Prenuptial Agreements

Prenuptial agreements are contracts between two persons contemplating marriage that sets forth their property rights in the event of death or divorce. Typically these agreements focus on property owned by the wealthier of the two spouses. Antenuptial or post-nuptial agreements are similar but are made after the parties marry. All such agreements must be in writing.

Prenuptial agreements were previously invalid because they were thought to encourage divorce. That changed with a 1991 Michigan case) that held that such agreements can be enforceable (1). Previously another statute specifically allowed such agreements in Probate (2).

Unless a prenuptial agreement is ambiguous, it controls in the absence of fraud, lack of knowledge or consent, mental incapacity, or undue influence (3). A claim of lack of consideration or that the agreement is contrary to public policy fails because in addition to the actual benefits that a party derives from such an agreement, marriage alone is a sufficient consideration for an antenuptial agreement (4).

To determine if a prenuptial agreement is valid, it is best to initially consider three questions:
1. Was the agreement obtained through fraud, duress or mistake, or misrepresentation or nondisclosure of material fact?
2. Was the agreement unconscionable when executed?
3. Have the facts and circumstances changed since the agreement was executed, so as to make its enforcement unfair and unreasonable?

The party challenging a prenuptial agreement has the burden of proof that the agreement is not enforceable. But, there are some circumstances that give rise to a rebuttable presumption of non disclosure. Failure to adequately provide for a spouse, secrecy, failure to fully disclose assets, and failure to have each party represented by independent counsel, are all factors that may give rise to a rebuttable presumption of non disclosure (5).

Full disclosure of assets is essential. When a prenuptial agreement is made in secrecy and fails to provide for a spouse, it will be set aside. The agreement must be free of duress. Therefore, it is good practice to allow the other party to consult with his/her independent attorney and extend adequate time for complete review. An agreement pulled out of one’s pocket under trying conditions such as on the morning of the planned wedding or on the steps of the church or courthouse will likely be held unenforceable.

The agreement must be fair. Giving one spouse all of his/her property and one-half of the other’s property may not be considered fair. If the agreement clearly spells out what property each has and allows each party to retain that property and then makes a fair division of assets and property that are accumulated during the marriage, the agreements will likely be upheld.

The agreement should be either drafted so that it takes into account the length of marriage or the agreement is periodically revised (6) : “Have the facts and circumstances changed since the agreement was executed, so as to make its enforcement unfair and unreasonable?” Agreement that might be fair after a two-year marriage may no longer be fair after a twenty-year marriage, particularly when one spouse limits employment opportunities in order to benefit the other spouse. This would take place if one spouse remained at home and hosted frequent business parties while the other spouse developed business opportunities. The stay-at-home spouse would then have a good claim for alimony or spousal support, unless the prenuptial agreement treated him/her fairly.

The agreement must be made after full disclosure. When a party fails to disclose the full extent of his/her premarital assets, the other spouse may later successfully challenge the prenuptial agreement (7). The disclosure should not only be of the assets and liabilities that each of the parties have before the marriage, but should also disclose the rights that each party is giving up in entering into the agreement.

A long marriage or significant growth of assets do not necessarily invalidate a prenuptial agreement (8).

There are certain things that a prenuptial agreement will not and cannot effect such as the obligation to pay child support for a child is born of the relationship or the issue of custody of minor children.

There are normally several topics covered in the typical prenuptial agreement:

a) Name and address of each party
b) Description and value of real and personal property owned by each party
c) Definition of ownership of after-acquired property
d) Property to be held separately, jointly, or in common.
e) The effect of death of a spouse on the terms of the agreement.
f) That each party has had an opportunity to consult their own attorney.
g) Effect of the agreement upon divorce or separation.
h) Provisions relating to life insurance and pension benefits
i) Provisions for making of a will.
j) Who will be responsible for what debts.
k) Severability clause.
l) Revocation, termination, or modification provisions.
m) A listing of rights that each spouse is waiving.
n) Other general provisions, including the right to seek an independent appraisal of the value of property before signing the agreement.

Prenuptial agreements are different than standard contracts. Because of their special requirements, it is recommended that you seek an attorney who has expertise in family law and in drafting prenuptial agreements. In some situations it may make sense to consider additional estate planning tools to effectuate the parties’ wishes.

Footnotes:
(1) Rinvelt vs. Rinvelt,(1991
(2) MCL 700.291, MSA 27.5291
(3) Kennett vs. Mc Kay (1953).
(4) Hockenberry v. Donovan (1912).
(5) In re Benker Estate, (1982); Rinvelt vs. Rinvelt (1991).\
(6) Rinvelt quoting Brooks v Brooks (Alaska 1987):
(7) Estate of Halmaghi (1990).
(8) Reed vs. Reed (2005)