Prenuptial Agreements Explained
Prenuptial agreements are contracts that are entered into before marriage. Such agreements typically set forth the rights and obligations of the parties in the event of the dissolution of their marriage. They can be very simple or incredibly complex depending on the needs of the couple. Prenups can set forth how property is to be divided, whether spousal support is to be paid, how assets that are given at a specific date during the marriage are to be treated, where minor children are to go to school, etc. In many cases, the consideration for the prenuptial agreement is that the parties intend to marry and upon that marriage, the other promises in the agreement are to be performed.
Couples considering a prenuptial agreement often do so because, in the case of one partner having substantially more wealth than the other , they wish to protect their separate property. A prenuptial agreement may also be used when one or both parties has children from a previous relationship and they want to insure that the property acquired post-marriage belongs to the children from the previous relationship (and not to the new spouse). Sometimes a couple will enter into a prenuptial agreement simply because they are very business-savvy. Such persons understand that the agreement is important to provide certainty between the partners if their relationship comes to an end.
Regardless of the reasons behind the desire for a prenuptial agreement, there are some things that a prenuptial agreement cannot address: custody and visitation of minor children, child support of the minor children and distribution of property after the death of a party (this type of agreement is called a will/testament). Additionally, your prenuptial agreement must be fair. If your prenuptial agreement is unfair, it will not be entered by the Court and it is subject to being vacated later in an action to vacate. Further, if your prenuptial agreement is based on fraud, the agreement is subject to being nullified. It also must be entered into voluntarily; the voluntary nature of the prenuptial agreement, however, does not mean that it cannot be signed the day before the wedding.
Legal Conditions for an Enforceable Prenup
In order for a prenuptial agreement to be considered valid and enforceable by a judge, it must meet certain legal requirements:
Agreement and Voluntary Consent – The agreement must be the result of voluntary consent and agreement by both parties. Even if the agreement has been carefully drafted, without voluntary consent the agreement can be rendered null and void.
Consideration – As with any contract, there must be some exchange of consideration or debt in the agreement.
Independent Counsel – The courts have held that both parties to the agreement must be represented by individual attorneys who would be satisfied that the parties had the benefit of independent advice.
Full Disclosure of Assets – The parties must fully disclose their current financial assets. Often this is satisfied by the execution of a full financial disclosure statement along with a recent net worth statement.
Fair and Reasonable – The prenuptial agreement must be truly fair to both parties. Unlike a post-nuptial agreement there cannot be a discussion that one party will hold all the assets after the marriage. If one party appears to be getting the better end of the deal, the court may hold the agreement unenforceable.
This can be a very persuasive tool when you’ve put in place the important prerequisites. An experienced attorney will help you deal with these requirements so that your prenuptial agreement is as binding as it can be!
Why Prenups Get Challenged in Court
While most prenuptial agreements are enforceable, there are some situations in which courts set them aside. These include instances of fraud or coercion; the failure to make a full disclosure of assets and debts; when individuals don’t have the capacity to sign, and unconscionable terms.
Fraud
Fraud in a prenuptial agreement can occur if one person:
Coercion
If one person is forced to sign a prenup under duress or coercion, this, too, can be considered fraud, and may cause a court to award relief. For instance, if you don’t have time to review the document, or are pressured to sign before the marriage date to procure a marriage license, it may be coerced. However, in order for a court to set aside a prenup on the basis of coercion, there must be evidence that one spouse made a threat, either physically or psychologically.
Lack of Disclosure of Assets, Debts and Incomes
Failure to make a full and fair disclosure can be grounds for setting aside a prenuptial or post-nuptial agreement. Courts have held that there must be a fair exchange of information, such as finances, assets, liabilities and more, in order for a prenup to be valid.
Capacity
Four elements are inherent in the concept of capacity: When one person lacks the capacity needed to fully understand the implications of what a prenup means, a judge may decide that the contract is void.
Unconscionable Terms
The terms of the contract may be so unfair to one spouse that the judge deems them unconscionable. For example, for a couple who expected to have four children together, it could mean that the terms of the agreement regarding children should be set aside. For circumstances in which a prenuptial agreement was entered into when a person did not have the mental capacity to sign, the prenup can be set aside.
Any one of these factors may cause a judge to set aside a prenuptial agreement.
How to Improve a Prenup’s Enforceability
To ensure that your prenuptial agreement will be enforceable in the event that it needs to be presented in a divorce, it is important to have an experienced attorney involved in the negotiation, drafting and finalization of the document. Some of the steps that you can take to protect your interests and help avoid invalidation of the agreement include: First, The agreement must be based upon full and fair disclosure. If a party is concealing assets or omitting material financial information from the agreement, the prenuptial will likely be rejected by the court because of the absence of full and fair disclosure. The best way to prevent this is to provide all parties involved with a clear accounting of your assets and income. Second, Each party must have sufficient time to review the agreement before signing. While there is not a specific waiting period mandated by the law, the parties should have at least 7 days between the presentation of the agreement and the signing of the agreement. Third, Each person involved in the drafting of the agreement must have independent legal representation. While joint representation is allowed under New Jersey law, we advise against this practice. In order to have the prenup upheld in court, each party must have their own attorney to advocate for them and make sure that they are not being taken advantage of by a spouse. After the document is signed, take care to keep copies of the prenup and any financial documents used in its negotiation. If one of the people involved in the negotiation attempts to change the terms of the agreement or unfairly renegotiate it after the marriage has begun, you can appeal to the court for enforcement of the original agreement.
Recent Developments and Judicial Decisions
A California case involving a fitness mogul and NBA All-Star offers a prime example of how courts have handled the enforcement of prenuptial agreements. The 2018 case, In re Marriage of Bacon, involved former NBA player Matt Bacon and his wife, Holly. The couple married in 2004 and signed a prenuptial agreement shortly before marriage. Five years after their divorce, Ms. Bacon filed to set aside the prenup on the grounds that she had signed it under duress. After years of litigation, including an appeal to the Ninth Circuit, the court found that the agreement had been set aside.
The Bacon case illustrates how a court might find that a prenup was not entered into willingly. In this case , evidence showed that the wife’s mother had encouraged her to learn about and sign a prenuptial agreement. Testimony revealed that Matt Bacon had even signed the agreement shortly before the wedding so that Holly would not have an opportunity to read it and understand its provisions. Though Holly initially seemed to understand the agreement’s provisions, court testimony showed that this information was simply "fed" to her.
As with any contract, having a full understanding of the terms of the agreement is essential for a court to enforce its terms. If a party falsely induces another party into signing the agreement or the agreement was unfair or not balanced, a court might set it aside as unconscionable.
Options Other than Prenups
When a prenuptial agreement is undesirable or unfeasible, there are several alternatives that can be considered. Among these alternatives are postnuptial agreements and cohabitation or domestic partner agreements.
Postnuptial Agreement – Pursuant to Tennessee law, a husband and wife may enter into a contract with respect to the following:
The postnuptial agreement must be in writing and signed by the parties, but does not need to be notarized or witnessed. "Property" is defined as the real and personal property, tangible and intangible, belonging to either spouse, and includes dower and curtesy rights, the right to elect against a will, distributive share and all rights of homestead, contingent or expectant, and all other claims or interests of such spouse in the estate of the other, whether already acquired or hereafter to be acquired, and all claims, creditors, attachments and entries against the property." In Tennessee, any transfer or encumbrance of property made pursuant to a postnuptial agreement is deemed to be supported by adequate and full consideration.
Domestic Partnership Agreement – An agreement between unmarried individuals who live together in similar circumstances as a married couple may be entered into, referred to as a cohabitation agreement. A cohabitation agreement may address the following:
In Tennessee, contracts between persons of the same sex are valid, and are interpreted under the same rules as apply to other valid contracts. In addition, the courts of this state will recognize a validly executed contract between persons of the same sex, even if the contract infringes on a constitutional right of marriage.
Expert Guidance and Advice
Insights and tips from family law attorneys
As family law attorneys, we often have clients come to us after executing a prenup only to later question its enforceability or how it will be enforced in the event of divorce. While you should always consult your attorney before signing or relying on a prenup, it is helpful to understand how courts generally analyze the enforceability of those agreements.
For a prenup to be enforceable, the party must have executed the agreement voluntarily. Generally, you cannot force your spouse or fiancé into signing a prenup against his or her will. Nevertheless, the agreement should also be the product of fair and reasonable disclosure. A court may find that parties have an unequal bargaining power and that one party was pressured into signing the prenup. Because the signer’s ability to have free range to negotiate and decide whether to enter into the prenup is integral to a finding that the agreement is enforceable, your attorney should provide you a full and adequate disclosure of your spouse’s assets at the time of execution.
Another consideration when reviewing the enforceability of a prenup is the length of the parties’ relationship by the time the prenup is executed . The longer the parties have had to negotiate the terms of the prenup, the more likely the court will find that the prenup was the product of a reasoned negotiation between the parties.
Next, the parties should not be under duress when the prenup is executed. Duress can occur through economic or physical duress. As discussed above, economic duress may arise when the person drafting the prenup does not provide his or her spouse with a full and fair disclosure of all assets or does not give them enough time to discuss or review the document. Physical duress occurs when one party threatens harm to the other unless the prenup is immediately executed.
The court must also find that the prenuptial agreement is unconscionable. Injury to one party for signing the prenuptial agreement must be substantially more than the injury caused to the other party by not having entered into the agreement. In addition, the prenuptial agreement should affect the parties’ rights concerning any children of the marriage. A court may find that language in the prenup cannot override a parent’s statutory right to receive child support from the other parent. Because agreements concerning children are usually unenforceable, you should consider the long-term impact of the agreement on your entire family.