenup. The prenup stated that William’s retirement account containing $97K was separate property. Sadly, after 20 years of marriage, the couple split. During the divorce, Lora Lou sought a portion of the retirement account. However, it was listed as separate property in the prenup so it’s safe and sound right? Not exactly. During the 20 years of marriage, the retirement account ballooned to a whopping $994K. Wow! Now, here’s where things get interesting. The prenup specified that the retirement account was his separate property. However, he did not specify how the increase in value during the marriage would be treated. The court decided that the increase in value was part of the marital pot and subject to division between the spouses. William got the $97K and the increase in value ($897K) was split between the spouses. Some judges disagree with the outcome of this case but it offers an important lesson. When preparing your prenup, you should always consider the increase in value of your property and assets. Thompson v. Wolfram, 162 N.E.3d 498, 506 (Ind. App. 2020), reh’g denied (Feb. 22, 2021)

Spousal Support

Term used for spousal support: “maintenance”

You may be more familiar with the term alimony (especially from the tabloid headlines!). However, alimony, spousal support, and maintenance all mean the same thing. Maintenance is financial support provided by one spouse to the other during or after divorce. Maintenance doesn’t apply in every situation. The Indiana spousal maintenance statute provides the following scenarios when maintenance is warranted:

• If one spouse is found to be physically or mentally incapacitated
• If one spouse lacks sufficient assets to support themself
• If one spouse needs support while they acquire education or training for a job

Here are a few other factors that the court will consider: level of education, any interruptions in education, training, or employment of the spouse seeking maintenance, and earning capacity of each spouse. If you and your spouse don’t want maintenance to be an option, you can use your prenup to limit or eliminate maintenance altogether. >>For more fine print on spousal maintenance, read Indiana Code Section 31-15-7-2