Antenuptial Agreements: Enforceable or Unenforceable?

By

Michael A. Robbins

History and Current State of the Law Regarding Prenuptial Agreements

The 1963 Michigan Constitution, Article X, '1, provides the general framework for the legality of antenuptial or prenuptial agreements:

The disabilities of coverture as to property are abolished. The real and personal estate of every woman acquired before marriage and all real and personal property to which she may afterwards become entitled, shall be and remain the estate and property of such woman, and shall not be liable for the debts, obligations, or engagements of her husband, and may be dealt with and disposed of by her as if she were unmarried. Dower may be relinquished or conveyed as provided by law.

This provision eliminated the common law doctrine that a marriage resulted in a merger of the wife's identity with that of the husband so that no enforceable contract could exist between husband and wife.

More specifically, Michigan has a statute that expressly authorizes antenuptial agreements. MCL 557.28 states:

A contract relating to property made between persons in contemplation of marriage shall remain in full force after marriage takes place.

MCL 557.28 has been in effect since March 31, 1982. This statute is part of Public Act 216, titled A Rights of Married Women @. MCL 557.28 repealed '557.5 that basically contained the same language. However, much of the early history surrounding antenuptial agreements were based on the prior statute.

MCL 557.5 had been interpreted by the courts as an express policy statement that antenuptial agreements are to be treated favorably if they meet the requirements of contracts in general. Kennett v. McKay , 336 Mich.28 (1953).

Another statutory requirement that each antenuptial agreement must satisfy his MCL 566.132(c) which states:

In the following cases, an agreement, contract, or promise is void unless that agreement, contract, or promise or a note or memorandum of the agreement, contract, or promise is in writing and signed with an authorized signature by the party to be charged with the agreement, contract, or promise:

(3) An agreement, promise, or undertaking made upon consideration of marriage, except mutual promises to marry.

Compliance with MCL 557.5 (now 557.28) and MCL 566.132 (c) was the bear minimum that was required for the validity of any antenuptial agreement. Beyond this, it was unclear as to what constituted a valid antenuptial agreement.

The validity of antenuptial agreements was first discussed in Hockenberry v. Donovan , 170 Mich. 370 (1912), where the Court stated:

Where the parties entering into an antenuptial contract are of mature years and have a full understanding of the meaning of the instrument, the agreement, if based on a sufficient consideration, and in the absence of fraud, is valid and enforceable, and is not against public policy. Marriage alone has been held a sufficient consideration to support a marriage settlement.

The Hockenberry case provides the outline for our current law when it states that the parties must have a full understanding of the meaning of the instrument and the agreement must be Abased on sufficient consideration and there must be an absence of fraud and the contract must not be against public policy. These requirements have been the subject of much litigation since originally stated in the Hockenberry case, especially the requirement that the contract must not be against public policy.

The most common type of antenuptial agreement that had been declared invalid was one that provided for a property settlement or alimony in the event of divorce. Such agreements were held invalid as being against public policy in Scherba v. Scherba , 340 Mich. 228 (1954) and In re Muxlow's Estate , 367 Mich. 133 (1962). In both of these cases, the Supreme Court stated the general rule that antenuptial agreements which tend to induce a separation or divorce of the parties after marriage is contrary to public policy and, therefore, void. However, in the Scherba case, the Court indicated that the Court could still use the invalid agreement as a guide in determining the divorce settlement. In the Muxlow case, the Court indicated that the contract did not tend to induce a separation and, therefore, found that the agreement was valid. In both of these cases, it was clear that the Michigan courts favored antenuptial agreements and would do what they could to enforce the intentions of the parties who enter into such agreements.

On the other hand, it has always been Michigan's public policy that antenuptial agreements that relate to the rights of each party on the death of the other are favored and have held to be valid. In re Muxlow's Estate , supra , and In re Banker's Estate , 416 Mich. 681 (1982). Antenuptial agreements in contemplation of death are favored as allegedly promoting marital tranquility, and are generally enforced if the parties have made a full disclosure of their assets and if the contract was not a product of fraud, duress or undue influence. The public policy reason which has caused courts to void agreements contemplating divorce are usually not considered relevant to agreements contemplating death. The courts instead focus on the spouse's interest in the preservation of the respective estates and on their understandable desire to avoid disputes concerning property after one spouse has died. See Klarman , Marital Agreements In Contemplation of Divorce , 10 U. Mich. J.L. Ref. 397 (1997) and In re Muxlow's Estate , supra.

On July 22, 1991, the Court of Appeals decided Rinvelt v. Rinvelt , 190 Mich App 372 (1991). In Rinvelt , the Appellate Court held for the first time that "antenuptial agreements governing division of property in the event of divorce are enforceable in Michigan" and that such agreements would no longer be considered void as "against public policy".

In affirming the lower court ruling, the Court of Appeals quoted extensively from an Opinion by the Alaska Supreme Court in Brooks v. Brooks , 733 P. 2d 1044 (Alaska 1987) and 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 of 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.

If none of these factors are present, the prenuptial agreement should be enforced.

The Court of Appeals noted that the "outdated policy concern" that led to the rule against enforcing antenuptial agreements upon divorce "are no longer compelling". The Court also held that the "party challenging the agreement bears the burden of proof and persuasion". The Court in Rinvelt rejected the argument that antenuptial agreements in contemplation of divorce weaken marriages. Rather, it took the view that such agreements actually promote marriages in situations where people would not get married unless they had the ability to protect their financial interest. Michigan has now joined the growing number of states that uphold the validity of premarital agreements in contemplation of divorce.

Guidelines to Ensure Enforceability

1. All antenuptial agreements must be in writing and signed by the parties – MCLA 556.132© )

2. Each party should be represented by independent counsel.

a. Suggest to each party to retain separate counsel and then document your suggestion in writing.

b. This suggestion will ensure that each client has been explained their obligations, rights and alternatives and will ensure that each party fully understands the terms of the agreement, the nature of their waiver and/or relinquishment of rights, and that each party is voluntarily entering into the agreement. This discussion should also include an understanding of what differences could result in the absence of the intended agreement.

c. Do not represent both parties.

d. It is best if each party chooses his or her own attorney. This will avoid any problems that may result if the wealthier party chooses or even suggests an attorney for the other party.

e. Each party should be responsible for their own attorney fees.

3. The agreement must be "fair" and "conscionable" when executed.

a. In order to determine whether a contract was unconscionable when executed the Courts must look at how the property will be divided.

b. The antenuptial agreement should be clear as to the status of the parties when they were married, including, but not limited to a statement as to their prior marriages; children; assets; and income.

c. The financial issues that must be addressed in the prenuptial agreement include, but are not limited to what property will be retained as separate or premarital property; what will happen with the appreciation of those assets; what will happen with the co-mingling of those assets; what will happen with spousal inheritance rights; how will parties share the obligations for living expenses and earnings during the marriage; how will property acquired during the marriage be owned or shared; what portion of the property of the wealthier party will go to the less wealthy party in the event of divorce or death; will the sum or amount of property going to the other spouse be increased as the marriage continues and/or is there a provision as to when the prenuptial agreement ends; have the children from previous marriages been considered.

d. You want to include any other information which would show the Court that the agreement was fair and conscionable when it was executed.

4. The agreement must be voluntarily entered into without fraud, duress or mistake, or misrepresentation or nondisclosure of material facts.

a. Make sure that your client discusses, negotiates and enters into the agreement well in advance of the wedding.

b. Every attempt should be made to eliminate the element of duress and to make sure that both parties fully understand the intended agreement and that it represents the understanding of both parties, with each party having the opportunity to explain any objections and the opportunity to modify, compromise, and reach a mutual understanding as to the agreement's ultimate terms and conditions.

5. There must be a full, fair, and complete disclosure of each party's assets, liabilities and income.

a. Attached to each agreement should be a detailed financial statement giving full disclosure.

b. That there should be an indication that the values placed on the assets are approximate and also being used to identify the asset, not necessarily appraise the asset.

6. Have the facts and circumstances changed since the agreement was executed, so as to make its enforcement unfair and unreasonable. Once again, your agreement should take into consideration an additional distribution of property or income if the marriage continues in tact; or a termination date of the antenuptial agreement in anticipation of future changes.

7. Additional Considerations.

a . Meet separately with your client, away from the other party and the other attorney.

b . Document the investigation of assets or the opportunity for investigation.

c . Document the negotiation process and retain copies of correspondence and drafts of the agreement in order to show changes at the request of the other party.

d . Keep abundant documentation in writing of the parties' voluntary agreement in the process of drafting the agreement and the degree of their disclosure.

e . Document the parties' level of education, experience in business and legal matters, and prior marriages.

f . Include a statement showing which state laws apply to the agreement.

g. The agreement should state that it is being executed in contemplation of marriage, and that the marriage will be a valid consideration in the event that other consideration fails. The contract should also state that it is conditioned upon marriage. Therefore, if the marriage is not consummated, then the agreement is null and void.

h. Consider alternatives to an agreement, such as the establishment of an inter vivos trust before marriage or the keeping of separate accounts during marriage.

i. If you think that the agreement or any part of the agreement may be unenforceable, write an appropriate letter explaining this to your client and include an appropriate provision in the agreement.

j. Provide each party with a copy of the agreement.

k. Make sure that each party read the document and fully understands it.

l. Review with your client the initial draft and every subsequent draft of the agreement and request his or her input to ensure that it is clear and unambiguous.

m. Hold a final meeting where the parties read the agreement, line by line, and where counsel for each party asks and obtains the acknowledgment of their client that the agreement is being voluntarily entered into, free from fraud, and undue influence and that the parties have sought and obtained separate legal advise so as to understand their respective rights, obligations and the nature and extent of any waiver they are required to make pursuant to the terms of the agreement.

n. You may wish to videotape the final review before a certified court reporter so that a future court could view the parties' actual review and discussion of the provisions of the agreement with their counsel.

o. The parties should likewise be interrogated as to their understanding of the agreement and the fact that it is being entered into voluntarily and without duress of any type.

p. It may be advisable that there be witnesses, and possibly a notary, to ensure the validity of the signatures as well as the understanding and/or state of mind of the signators.

Some excerpts from the preceding section were obtained from the following:

Premarital Agreements – Check list, 16 Family Advocate 4:12 (1993); Morganroth, Fred; Considerations In Preparing Enforceable Antenuptial Agreements (March 5, 1998); Robbins, Norman; Checklist for Antenuptial Agreements (1988).

Guidelines to Challenge the Enforceability of the Antenuptial Agreement

As discussed above, a prenuptial agreement will be upheld in Court if it is fair, if it was executed voluntarily, and if it was entered in good faith. Therefore, an attorney trying to have a premarital agreement set aside must reverse the formula and show that if certain events occurred, then the agreement is unfair, involuntary, not entered in good faith, and invalid. Once again, the party claiming that the agreement is invalid has the burden of proof.

1 . Fairness. Fairness in a prenuptial agreement has become synonymous with equitableness. The equitableness of an agreement is measured by whether it provides for a disproportion allocation on dissolution or divorce. The attorney must establish that upholding the agreement would award the attacking spouse insufficient funds or property to provide for his or her reasonable needs. Thus the agreement is unconscionable. The benefits received under the agreement may be shown to be disproportionate through:

a . examining the nature and extent of the parties' respective estates at the time of execution;

b . assessing what the attacking party would likely receive if, instead of a prenuptial agreement, an award of property or support was made by the Court;

c . assessing what the attacking party would receive by law if the opposing party were to die and no premarital agreement existed;

d . examining the length of the marriage and the age of the parties.

2. Good Faith. Good faith requires that each party makes a full and fair financial disclosure before execution of the agreement. Disclosure involves more than the parties providing financial information to each other. Key questions about financial disclosure include:

a . What valuation method was employed?

b . What property, funds, or potential benefits known to be subject to receipt in the near future were disclosed?

c . What full and complete information about the assets were revealed?

3. Was the agreement executed voluntarily. If fraud or misrepresentation exists in one side's financial disclosure, the agreement was not voluntarily executed because the other party could not have known what was to be gained or lost by entering into the agreement. Likewise, coercion or duress will vitiate a prenuptial agreement for lack of willingness. Although fraud and misrepresentation are usually financial issues, coercion and duress are often determined by timing. A premarital agreement negotiated over weeks or months is far less susceptible to a charge of being induced through coercion or duress than one presented to a future spouse on the eve of the wedding. To gauge coercion and duress, the attorney should ask:

a . When was the party now seeking to set aside the agreement first shown the document?

b . How old was the party and what was the his or her capacity to understand the agreement at the time?

c . What were the parties' relative ages?

d . Who was present when the document was first disclosed?

e . Which party drafted the agreement?

f . How many drafts of the agreement were prepared.

g . Was the document executed on the first draft?

h . Who was present at the time of execution?

i . What was said and by whom about the execution of the agreement?

Some excerpts from the preceding section were obtained from Frumkeys and Greene: How to Get An Agreement Set Aside, Family Advocate (Winter, 1984).

Conclusion

In order for an antenuptial agreement to be valid in the State of Michigan, the three factors outlined in Rinvelt must be satisfied. A considerable amount of planning and safeguards must be implemented in order to ensure the validity of the agreement. Each and every one of these factors must be addressed in order to provide your client with the highest degree of probability that the antenuptial agreement will be enforced.

On the other hand, setting aside a prenuptial agreement involves a logical, methodical and analytical approach that begins with the three elements of fairness, willingness and good faith. Evidence must be presented on each of these elements in order to demonstrate to a court that a antenuptial agreement should be set aside because some form of fraud, duress, mistake, misrepresentation, nondisclosure, unconscionableness or change of circumstances has taken place.