Prenuptial Agreements
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What is a Prenuptial Agreement?
Also called an “Antenuptial Agreement” or simply a “Prenup”, this is a document which outlines a couple’s agreement of how they want the assets to be divided or allocated should the marriage end in divorce, or should one of the parties predecease the other.
Who might need or want a Prenuptial Agreement?
Prenuptial agreements are typically made in cases where one party is entering a marriage with either significantly larger assets than the other, or in cases where this is a second marriage and there are children from previous relationships and the parent wishes to preserve those children’s priority interest in that parent’s estate. Examples might include a couple in their 60’s, who each brought assets such as property and a retirement account into the marriage, who have children from previous relationships, and who feel that if one of them should pass away, they would want their children to inherit a specific portion of those assets brought into the marriage. Another example could be a party who enters the marriage with a much larger income and asset situation than the other, and who desires to have a provision in case of divorce.
How should a Prenuptial Agreement be written?
Michigan case law does not necessarily favor Prenuptial Agreements. The courts look to two cases, Rinvelt v Rinvelt, 190 Mich App 372, 380, 475 NW2d 478 (1991) (Rinvelt), which set the framework for whether the agreement is enforceable, and a more recent Court of Appeals Case, Allard v Allard, 318 Mich App 583, 8989 NW2d 420 (2017) (Allard III), in which the appeals court stated that, “The parties to a divorce cannot, through antenuptial agreement, compel a court of equity to order a property settlement that is inequitable.” The appeals court based their decision on Michigan statute law and case law that grants authority to judges in family law courts to divide the parties’ property based on how the Judge perceives “equity”, that is, a fair division. The parties to an agreement cannot waive a court’s equitable powers (MCL 552.12, MCL 552.23(1), and MCL 552.401). Therefore, there are two standards that should serve as the framework for writing a Prenuptial agreement: 1. Enforceability, and 2. Equity.
Can we write and sign an agreement on our own?
The short answer is probably not, if you want it to actually hold up in court. You will likely need to hire a Michigan prenup attorney who will apply the rulings and holdings in Michigan Case Law, including those of Allard III, to your specific situation.
What should an attorney consider when writing a Prenuptial?
It is up to the attorney drafting the prenuptial to balance both the client’s desire or need to preserve assets which they bring into a marriage with what case law and the court will allow in terms of enforceability and equity. There are two consecutive barriers that must be met and overcome in order for a Prenuptial Agreement to be honored by the court.
1. Enforceability
The first standard that must be met in drafting the agreement is Enforceability. In order to be enforceable, the agreement must meet the criteria given in the long-standing case law given in Rinvelt, where the court held that Prenuptial Agreements are enforceable, as long as they meet the following criteria:
- Was the agreement obtained through fraud, duress, mistake, misrepresentation or non-disclosure of material fact? (Rinvelt). The parties must have been open, honest about their relative financial positions, fully informed before signing, and aware of their rights.
- Was the agreement unconscionable when it was executed? Was it reasonable and fair, or did it take advantage of a weaker party who might not be able to effectively negotiate? (Rinvelt).
- Have the facts and circumstances changed so much since the agreement was executed that it is now unfair or unreasonable to enforce it? (Rinvelt)
The attorney needs to draft the Prenuptial Agreement with the enforceability factors firmly included in the agreement. The parties will need to be open and honest with the attorney, disclosing their relative financial positions and their reasons for entering into the agreement.
2. Equity
Once a Prenuptial Agreement has passed the enforceability test, the second standard, Invasion of Property, will affect whether the agreement will be upheld as written. This is the most current standard, given in Allard III, which in certain circumstances supersedes Rinvelt and the enforceability standard. In Allard III, the court based its decision on the principle of equity, a long-standing standard to which courts have the authority to adhere, regardless of any agreement by the parties or whether a party has actually petitioned the court to consider a fair or equitable division. While under Rinveld a Prenuptial Agreement may have been enforceable, now under Allard III, that same agreement may not pass the court’s perception of equity and will therefore not be upheld as written or agreed to. The Judge may, and has authority to, “invade” a spouse’s separate property to balance the parties’ financial status and provide a fairer division. Here, the Judge will look to Michigan statutes:
- MCL 552.23: “If the estate and effects awarded to either party are insufficient for the suitable support and maintenance of either party and any children of the marriage who are committed to the care and custody of either party…” the court is allowed to award some of the separate property of the one spouse to the disadvantaged party.
- MCL 552.401: The court may award a disadvantaged party some or all of the other party’s separate property, “if it appears from the evidence in the case that the (disadvantaged) party contributed to the acquisition, improvement, or accumulation of the property.”
In short, the parties cannot simply sign or negotiate away the court’s right to balance the relative financial positions of the parties if preserving one person’s separate property will result in an inequitable result. The attorney should plan for this reality even if the value of the parties’ assets are not far apart at the time of drafting the Prenuptial Agreement. Note that planning for an equitable outcome does not necessarily mean that it must be equal. The point of equity is to allow the disadvantaged spouse to continue in a reasonable lifestyle, and one to which they were accustomed during the marriage, and to not be left impoverished.
One purpose of a Prenuptial Agreement is to provide a more certain outcome for a future event; therefore, the agreement must be forward-looking in terms of both Rinveld and Allard III. It should include options to provide enforceability and equity such as life insurance or disability provisions which could be awarded to a disadvantaged spouse. A fade-out or sunset provision tied to a length of marriage may also offer some protection to the agreement in terms of balancing assets as well. Again, this does not necessarily mean that a property division must be equal, however, an agreement should consider the current and future needs and standard of living of each party. A thorough revision of the parties’ finances, assets, and desire to maintain separate property can provide a framework in which to look for creative ways to meet the standard of Invasion of Property.
