Antenuptial Agreement After Reed v Reed

In 1991, the Court of Appeals decided Rinvelt v. Rinvelt, 190 Mich. App. 372, which held for the first time that:

Antenuptial agreements governing division of property in the event of divorce are enforceable in Michigan.

In Rinvelt, the Court of Appeals adopted three factors to be considered in determining the validity of a prenuptial agreement:

1. Was the agreement obtained through fraud, duress or mistake, or misrepresentation or non-disclosure 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?

On March 8, 2005, a divided Court of Appeals, in the 2-1 published opinion of Reed v. Reed, Docket No. 248895, reversed a trial court's decision which set aside a 27-year old prenuptial agreement and concluded that the prenuptial agreement was valid and should have been enforced.

In the Reed case, the trial court was faced with the following facts:

1. The parties signed a prenuptial agreement on

May 15, 1975.

2. The prenup indicated that:

Each party would have "complete control" over his or her "separate property" acquired by them in their "individual capacity."

3. The parties were then married on July 5, 1975.

4. At the time of the marriage, Mrs. Reed had been
employed as an engineer for approximately three years and Mr. Reed just graduated law school and was employed in an entry level attorney position. The parties combined net worth was less than $20,000.

5. During the marriage, the parties raised two
children and accumulated assets in excess of $5,000,000. Mrs. Reed was the primary caretaker of the children and Mr. Reed continued to run his own law practice.

6. After 30 years of marriage, Mrs. Reed filed for
divorce and filed a motion to set aside the 27-year old prenuptial agreement based upon the third factor of Rinvelt .

That the facts and circumstances have changed since the agreement was executed so as to make the enforcement unfair and unreasonable.

7. The trial court granted Mrs. Reed's Motion for Summary
Disposition and set aside the prenuptial agreement.

8. The Court of Appeals reversed by stating:

A. Before you can set aside a prenuptial

agreement saying the facts and circumstances have changed, you must first decide if the change in circumstances was "foreseen."

B. The Court of Appeals went on to say:

i. A long-term marriage should have been foreseen.

ii. Assets growing in value or accumulated should have been foreseen.

iii. Children being born should have been
foreseen.

9. Based on this analysis, the Court of Appeals concluded
that the 27-year old prenup was valid.

DOES THIS MEAN THAT ALL PRENUPTIAL AGREEMENTS ARE VALID AFTER REED?

THE ANSWER IS "NO."

Rinvelt is still good law and prenuptial agreements can still be challenged if you can show:

1. The agreement was obtained through fraud, duress, mistake or misrepresentation.

2. The agreement was unconscionable when executed.

3. That the facts and circumstances have changed since
the agreement was executed so as to make the enforcement unfair and unreasonable.

Despite the Reed case, prenuptial agreements, even if valid, can still result in a different property division than contained in the prenuptial agreement pursuant to two Michigan statutes which Joe Aviv will talk about more in a minute.

My hot tip is that if you are going to draft or review a prenuptial agreement after Reed , you must consider the following:

1. Make sure the agreement was voluntarily entered into.

2. Make sure there is full disclosure.

3. Make sure the agreement is "fair" and "conscionable" when executed.

4. Make sure you address all "foreseen" events such as:

a. Children
b. Length of marriage
c. Fault
d. Appreciation or depreciation of assets
e. Acquisition of property
f. Co-mingling of separate and marital property
g. Health issues
h. Debt issues, including bankruptcy
i. Any other foreseen event you can think of

Finally, in light of the Reed case, I would highly suggest that a sunset or termination date be included in every prenuptial agreement providing for a date when the agreement will end. Otherwise, the prenuptial agreement may last forever.