Case Study: Undue Hardship & the Illinois Uniform Premarital Agreement Act

Section 7(b) of the Illinois Uniform Premarital Agreement Act states that if a provision of a premarital agreement modifies or eliminates spousal support and that modification or elimination causes one party to the prenuptial agreement undue hardship in light of circumstances not reasonably foreseeable at the time of the execution of the prenuptial agreement, a court, notwithstanding the terms of the prenuptial agreement, may require the other party to provide support to the extent necessary to avoid such hardship.  The following is a case study involving the application of these principles.

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In the case of In re the Marriage of Barnes, the Appellate Court for the Fourth District analyzed what constitutes undue hardship and unforeseen circumstances.  In that case, Edward was the sole shareholder and chief executive officer of a company.  He earned in excess of $250,000 per year.  His wife, Sandra, quit her office job where she had been earning $19,000 per year in order to spend more time with Edward.  Before their marriage, they signed a prenuptial agreement.

As part of their prenuptial agreement, Edward waived the right to seek maintenance from Sandra.  Sandra generally waived maintenance, unless the marriage lasted for a specified length of time.  If they got divorced after three years of marriage, Edward would pay Sandra $5,000.  If the marriage lasted five years, Edward would pay Sandra $7,500.  After seven years, he would pay her $10,000.  After fifteen years, he would pay her $25,000.

 

After 8 years of marriage, Sandra filed for divorce.  Under the terms of the prenup, she would have been entitled to $10,000 in maintenance.  In court, she contested the maintenance provisions of the prenuptial agreement.  Under Illinois law, the party seeking to invalidate a prenuptial agreement has the burden of proving that the prenuptial agreement is unenforceable.

 

At the time of trial, Sandra had gotten a job earning $24,000 a year doing clerical work.  She argued that if the court only permitted her to receive $10,000, she would suffer undue hardship.  Following the law as set forth in the Illinois Uniform Premarital Agreement Act, the Court looked analyzed whether undue hardship existed as a result of circumstances which were not reasonably foreseeable at the time the prenuptial agreement was signed.  In particular, the Court found that such an adjustment from a lifestyle of luxury to one limited by a $24,000 salary might not be easy, but it would not constitute an “undue hardship.”  In fact, Sandra had acknowledged that her employment at the time of trial was in line with her experience and expertise as referenced in the prenuptial agreement.

 

The Court next examined whether the outcome was the result of unforeseen circumstances, and found that it was not.  On that issue, the record reflected that it was Edward’s fifth marriage, and thus it was reasonably foreseeable that the marriage between the parties might fail. As a result, the Court found a justification for finding that no undue hardship resulted and that the various unforeseen circumstances were actually foreseeable.

 

There were a few other important points that the Court noted in its opinion.  First, the parties had made a full and complete financial disclosure at the time the prenuptial agreement was negotiated and signed.  Specifically, the Court found that their agreement reflected the gross disparity in the parties’ assets and income at the time of the marriage. Sandra acknowledged that she was aware at the time of the Agreement that Edward’s income far exceeded her own.  The mere fact that he had far more financial resources than her did not make the agreement unfair.  One party’s agreement to marry is in and of itself sufficient consideration for financial concessions by the other party in the context of a premarital agreement. See In re Marriage of Sokolowski.  What is therefore important to consider is that the Illinois Uniform Premarital Agreement Act does not allow a court to invalidate a premarital agreement merely because it results in a disproportionate allocation of assets to one of the parties. In re Marriage of Heinrich.   In order for Section 7(b) of the Illinois Uniform Premarital Agreement Act to apply, there must be circumstances not reasonably foreseeable at the time of the execution of the prenuptial agreement.

 

The Court also noted that Sandra lived a lifestyle with Edward that was beyond what she could possibly have enjoyed on her own before or after a dissolution of their marriage. She nevertheless entered into the Agreement whereby she waived all maintenance other than a stipulated amount tied to the length of the marriage. Pursuant to the parties’ agreement, Edward was ordered to pay Sandra $10,000 in maintenance.

 

Prior to negotiating or signing any prenuptial agreement, you should consult with a knowledgeable attorney.