All About Antenuptial Agreements
Antenuptial Agreements (aka "pre-nup" agreements) are contracts which are entered into prior to marriage. They are often utilized by parties who have substantial assets before marriage and wish to protect those assets in the event of a divorce; or by parties who have children from previous relationships and do not want to be responsible after the second marriage for payments for obligations (such as college expenses) owed to their first spouse; or by parties who have a family business and wish to protect those assets to the extent possible. Understandably, the general term for these agreements is "premarital agreement".
However, under Massachusetts law, premarital agreements do not have to be entered into before a marriage. Rather, due to a change in the statutory definition of a "marriage contract", entered into by the legislature via M.G.L. c. 208 §1 (amended as part of the Massachusetts Alimony Reform Bill in 2012), premarital agreements are a type of marriage contract that may be entered into before or during a marriage.
Under M.G.L. c. 208 §7, Marriage Contracts, which now includes premarital agreements, are specifically defined as "voluntary written agreements between spouses or prospective spouses…" that generally have the same effect as a traditional premarital agreement. A typical checkbox type of agreement would include terms on marital property rights , anything in addition to marital property rights, such as a waiver of alimony or a provision for continuation of employment in a family business, waiver of spousal support, and a share of the marital estate.
Postnuptial Agreements are contracts between parties who are already married. Massachusetts law makes no distinction between a valid agreement that occurs prior to or during a marriage, as described above.
Antenuptial agreements must be recommended by separate counsel for each party, prior to signing the agreement, for the agreement itself to be enforceable (M.G.L. c. 208 § 7). I strongly recommend that any agreement be reviewed by counsel, as some of these agreements contain terms that may potentially be subject to litigation, i.e. the issue of whether the terms were clearly explained to the parties which could give rise to a future challenge. In addition, there are high net worth clients that could be the subject of a claim for alimony even with a valid and enforceable pre-marital agreement as several of its provisions are now subject to statutory guidelines, whether the prospective spouse has an attorney or not (M.G.L. c. 208 § 53).
Antenuptial agreements are utilized both in mediation, and in collaborative divorce cases.
Applicable Law in Massachusetts
Antenuptial agreements in Massachusetts are governed by G.L. c. 209, §25. They must be in writing, signed and notarized by both parties (with certain limited exceptions), and they can only be enforced if they are entered into at least five days before the parties’ marriage. The statute, however, does not expressly state that the agreement must be "fair and reasonable" when the parties execute it, though there is some case law supporting such a requirement. So long as the agreement is executed according to the statute, however, many Massachusetts decisions have enforced antenuptial agreements that are not fair at the time of execution or even at the time of divorce.
Antenuptial agreements can cover three basic topics: every decision about how property and income will be dealt with as a result of death or divorce; what will happen with alimony or spousal support (more typically called "alimony" in Massachusetts); and waivers of retirement benefits. Almost anything that a husband and wife can agree to, including the choice of which state’s law will govern the agreement, can be established in an antenuptial agreement. However, courts strongly disfavor agreements that limit (or even attempt to limit) the parties’ rights to child support and child custody. These agreements can also cover issues like health insurance, tax liabilities, and even naming rights.
Because antenuptial agreements often involve complex economic issues and because the stakes can be very high, it is critical to have a well-reasoned and well-written agreement that includes concise, simple language. Even well-written agreements are often challenged; therefore, it is critical that the parties be properly represented when entering into these documents.
Essential Elements of an Antenuptial Agreement
Key Components of an Antenuptial Agreement in Massachusetts:
When discussing a prenuptial agreement with a client, the conversation often begins with a recitation of what a prenuptial agreement must be and include in order for it to be enforceable. The following are the basic requirements of an antenuptial agreement pursuant to Massachusetts General Laws c. 208 s. 25.
• The agreement must be written and signed by both parties.
• The agreement requires a full disclosure of the property and financial obligations of each party.
• The agreement is signed voluntarily without fraud, deceit, undue influence or coercion.
• Each party has a right to independent counsel.
• Each party had at least 5 days between receipt of the final draft and signing the agreement, to review the agreement with independent legal counsel.
The above four requirements are the basic components of an antenuptial agreement that will result in an enforceable contract. The following descriptions are optional contractual provisions that can be included.
Asset Division and Spousal Support: The most common provisions that are often included relate to the division of assets and alimony. Often there is a date of separation defined with set alimony payments during the pendency of divorce and through a specific date, such as the date of a child graduating from high school. The parties often include a sliding scale for alimony payments that decreases the amount of support after the date of separation. There can be a plan set forth that terminates alimony based upon a significant life event such as death, voluntary or involuntary unemployment, remarriage or cohabitation (sometimes defined as living with a person in a place where they reside and engage in romantic relations together). The parties can define how assets and accumulated property will be divided, what is joint or separate property (specifically if any inheritances after the marriage), and how debts will be allocated. It is important to recognize that an antenuptial agreement should be viewed as a contract in which one person is making a "bet" and the other person is "drawing" cards. A contract is only enforceable if both parties are agreeing to the contract concurrently. Therefore, it is essential that all material disclosures are made so that both parties are gambling on equal footing. For example, I often ask my clients to consider their spouse’s family background and opportunities. If you are marrying into a family/individual who is likely to inherit $5 million, should you be entitled to that wealth either during the marriage or upon divorce?
For many people, the thought of negotiating, writing and signing a prenuptial agreement is distasteful and requires a great leap of confidence and trust between the parties. Yet a well crafted antenuptial agreement can be one of the most beneficial contributions that you and your spouse arrange prior to marriage. It is also one of the most inexpensive "insurance policies" you may ever potentially purchase.
Advantages of Antenuptial Agreements
"Antenuptial agreements can provide for financial security, settle property rights in case of death or divorce, protect individuals from the debts of their spouse, create and define spousal and nonmarital trusts, establish ground rules for spousal support in the event of divorce, determine the management of assets during and following divorce, as well as address many other matters that may be important to the parties," said Sarah M. Vancour of MCS Group, who is quoted in a fellow Massachusetts Divorce Law Blog post, " Mass. Divorce Lawyer: Antenuptial (Premarital) Agreements can be Valuable Tools for Establishing Rights."
In addition to the above items, the Massachusetts Divorce Law Blog continues that the "ultimate purpose of an antenuptial agreement is to provide certainty and finality to the parties concerning their property interests, as well as to the protection of any children their current or future relationships."
How to Prepare an Antenuptial Agreement
In Massachusetts, a few months before the wedding date, a couple thinking about antenuptial agreements will try to ensure prevent a challenge to the agreement on the ground of not having received good legal representation from the other spouse. This is done by reviewing the agreement together with a new window of opportunity to have some legal advice on whether the agreement is reasonable and doesn’t appear to have any signs of a contract being signed under duress. Practically, many engaged couples are already living together before getting married, and that, for whatever reason, puts the agreement at risk of it being challenged in court as inappropriate. In addition, the Home Statute requires the agreement be signed no later than 30 days before the marriage.
The necessary legal counsel doesn’t have to be extensive; just a thought-out summary that proves that the person seeking to set aside the agreement had been well advised. It is very tempting for a couple to have a friend or family member review the agreement for the purpose of making sure that it doesn’t prevent a future claim that the other person didn’t have appropriate legal advice . However, the law makes clear that the person giving legal advice must not have any conflict of interest; that is, that they don’t also represent the other party at the same time. So, it is best to find a completely separate attorney to provide the required legal advice.
In general, the more time that passes between the signing of the agreement and the divorce proceeding, the less chance it will be that a judge will set aside the agreement. That means if the wife spends one week with her own attorney before signing the agreement, there is a better chance that the agreement will be upheld in court than if the husband is given a two-month time period to work with his own attorney without the wife’s attorney nearby.
Most importantly, the agreement must be fully disclosed. If the husband hides a retirement account, that could be considered a failure to disclose. It is really important that the initial financial disclosure made by the parties be updated in the process of the negotiation of the agreement. In fact, the standard provisions of the agreement include a section requiring updated financial disclosure that is signed by both parties and keep with the agreement. This Financial Statement should be initialed and updated at each meeting.
Myths Regarding Antenuptial Agreements
Despite their potential benefits, antenuptial agreements are surrounded by misconceptions that can prevent couples from viewing them in a positive light. One common misconception is that antenuptial agreements are only for couples who, for example, have kids from previous relationships and want to ensure children from both prior and current relationships will be taken care of. Nothing could be further from the truth. Antenuptial agreements can be immensely helpful for couples who have no children. Such agreements can provide predictability as it relates to financial matters such as deciding how assets will be treated in the event of a death or divorce. An antenuptial agreement can create a roadmap for success, but has no bearing on the occurrence of such an event. However, it ensures that the future will be orderly as it relates to property division. Some think that antenuptial agreements are only for the wealthy. Again, this is not true. Antenuptial agreements can benefit all parties regardless of their financial status upon entering into the premarital agreement. A middle class couple can appreciate the purpose of an antenuptial agreement just as much as somebody with a high net worth and who owns multiple properties including vacation homes in different states. Another misconception is that antenuptial agreements are easy to undo. The truth is, an antenuptial agreement is a legally binding contract and is not easily undone or avoided. The agreement must have been entered into in a manner that does not involve fraud or deception, and the terms must be fair to all parties involved. Further, if one party has not been represented by independent counsel, that party can set the agreement aside. However, these factors must be present in order for this to happen. Perhaps most importantly, many couples have concerns about equality or fairness in the agreement preparation process. Antenuptial agreements must be fair to both parties, the terms must be equitably negotiated and there must be complete financial disclosure.
Challenges to Antenuptial Agreements and Enforceability
Court Enforcement (and Non-Enforcement) of the Parties’ Antenuptial Agreement:
Challenging the Enforceability of a Prenup
While the general rule is that antenuptial agreements are usually held enforceable by Massachusetts courts, what defenses exist for attacking the enforceability of a prenup?
Specifically, in any situation where there is a claim (or even the possibility) that an antenuptial agreement is not enforceable, the burden rests with the party who is attempting to avoid the consequences of that agreement to provide proof to support his or her argument that the prenup is invalid. Even better, the party challenging the enforceability of the prenup must be able to provide convincing evidence that the agreement should not be enforced.
In contrast, the person who seeks to enforce the prenup does not have the burden of proof. Instead, the individual who is attempting to enforce the prenup must establish only that the antenuptial agreement meets the following elements:
Fact Pattern: Jo and Pat marry. Prior to the wedding, Jo and Pat enter into an antenuptial agreement that provides for no alimony upon termination of the marriage and requires that all property acquired during the marriage be kept separate, owned exclusively by the spouse who acquires the same.
Pat later files a complaint for divorce and, shortly thereafter, Jo files a counterclaim. Both Jo and Pat want a divorce on the grounds of irretrievable breakdown. However, at the final hearing Pat makes an oral motion to set aside the premarital agreement. Pat claims that she was not given a fair and reasonable provision for her share of the property or maintenance. As specific examples, Pat argues that she gave up premarital equity in a Boston condo in exchange for equity in the marital home that was acquired during the marriage. At the time they were married, the Boston condo was worth $350,000 while the have since appreciated to $650,000. At the same time, Pat also claims that she was coerced into signing the antenuptial agreement as there was no time for her to consult with legal counsel. Jo admits that he did not provide Pat with a fully completed copy of the agreement 60 days prior to the wedding. As such, Jo cannot prove that the antenuptial agreement is enforceable.
The court finds that the antenuptial agreement is unenforceable as it fails to meet the statutory requirements. Specifically, the antenuptial agreement is neither fair and reasonable nor entered into voluntarily. Because the antenuptial agreement is not enforceable, the court proceeds with the divorce.
Conclusion: Making the Right Decision
Navigating the landscape of antenuptial agreements can feel daunting for couples. However, with the right guidance and understanding, such agreements can become powerful tools for ensuring peace of mind and financial security. The key to making a well-informed decision lies in consulting experienced legal professionals who can navigate the complexities of Massachusetts law and tailor an agreement that is not only enforceable but is also fair and balanced.
Both partners are advised to seek individual representation before finalizing an antenuptial agreement. This helps to ensure that the process is fair and that no one feels pressured into making hasty decisions. An attorney well-versed in family law will provide thorough guidance on the contents and ramifications of the agreement , enabling couples to make informed choices that align with their particular personal and financial circumstances. Such expert consultation also helps in identifying relevant issues and finding solutions that are equitable for both parties.
In conclusion, while antenuptial agreements may seem counter-intuitive to the essence of marriage, they hold significant merit in today’s society. As such, it is critical for engaged couples to appreciate their potential and to utilize the legal resources available to them when entering into such arrangements.