Prenuptial Agreements: What Is It and Do I Need One?

A recent (May 2006) decision of the Massachusetts Probate Court held that in a divorce, the husband could enforce a prenuptial agreement governing the division of assets, entered into by the parties prior to their marriage, even though neither had consulted an attorney. But what is a prenuptial agreement, should you have one, and are they always enforceable?

By entering into a prenuptial (also known as an antenuptial) agreement, persons about to be married may attempt to dictate contractually how their assets will be divided if the marriage ends in divorce. In the absence of such an agreement, the division would be decided by a Probate Court judge, applying equitable factors set forth in a Massachusetts statute.

Prenuptial agreements are most common in situations where the parties to be married have significantly different incomes or assets. The more wealthy spouse might use the prenuptial agreement to limit any property division or alimony award to the other spouse in the event of divorce, thereby protecting the wealthy spouse’s interest or the interests of his or her children from a prior marriage.

Though subject to various limitations, prenuptial agreements are generally enforceable and a spouse seeking to overturn the agreement bears a very heavy burden. As a result, prenuptial agreements sometimes produce results that appear unfair. Therefore, entering into such an agreement should carefully consider its terms and should definitely consult an attorney.

Dick and Jane
Imagine a couple, Dick and Jane, are about to be married and decide to execute a prenuptial agreement because Dick has far greater assets and income potential than Jane, and they want the agreement, rather than a Probate Court judge, to govern what each receives if the marriage fails. At the time the agreement is signed, Jane is 25, has a net worth of $30,000, income of about $40,000, and is in good health. Dick is 30, has a net worth of $1,000,000 income of $100,000, and also is in good health. Both are college graduates and neither has any children at the time they decide to marry.

Their handwritten agreement, executed after full disclosure of their financial information to one another but without consulting an attorney, provides that upon termination of the marriage Jane will be entitled to alimony of $20,000 per year, to the $30,000 she entered the marriage with, and nothing else.

Dick and Jane’s marriage lasts 15 years, during which time Jane continues to work and also manages the home, including entertaining related to Dick’s business. During the marriage, Jane’s net worth increase to about $100,000. However, Dick’s separately held assets increase in value five-fold, raising his net worth at the time of divorce to $45 million. His income also substantially increases.

The marriage, which results in no children, is rocky to say the least. Dick is verbally abusive, drinks too much and engages in a long series of extramarital affairs. The marriage ends when Dick decides he prefers to live with his 18 year old secretary and demands a divorce from Jane.

Seeking to enforce the prenuptial agreement, Dick writes Jane a check for $30,000 (representing her assets entering the marriage), a $20,000 check for the first year’s alimony, and calls her a cab. Jane thinks this is quite unfair in view of their long marriage, Dick’s contemptible behavior, and the significant increase in his assets since the agreement was signed. in the Probate Court, she asserts that the agreement is void. But is it?

Enforceability of prenuptial agreements
In fact, the agreement is likely to be held enforceable and Jane may well be out of luck. Under Massachusetts law, prenuptial agreement is enforceable only if it was (1) valid at the time signed and (2) fair and reasonable at the time of the divorce. To be valid when signed, the agreement must make fair and reasonable provision, measured at the time of execution, for the party contesting its validity and the contesting party must have been fully informed of the other spouse’s financial worth. In determining whether an agreement was fair and reasonable at the time of execution, the court can consider the parties' net worths, their ages, intelligence, business sophistication, and prior family responsibilities.

Notably, Massachusetts courts have held that even a one-sided agreement that leaves the contesting party with considerably fewer assets and imposes a far different lifestyle after divorce than the contesting spouse had during the marriage, is fair and reasonable unless the contesting party is essentially stripped of substantially all marital interests. Moreover, although persons entering into a prenuptial agreement should always consult separate attorneys, Massachusetts courts will enforce an otherwise fair agreement entered into without the involvement of counsel.

If the court finds that the agreement was valid when entered into, it must then determine whether the agreement remains fair and reasonable at the time of divorce. The contesting spouse cannot avoid the agreement on the basis of its unfairness at the time of divorce unless, due to circumstances occurring during the course of the marriage, enforcement of the agreement would leave the contesting spouse without sufficient property, maintenance, or appropriate employment to support herself. This means that the court must focus on any change in the contesting spouse’s situation, such as a deterioration in his or her health, reducing the contesting spouse’s income earning potential. The court cannot take into account a change in the financial situation of the more wealthy spouse who seeks to enforce the agreement.
That is why Dick can enforce the agreement against Jane. Although the agreement was one sided at the time it was signed, and imposed on Jane a lifestyle after marriage far inferior to that she enjoyed during the marriage, it did not strip her of essentially all marital interests. In addition, the increase in Dick’s assets and income during the marriage is irrelevant because only a change in Jane’s ability to support herself would justify a finding that the agreement was unfair at the time of divorce. Because she remained healthy and employed, there was no such change.

But what about the length of the marriage and Dick’s abusive and immoral behavior? That also is irrelevant. The purpose of a prenuptial agreement is to govern the distribution of assets upon divorce, and to render inapplicable the statutory factors which would otherwise govern and allow for an “equitable distribution” of marital assets. Those statutory factors allows the court to consider, in awarding alimony or dividing property, the conduct of the parties during the marriage and the length of the marriage, among other factors. But Dick and Jane’s agreement makes that statute inapplicable.

Of course, the result might be different if Dick and Jane had minor children at the time of their divorce. Parents may not contractually bargain away the rights of their children. Similarly, a court will modify the terms of a prenuptial agreement which attempts to decide child support or custody issues in a manner not in the child’s best interests.

Should you sign a prenuptial agreement?
As illustrated above, a prenuptial agreement is a binding contract. Except in the most extraordinary circumstances, that contract is likely to be enforced upon divorce. Thus, if you are the less wealthy spouse, you should carefully consider the terms of the proposed prenuptial agreement. You should also make sure that you have a complete understanding of your prospective spouse’s financial situation, and determine what standard of living you would want or need after the marriage should it end in divorce. Specific terms concerning alimony, the division of assets separately held when entering the marriage, and assets acquired during the marriage should be included in the agreement. You should also consider a provision increasing the alimony/property award as the more wealthy spouse’s income/net worth increases.
At a minimum, you should definitely consult an independent attorney prior to signing a prenuptial agreement.

If you have questions regarding this or any other legal real estate matter, please contact Attorney Roger T. Manwaring, Esq. at rtm@barronstad.com or (617) 531-6584 and Donald L. Pitman, Esq. at dlp@barronstad.com

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