What is a Prenup?
A prenuptial agreement is an enforceable contract entered into prior to the marriage that sets forth the property rights of each spouse. The prenup, or premarital agreement, is often used in the event of divorce, or death, to address what will happen to the spouses’ property, assets, debts and other considerations if the marriage ends.
In fact, a valid prenuptial agreement can contract away many of the state’s default rules regarding the division of property and the payment of spousal support upon divorce . Matters often covered in a prenup, in addition to what will happen to the property upon divorce, include the division of separate property acquired during the marriage, which spouse will be responsible for debts, whether one spouse has primary custody of the children and how the other spouse will contribute to childcare, whether alimony should be paid and if so, in what amount, any requirement for family counseling if the couple experiences problems, and even what will happen to an inheritance.
Requirements of a Valid Prenup
A prenuptial agreement, to be valid and enforceable, must meet certain legal requirements. First and most importantly, a prenup must be in writing. This requirement is obvious, of course, but it is nevertheless essential. Verbal prenuptial agreements do not exist in California.
Second, both parties must sign a prenuptial agreement prior to the marriage. If the parties have already been married and then decide to create a prenup, they will have to execute a postnuptial agreement instead, which is a different type of contract.
Third, each party must have been properly informed of the contents of the agreement. Specifically, he or she must have been given a fair and reasonable disclosure of the property or financial obligations of the other party. Prenuptial bargains are generally not confidential, but the extent of the disclosure can be kept secret with the inclusion of an enforceable confidentiality clause.
Fourth, both parties must have voluntarily entered into the agreement. The prenup should adequately inform each spouse of the possible influence the contract will have over his or her rights, typically in terms of income and property, during the marriage and after dissolution. Failure to comply with this requirement makes the contract either void or voidable.
Fifth, prior to signing the agreement, each spouse must have been (a) represented by independent counsel or (b) waived counsel in writing. The provision attempts to ensure that no one enters into an agreement in ignorance of the potential consequences of the choice, i.e., that agreeing to the contract will impact his/her legal rights.
Common Ways a Prenuptial Agreement Can be Voided
Should there be evidence of fraud, force or pressure, an agreement might be voided. Or if someone was not able to exert his or her free will, that agreement is at risk. If the agreement is so one-sided that the distribution of property under it would be considered unconscionable or if it was not procedurally executed properly, the document would have a fair chance of being voided.
In a situation involving fraud, one spouse would have to show that the other spouse intentionally misrepresented a substantive fact. Not all statements, even if found to be "false" will result in voiding a document. For example, if a spouse tells his or her partner that he has substantial investments when in fact the investments are not significant, but the spouse didn’t have any idea as to whether or not the investments were significant or in what percentage they were held, the agreement may not be voided.
A situation can lend itself to be voided if one spouse provides the other with extensive financial documentation but requires the other to sign the document without providing the financial documents. Moreover, the agreement should not have terms that leave one spouse with overly harsh consequences such as in the case of divorce. The courts have little problem finding a prenuptial agreement unconscionable if it was signed an hour before the wedding, requiring the other spouse to hurry unrepresented into signing.
How to Challenge a Prenuptial Agreement
A prenuptial agreement can be challenged when the side who wants to get out of the agreement can prove its terms are unfair and that the agreement was signed under a cloud of duress. When one side attempts to challenge a prenuptial agreement, they must take a few legal steps.
Step 1: Before You Challenge
It’s always preferable to try to work it out with the other side. It’s never too late to get divorced or separated. If the other side is intransigent on the issue, you may have to proceed.
Step 2: See an Attorney About the Challenge
Your divorce lawyer should be consulted if you’re going to challenge the prenup. Be sure you pick one who has experience, not just any attorney specializing in divorce law. People can and do get prenuptial agreements wrong. If the agreement was drafted by an attorney and/or reviewed by another attorney, it may still be valid despite your allegations.
Step 3: Talk to Your Divorce Lawyer
After reviewing the agreement, the attorney generally talks to you about why you feel the contract is invalid. The attorney also goes over with you the evidence the court will need to hear to rule in your favor , as the side challenging the contract. Each side seeking a divorce has to provide full disclosure of finances to each other unless they agree otherwise. Your prenuptial agreement should be one of the forms your attorney requests. It would be helpful if you and your divorce attorney came up with examples of how the agreement might hurt you.
Step 4: Allow Your Lawyer to Challenge Me
Your divorce lawyer compiles the information. He or she then asks a court to rule that the prenuptial agreement is void. If the judge agrees, the judge sets aside the contract. The judge cannot set aside the agreement based on your mere emotions. The judge must first hear and see several pieces of evidence, such as: The judge also expects proof that you were given sufficient time to consider the agreement. For example, five days is not sufficient time for you to have made an informed decision. As to being taken advantage of whether deliberately or unintentionally, the judge looks at prior patterns of psychological abuse by your spouse. Extensive dating and engagement abuse can demonstrate that.
Recent Voided Prenuptial Agreements
Several recent cases have highlighted issues surrounding the voiding of prenuptial agreements. These cases underscore key takeaways and legal precedents:
A16-0531, 2017 WL 951853 (Minn. Ct. App 2017) The prenuptial agreement was created when Husband’s business was doing well and had a large income stream. By the time of divorce, the business was struggling and generated little income. The district court found that the agreement was no longer conscionable or fair at the time of the divorce. However, the Court of Appeals reversed the district court and found that amendments to the agreement should have been attempted first. In furtherance of this goal, the Court remanded the case for a trial and appointment of a special master to determine a fair, reasonable amendment to the agreement probably would have worked to accomplish the parties’ goals. Because the district court failed to attempt an amendment to the agreement, the district court abused its discretion by voiding the prenuptial agreement.
A07-1495, 2008 WL 649081 (Minn Ct. App 2008). Husband in this case was an employee of a non-profit organization which developed and implemented a volunteer program under its umbrella. Husband was terminated from the organization, resulting in his loss of employment and the loss of his health insurance. The district court found that Wife was receiving regular premium payments from the non-profit to pay for Husband’s health insurance coverage. The Court of Appeals found that the non-profit was Payson, a family entity because Husband, Wife and the children were all members. The non-profit itself did not regard Payson as an entity, but the Court found that for purposes of the divorce, the non-profit should be grouped with other family entities. The Court further found that Payson was not a third party beneficiary of the agreement since the co-payments and deductible requirements were specified in the agreement, and Payson was not identified by name or role. Payson was an indefinite reference; therefore, it was not a third party beneficiary.
A14-0992, 2015 WL 4968856 (Minn Ct. App 2015), review granted May 22, 2016. Wife challenged the prenuptial agreement distribution of Wife’s separately held property without compensation in the event of divorce. Specifically, Wife argued that the Court should void the agreement because there was inadequate consideration. The district court found that the contract was valid and enforceable based on the existence of adequate consideration. On appeal, the Court of Appeals agreed that the agreement was valid and enforceable. Therefore, the Court of Appeals affirmed the district court’s decision to enforce the agreement.
A15-0591, 2016 WL 7547620 (Minn Ct. App. 2016), review denied January 4, 2017. Husband filed for divorce after 43 days of marriage. The parties had executed a prenuptial agreement wherein Husband waived his right to spousal maintenance. In Husband’s motion to enforce the prenuptial agreement, Husband argued that he had waived his right to spousal maintenance and Wife should be prohibited from pursuing any claim for spousal maintenance. Alternatively, Husband argued that he should be awarded the full value of the marital property, as contemplated under the agreement. Wife sought to void the agreement because (1) it was unconscionable at the time it was signed; and (2) no economic disclosure had been made. The district court rejected Wife’s argument and instead found that the agreement was enforceable. The Court of Appeals affirmed the district court’s ruling. The Court found that the agreement was not unconscionable at the time it was signed, but rather was reasonable under the circumstances and both parties had been well represented by counsel. Therefore, the Court found that the agreement was valid and enforceable.
Prevent Your Prenup from Being Voided
When a couple creates a prenuptial agreement, we always advise them to ensure that both parties obtain legal advice from an independent lawyer with experience in drafting and reviewing such documents. Not only is this the safest way to create a valid agreement, but it also increases the likelihood of the document being enforceable.
Often, the agreement will be created as part of a collaborative divorce process, in which the couple works with a team of professionals, each specializing in their respective areas of expertise. In these cases, the presence of the divorce coaches ensures that the paperwork is drafted properly and provides both parties with the appropriate advice. The frequent interplay of various experts, each engaged to provide legal or financial guidance, helps ensure the prenuptial agreement is valid and legally binding. Additionally, we advise that the agreement should not be drafted at the last minute. As mentioned above, even within the collaborative model, the parties might not end up with a legally binding agreement if it were to be signed at a time when both parties are under stress. We advise that proper lead-in time (i.e. , many months) is preferable. As well, ensure that your prenuptial agreement is properly filed with the appropriate provincial office. In Ontario, for example, it is retained at the local courthouse. This may seem like a relatively simple step, but the argument can be made that you did not intend to have the agreement enforceable until it is signed and filed. In such a case, the agreement could then be perceived as having been signed under duress, if the filing happens after a separation or divorce has already commenced. Finally, not all agreements are able to sufficiently protect both parties involved. Sometimes, even when the prenup is very recent, one party will make the argument that they were coerced into signing because of the power imbalance (or vast difference in wealth) between the two of them. While many arguments in this vein are quashed before they even reach court, some can make it through all the way to completion. To protect yourself, ensure that you are getting the best legal advice possible, and do not sign anything without being sure that you understand every detail within it.