Family Law Prof Blog

Prenuptial Agreement Considerations for Same-Sex Couples

From The National Law Review:

Nearly everyone who is engaged to be married contemplates a prenuptial agreement at some point, even if only to acknowledge the possibility briefly and conclude that they are not a good candidate.

Most young couples entering a first marriage with few assets and no children probably decide that the benefit of a prenuptial agreement doesn't outweigh the cost – both the financial cost and the cost of a tense conversation with their future spouse where they discuss the possibility of divorce before they've even tied the knot.

On the other hand, couples entering a second marriage later in life might conclude that a prenuptial agreement is worth the financial and personal investment if either of them has children from a previous relationship or has accumulated significant assets.

A same-sex couple that gets divorced after being together for decades but married for only a few years might only be "credited" with the few years of legal marriage. This can skew the reality of the relationship and generate an unfair result in divorce.

Now that marriage is available to same-sex couples in Michigan, those couples must also decide whether or not a prenuptial agreement is right for them. The same factors that opposite-sex couples consider are important, of course, but there are other considerations that are unique to same-sex couples.

Read more here.

Is a Prenuptial Agreement a Must for Most Couples?

From The Wall Street Journal:

It may not be the most romantic idea, but many couples planning to marry opt for prenuptial agreements. In a survey of 1,600 members of the American Academy of Matrimonial Lawyers, a professional group based in Chicago, published in October 2013, 63% of the respondents reported an increase in prenups over the previous three years.

Prenups come into play in divorces, of course, but that’s not all. Besides establishing how assets are divided when a married couple splits up, prenuptial agreements also can determine who gets what when one spouse dies.

With that kind of power over people’s financial fates, these are controversial documents.

Some proponents of prenuptial agreements argue that they protect the interests of both parties to the agreement and prevent nasty, costly court battles when a relationship ends. But some critics say the nastiness that can arise in negotiating a prenup can cripple a marriage before it even starts, and that there are laws on the books that do a better job in most cases of balancing the interests of both spouses when they split or one dies.

Read more here.

 

Florida Supreme Court Strengthens Waiver Rule in Prenuptials

From Daily Business Review:

The Florida Supreme Court got a collective cheer from divorce lawyers who represent the wealthier spouses in fights over prenuptial agreements.

Resolving a dispute among the districts, the high court made it easier for divorcing spouses to claim individual assets through a prenup. The justices said if the document shows one spouse's intent to waive all interest in the other spouse's assets, when the marriage ends the disadvantaged spouse can't break the prenup and share them.

The unanimous Sept. 10 ruling in the case of a Palm Beach County couple means ex-wife Diane Hahamovitch walks away with the $1.9 million the prenup promised her. Ex-husband Harry Hahamovitch, a mortgage broker and financial planner, gets to keep everything he acquired during the couple's 22-year marriage.

The ex-wife argued their 1986 agreement didn't specifically refer to the enhanced value of the husband's property due to marital labor or funds. Also, it didn't state the husband's earnings would be considered his separate property.

But the justices agreed with the Fourth District Court of Appeal that the phrasing was so broad, a few missing magic words didn't matter.

Read more here.

Franck: "'So Hedge Therefore, Who Join Forever’: Understanding the Interrelation of No-Fault Divorce and Premarital Contracts"

Jens-Uwe Franck has posted 'So Hedge Therefore, Who Join Forever’: Understanding the Interrelation of No-Fault Divorce and Premarital Contracts, 23 International Journal of Law, Policy and the Family 235 (2009), on SSRN.  Here is the abstract:

This article explores the interrelation between the availability of no-fault divorce and the enforceability of premarital contracts, exemplified by American and German law. The traditional common law doctrines in the USA and - at least with regard to spousal support - the German civil code of 1900 were similarly hostile towards premarital contracts. In both legal systems divorce was fault based. Conventional wisdom tells us that no-fault divorce and the enforceability of premarital contracts emerged together out of a spirit of liberalization. Yet, by reconstructing the history of both legal institutions, one may observe a more subtle interrelation. The vast majority of jurisdictions in the USA responded to the availability of no-fault divorce with the enforceability of premarital contracts, which reveals a causal relationship. In the case of Germany, it was already in 1938 when the lawmaker introduced through the Ehegesetz (Statute on Marriage) ‘irretrievable breakdown of marriage’ as grounds for divorce, and at the same time legalized premarital contracts on permanent maintenance. From today's perspective, a functional understanding of the interrelation of both legal institutions seems to be the most promising. Family law, criminal law, and tort law are in retreat as protective mechanisms against risks of opportunistic behaviour and hold-ups that may arise through the availability of no-fault divorce. Premarital contracts on the financial consequences of divorce may be apt as an instrument to protect the interests of spouses against such risks. This finding provides a sound justification for contractual freedom in this field and shows that the availability of premarital contracts should be understood as a logical corollary of the availability of no-fault divorce.

MR

Ryznar and Stępień-Sporek: "To Have and to Hold, for Richer or Richer: Premarital Agreements in the Comparative Context"

Margaret Ryznar (yours truly, in the interest of disclosure) and Anna Stępień-Sporek (University of Gdańsk) have posted To Have and to Hold, for Richer or Richer: Premarital Agreements in the Comparative Context, 13 Chapman Law Review__(2010), on SSRN.  Here is the abstract:

The premarital agreement, perhaps one of the world’s most unromantic documents, also happens to be quite powerful and complex. Although its most highly-publicized use has been to control post-divorce property division, the premarital agreement’s most significant importance is in its power to circumvent the statutory defaults governing spouses’ rights and responsibilities not only during divorce or death, but also during marriage. However, the enforceability of premarital agreements is subject to procedural and substantive review in the United States. Such agreements also raise universal public policy issues with regard to the meaning of fairness and the limits on freedom of contract. To further understand and address these issues, this Article considers premarital agreements in the comparative context, analyzing the approach of the United States, as well as that of France, Germany, Switzerland, and Poland. The resulting lessons implicate the freedom of contract, the potential characteristics of the regulatory framework surrounding premarital agreements, and the popularity of such agreements among prospective spouses.


MR

Increased Use of Premarital Agreements in England

We have recently covered (here and here) the preference in English law for equal property division between divorcing spouses.  Of course, one way to avoid statutory and legislative defaults is through contract, in the form of premarital agreements.  At the present time, however, such agreements are not legally enforceable in England, although they may certainly guide the courts in their ultimate decisions.  The unenforceability of premarital agreements may help explain the traditional rarity of such agreements between prospective spouses in England.  However, one of our readers recently pointed out that the English Law Commission is re-examining marital property agreements, with a report and draft Bill expected in late 2012.  There has been another development as well: English family lawyers are now seeing a tenfold increase of the use of such agreements. 

Will a Tiffany’s one-carat diamond soon come standard with a premarital agreement in England?

                                                                                 
MR

Case Law Development: Duress & Undue Influence in Post-Nuptial Agreements

The California Court of Appeals addresses the burdens of proof and standards for establishing the defenses of undue influence and duress when seeking to make a marital agreement regarding property unenforceable.  The case involved a couple who had executed a premarital agreement giving Husband all his business property.  Eleven years later, while Husband and Wife were staying at an inn, he executed a document transferring to Wife as her separate property 20% of the stock in his business and the family home.  The couple separated a few months later and Husband soon thereafter filed for divorce.  The trial court found that this document was unenforceable due to undue influence and duress, as Husband had provided credible evidence that he had signed the document after Wife had screamed at him, struck him, and threatened to divorce him and alienate him from their children if he did not provide her with this security.  The court of appeals affirmed.

In regards to the undue influence argument, the court began with the presumption that, because married couples are in a confidential relationship with one another, "if one spouse secures an advantage from [an interspousal] transaction, a statutory presumption arises under section 721 that the advantaged spouse exercised undue influence and the transaction will be set aside."   Since Wife gained an advantage from the transaction, she then had the burden of rebutting the presumption of undue influence by proving that Husband's signature was "freely and voluntarily made, with full knowledge of all the facts, and with a complete understanding of its effect."  The court found that the trial court's decision that Wife had not met this burden was supported by the evidence.  The court agreed Husband had "executed the document as a reaction to [Wife's] continued yelling and screaming and out of fear that she would otherwise block him from having a continued relationship with his children" and therefore the agreement was not freely and voluntarily made.

The court also found that the alternative grounds of duress was supported by the evidence. 

The court of appeals, found that duress does not require proof of illegal acts but rather "includes whatever destroys one's free agency" and may be proven by "threats, importunity or any species of mental coercion"'

In this case, Ralph's free will was constrained by Kathleen's threats to deny him access to his children. Kathleen disagrees, saying that any threat to deny Ralph access to the children could hardly constitute duress, inasmuch as child custody and visitation matters are resolved by the courts. She emphasizes that Ralph, as a successful businessman, had access to lawyers and should have known better than to be frightened at the suggestion that she somehow could have thwarted his rights to see his children. However, as Ralph testified, he did not discuss Kathleen's threats with legal counsel until after the date he was constrained to execute the October 1999 writing. Moreover, it is not unheard of for one parent to fail to comply with court custody or visitation orders or to engage in efforts to scuttle the relationship between the children and the other parent. As a practical matter, the courts are ill-equipped to undo the damage done by infighting parents....

It is also true, as Kathleen states, that Ralph admitted he was not actually afraid for his physical safety on account of Kathleen's physical abuse of him. The fact that he did not expect to wind up in the hospital the next time she struck him does not, however, mean that her abuse did not have a cumulative and real effect on his mental state.

In re Marriage of Balcof, 2006 Cal. App. LEXIS 1252 (August 15, 2006)
Opinion on the web (last visited August 15, 2006 bgf)

Case Law Development: No Presumption of Undue Influence in Post Marital Agreements Absent Proof of Unfair Advantage

Wife file for divorce.  The couple then decided to try to reconcile and, as part of their resolution, they drafted a post nuptial agreement to settle their financial affairs. Four years later when Wife again filed for divorce, she challenged the validity of the agreement that she contends is nothing more than a "pre-packaged divorce."

The California Court of Appeals affirmed the trial court's order finding the agreement valid and enforceable.  Relying in part on precedent drawn from the trustee-beneficiary context, Wife argued that the agreement should have been presumed the product of undue influence because husbands and wives are in a fiduciary capacity toward one another.  The court rejected this approach. It found the better analogy to be toward the fiduciary relationship of partners. 

"the precedents construing statutory requirements applicable to transactions between trustees and their beneficiaries are not controlling in interspousal transactions. Interspousal transactions are expressly governed by Family Code section 721, which prohibits a spouse from taking "any unfair advantage of the other," and treats the fiduciary duties of spouses like those of business partners. The distinction between the two types of fiduciary relationship - trustee-beneficiary on the one hand, and spouses or business partners on the other - is entirely reasonable, because in the latter fiduciary duties run in both directions. Indeed, just as it would be patently irrational to presume undue influence in a contract between business partners, it would likewise be unreasonable to presume undue influence in a contract between spouses, unless one of the spouses has obtained an unfair advantage. For these reasons, we conclude that a contract between spouses that "advantages one spouse"..., and therefore raises a presumption the transaction was induced by undue influence, is a transaction in which one spouse obtains an unfair advantage over the other."

The court likewise rejected Wifes arguments that the agreement was based on fraud because husband did not provide wife with written information about the mergers in progress during the negotiation of the post-marital agreement.  The court concluded that wife was aware of the negotiations and failed to investigate their significance or effect and thus was bound by the terms of the marital agreement.

In re Marriage of Burkle, 2006 Cal. App. LEXIS 732 (May 18, 2006)
Opinion on the web (last visited May 19, 2006 bgf)

Paul McCartney To Divorce

"Just like the song, Paul McCartney turns 64 next month. And apparently, he has the definitive answer as to whether Heather Mills McCartneywill need him or feed him on that day. No. The former Beatle and his 38-year-old wife announced Wednesday they'll separate, which churns up speculation as to what a divorce would cost McCartney, should it go that far.

"She could get a huge chunk of his wealth," said Patricia Hollings, a divorce specialist with the London legal firm Finers Stephens Innocent. Hollings said Mills McCartney's relatively young age and that they have a child, combined with McCartney's "staggering" wealth and celebrity status, have the potential to push the settlement into the stratosphere.

McCartney said on his Web site Wednesday he was upset over suggestions that Mills McCartney married him for his fortune, estimated to be $1.5 billion. The couple did not have a prenuptial agreement, Mills McCartney said in a 2002 Vanity Fair interview.

We repeat. Paul McCartney has $1.5 billion. And he got married without a pre-nup. That, friends, is love. That's trust. That's dumb." The Mercury News, Link to Article (last visited 5-17-06 NVS)

Proposal to Require Prenuptial Agreement

"A proposed ballot measure would require couples to have a prenuptial agreement before marriage, limit child support payments after divorces and eliminate any penalty for a parent who refused to make them.The initiative's author, Roland Riemers of Emerado, has filed numerous state Supreme Court appeals stemming from his two divorces." By Dale Wetzel, Associated Press Writer Link to Article (last visited 3-8-06 NVS)

Actor’s Wife Challenging Premarital Agreement

It is believed that Actor Eddie Murphy’s wife will claim he breached their premarital agreement when he had an alleged encounter with a transvestite prostitute at a beach in 1997.  Source:  Starpulse.com For the complete story, please click here (last visited March 4, 2006, reo).

Antenuptial With Fee for Nagging

"Sally Erickson and David Renzie thought they had the secret to marital bliss. But the eccentric list of demands outlined in their prenuptial agreement, which included mandatory backrubs and a $5 fee for nagging, still couldn't save their marriage.Now Erickson, 61, is suing Renzie, 62, for allegedly divorcing her in secret more than two years ago, according to Seminole County court records.Before saying 'I do' in 2001, the Florida couple agreed to a quirky prenuptial agreement. Erickson, a mental-health counselor, promised to cook breakfast a minimum of three times during the weekdays, and once on the weekends, according to the document.

"In return, Renzie will not wake Sally up on her 'off days,'" the document said.The agreement also required Renzie to rub Sally's back three times a week for five minutes. If Sally used the "F" word, she was sentenced one hour of yard work. Renzie had to pay $5 each time he complained, nagged or made "a fuss about Sally's expenditures ..."" By The Associated Press in The Times-Picayune Link to Article

Case Law Development: Antenuptial Agreements Valid at Execution are Enforceable at Divorce unless Spouse is Stripped of All Marital Interests

The Supreme Court of Massachusetts explained the application of its two-part test for enforcement of antenuptial agreements in a case in which Wife had agreed to waive alimony and nearly all rights to assets acquired during the marriage, even though she had substantially less earning capacity than husband and had been a full-time mother and homemaker for most of the marraige.  The court found the agreement valid at the time of execution because, measured at the time the parties were marrying, the agreemend was fair and reasonable, Wife's had been represented by counsel and there was no evidence of fraud. In the "second-look" at the agreement at the time of the divorce, the court held that "An agreement, even a one-sided agreement that leaves the contesting party with considerably fewer assets and imposes a far different lifestyle after divorce than she had during the marriage, is fair and reasonable unless the contesting party is essentially stripped of substantially all marital interests." (internal quotations removed)  The court emphasizes that "Where there is no evidence that either party engaged in fraud, failed to disclose assets fully and fairly, or in some other way took unfair advantage of the confidential and emotional relationship of the other when the agreement was executed, an agreement will be valid unless its terms essentially vitiate the very status of marriage."

2 judges dissented, finding the Wife's waiver of alimony to be unfair and unreasonable.

Austin v. Austin, 2005 Mass. LEXIS 727 (December 21, 2005)
Opinion avaiable on the web (last visited December 26, 2005 bgf)

Case Law Development: Malpractice in Drafting Pre-Nuptials

The Michigan Court of Appeals, in a 2-1 decision, upheld summary judgment for an attorney in a malpractice action based on his drafting of a prenuptial agreement.  The attorney had provided his client (Wife) with the agreement and instructed her to attach a list of assets to the agreement.  She did so, but without including values of the assets on the list.  When, in her subsequent divorce, the antenuptial was set aside for failure to disclose financial assets, Wife sued the attorney for malpractice.  The majority of the court of appeals upheld the trial court's summary judgment on the basis that the failure to disclose values in the asset list was only one factor in the court's decision to set aside the prenuptial, so that Wife could not prove that the attorney's negligence was the proximate cause of the court's action.

A scathing dissent castigated the attorney for his sloppy approach to drafting.  "defendant devoted a relatively small portion of his practice to family law, so it is not too surprising to discover that he left the tailoring of a boilerplate antenuptial to his client and his secretary....Attorneys are legal professionals who are hired to forge binding agreements and are best equipped to detect any fatal flaws. Just as a doctor may not provide a patient with plaster and gauze and expect the patient to set and encase her own broken leg, an attorney may not leave the most legally sensitive portion of a contract to a client's drafting skill and expect that it will survive judicial scrutiny. If a contract fails because of a flaw related to the attorney's abandonment of the drafting process, we should hold the attorney responsible."

Winkler v. Carey, 2005 Mich. App. LEXIS 2989 (December 1, 2005)
Opinion on the web at http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20051201_C255193_33_255193.OPN.PDF (last visited December 5, 2005 bgf)

Case Law Development: No Confidential Relationship Between Persons Agreeing to Marry

Georgia joins those states holding that no confidential relationship exists between persons who have agreed to marry.  With that standard applied, the Georgia Supreme Court uphelp a prenuptial agreement in which, after 18 years of marriage and the birth of four children, Wife was entitled to $2900 per month in alimony for four years and Husband was entitled to all the assets with which he entered the marriage (approximately $8.5 million) and all assets accumulated during the marriage (another $14 million).  The court held that, given no confidential relationship existed between the couple when they executed the agreement, Husband's failure to disclose his income was not fraud.  Moreover, his threat not to go through with the marriage even though Wife was pregnant, did not amount to duress.

Mallen v. Mallen, 2005 Ga. LEXIS 815 (November 21, 2005)
Opinion on the web at http://www.gasupreme.us/pdf/s05f0982.pdf (Last visited November 25, 2005 bgf)

Case Law Development: Postnuptial Agreement that Conditions Maintenance on Absence of Adultery allows Parties to Raise Issue of Adultery even if Not a Grounds for Divorce

The Virginia Court of Appeals decided a case involving an interesting postnuptial agreement in which husband agreed to pay alimony to wife upon divorce. The agreement provided that husband would pay more alimony if wife proved adultery and further provided that if husband proved wife's adultery, "she agrees to relinquish her rights under this agreement. For the purposes of this agreement, proof of adultery is defined as; unaltered photographic or video representation of adultery; or, a finding of guilty of adultery in a court of law." When wife filed for divorce and sought to enforce the agreement, husband filed interrogatories asking about wife's sexual activities outside of marriage. The trial court struck the interrogatories and, when husband filed an amended answer to allege wife's adultery as a defense to her request for mainenance, the trial court struck the amended answer as well. According to the trial court, husband could not seek discovery of adultery unless he filed a cross-complaint for divorce on the grounds of adultery, which husband did not do.

The court of appeals reversed, finding that husband's interrogatories were well within the scope of discovery under Virginia rules of civil procedure and that his answer rightly raised the defense provided by the agreement. The court of appeals found no grounds for the trial court's interpretation that husband would be required to sue for divorce on the grounds of adultery in order to raise the issue.

Hall v. Hall, 2005 Va. App. LEXIS 401 (October 11, 2005)
Opinion on the web at http://www.courts.state.va.us/opinions/opncavwp/2021044.pdf (last visited October 13, 2005 bgf)

Case Law Development: Interpretation of Pre-nuptial Agreement

In interpreting a prenuptial contract, the Indiana Court of Appeals addressed several novel issues including:
- the meaning of the term “estrangement” which was used in the contract as the event at which certain property should be valued (the court find estrangement occurs at, the latest, upon one party’s filing for divorce)
- the enforceability of an agreement in the contract requiring that the couple file joint tax returns if that reduced overall tax liability(the court found no error in the trial court’s requiring Wife to reimburse Husband for excess taxes paid due to her filing separate returns)
- the characterization of a tax loss carryover as marital property subject to distribution (the court joined Missouri and New York in concluding that tax loss carryovers can be considered marital property)

Magee v. Magee, 2005 Ind. App. LEXIS 1678 (September 12, 2005)
Available on the web at http://www.in.gov/judiciary/opinions/pdf/09120501ewn.pdf (last visited September 17, 2005 bgf)

Case Law Development: Claim of Economic Contribution Allowed Despite Post-Nuptial

In an opinion that reveals just how difficult it is to draft air-tight agreements, a majority of the Texas Court of Appeals allowed a wife’s claim of economic contribution to the marital home, despite a post-nuptial agreement dividing the parties’ properties, waiving claims against each other’s estates, and designating the marital home as community property.

Moroch v. Collins, 2005 Tex. App. LEXIS 7359 (September 6, 2005)

Opinion on the web at http://www.courtstuff.com/cgi-bin/as_web.exe?c05topin.ask+D+12311

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Case Law Developments: Trial Court May Not Enter “Reasonable Visitation” Order If Specific Parenting Time Plan Requested

In this case, the Michigan Court of Appeals provides us with fabulous final exam question material and interesting analysis of some unique issues.

The issue of first impression presented by the case was whether trial courts may order "reasonable visitation" when one party has requested a specific parenting time.  The Michigan Court of Appeals held that, under the terms of Michigan's custody statutes, a trial court must enter an order detailing specific parenting times if a party requests, even if the request is oral and during the pendency of the hearing.

In addition to the parenting time issues in this case, however, the Court of Appeals reviewed:

• division of pension survivor benefits, including the trial court's distribution of a portion of husband’s separate property;
• division of a personal injury award;
• transmutation of husband’s contribution to the purchase of a family home; and
• effect of a post-nuptial agreement of the division of property.

Pickering v. Pickering, 2005 Mich. App. LEXIS 2126 (August 30, 2005)
Text of opinion on web at http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20050830_C253342_46_253342.OPN.PDF

BGF

Case Law Developments: Conditioning Consent to Adoption Makes Post-nuptial Agreement Void Against Public Policy

Stutz v. Stutz, 2005 Tenn. App. LEXIS 517 (August 23, 2005)

This case presents no real suprises as law goes.  Readers will not even be surprised to know that couples will use children as a bargaining chip.  What makes this case unique is that the bargaining was not during divorce but in negotiating a post-nuptial agreement in the 20th year of an intact marriage in order to convince a husband to consent to an adoption. 

Mom wanted a baby and was unable to conceive.  Dad did not want to adopt.  Mom agrees in a post-nuptial to surrender her equitable share of the $11 million dollar marital estate and in return for Dad's agreement to adopt a child. The case has plenty of excerpts from the agreement, letters and testimony to paint a vivid picture of the mindset of both Mom and Dad as well as the questionable role of the attorneys involved in drafting the agreement. 

The court, of course, held the agreement void as against public policy, stating that "An adoption should not be viewed as a business opportunity by an adoptive parent.... We find the agreement arrived at by these parties to be both cynical and self-serving."  Your students will see it as a "Believe It or Not" story. 

Full text of opinion on the web at http://www.tsc.state.tn.us/OPINIONS/TCA/PDF/053/stutzlindaOPN.pdf

BGF