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Let’s start with some good news: US
divorce rates have declined markedly since 2000, according to data from the Centers for Disease Control. And in a new relationship study commissioned by Avvo, Millennials (respondents aged 18-34) said that
marriage still matters. Forty-eight percent said marriage is still a life goal,
and a full 90 percent believe relationships are meant to last.
And now for some bad: despite all of that data, hoping for the best and
having life goals for marriage doesn’t change the fact that divorce is very
much a reality.
Where there is divorce, there are also prenuptial agreements. These pre-marriage contracts purport to settle
issues regarding any distribution of assets in the event of a divorce. And
while that might seem pessimistic, a prenup can serve to insulate the
relationship from undue concern over asset ownership.
But sometimes, the agreement isn’t up to the task. Many prenups fail to
live up to the requirements of relevant state law, and end up causing more
rancor, rather than less. Here are three common reasons why prenups are
declared invalid.
Fraud
As with all contracts and legal agreements, there is an implied
requirement of good faith. That means that each side enters into the agreement with an honest
representation of their positions. When it comes to a prenuptial agreement,
good faith (and frankly, a good relationship) requires a true and honest
accounting of all assets owned when entering the marriage.
The negotiation of the agreement will determine what happens to current
and future holdings or earnings. Any failure to disclose or to properly list
the value of an asset can be construed as fraud and can lead to a judge
invalidating the entire agreement. Financial guru Suze Orman writes about this on her website: “Basically you need to be
able to prove that both you and your partner fully understood the extent of
each other’s assets and debts at the time you created the pre-nup.”
Coercion
This one should be obvious. Courts are not going to look kindly on a
prenuptial agreement that was signed as a result of undue pressure or
influence. Coercion, which can be difficult to prove, invalidates a contract
because it demonstrates that the agreement was not a true and accurate
reflection of the individual parties’ intent.
A recent case in New York threw out a prenup based on evidence of an
oral agreement between the parties. Elizabeth Petrakis was given a prenup to
sign six weeks before the wedding. When she refused, her soon-to-be husband
made a verbal deal with her. Petrakis alleged that he told her that after they
had children, he would toss out the agreement. She signed; they got married,
had kids, and then divorced—at which time, her now ex-husband sought to enforce
the prenup. The New York Supreme Court found the wife’s testimony more credible and that “the
defendant fraudulently induced the plaintiff to execute” the agreement.
The court acknowledged that the preference is to uphold private
agreements, but that given the importance of “matrimonial proceedings” that
“agreements addressing matrimonial issues” should have “limitations and
scrutiny beyond that afforded contracts in general.”
Bottom line, courts want to encourage parties to have private
agreements, but, at least in New York, they are going to take a very close look
at the facts surrounding the agreement and the credibility of both former
spouses.
Unconscionability
A challenge to a prenup based on the concept of basic fairness or gross
inequity may be one of the most complicated and a difficult to prove arguments.
Just having an agreement that is more favorable to one party than the other is
not going to be good enough to invalidate the agreement. A court is going to
have to weigh lots of objective facts to make a determination about what is
termed the “unconscionability” of the prenup.
Writing in the American
Journal of Family Law, attorney Jill Heitler Blomberg of Schoonmaker, George & Colin examined the concept of unconscionability in relation
to the Uniform Premarital Agreement Act, a proposed statute developed by a national
conference of attorneys working to provide uniformity in certain areas of state
law.
As Blomberg writes, “Some states have held that a premarital agreement is unconscionable
if there was a gross disparity in bargaining power which led the party with the
lesser bargaining power to sign the contract unwillingly or unaware of its
terms and the premarital agreement is one that no sensible person who was not
under delusion, duress, or distress would accept.”
Basically, courts are going to look at all of the facts and circumstances
surrounding the agreement. Did both spouses have their own attorney who could
examine the agreement? Were the disclosures made in good faith? Are there
clauses, such as weight gain parameters, requirements about sexual relations,
or childbearing thresholds, which simply cannot withstand a challenge under
basic fairness?
This is not to imply that a well thought-out and fairly negotiated
prenuptial agreement is not a good idea, but rather to say that a bad or unfair
agreement is not necessarily the end of the divorce discussion.
When it comes to prenups, experienced family law attorneys can help each party achieve its goals, either before
the marriage or in the event of its dissolution. Moreover, prepaid legal services offer simple and affordable options for the soon-to-be
wedded or divorced.
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