Premarital Agreements: The Ounce of Prevention

The old saying that “an ounce of prevention is worth a pound of cure” is very appropriate for spousal property agreements. During divorce property division litigation, lawyers spend countless hours disputing items like property classification, amount of spousal support, and other matters that a premarital agreement can resolve in only a few paragraphs. These contracts pay dividends in other areas as well, by clearing up thorny and agonizing inheritance questions which often lead to costly probate litigation. Similarly, premarital agreements can make divorce-related succession in a family-owned business much smoother than it would be otherwise.

Back in the old days (and by that we mean the 1980’s), a web of complex laws meant that only the one percent needed to bother with premarital agreements, which is probably one of the reasons these arrangements have such poor reputations in some quarters. But recent legal changes have streamlined the process and ensured consistency across state lines, so more people have access to the ounce of prevention.

Laying the Groundwork of a Premarital Agreement

Unconscionability and involuntariness, the two primary basis for overturning premarital agreements, both involve unequal bargaining power, to one extent or another. So, to forge a premarital agreement that can withstand these challenges, both spouses probably need to participate in the entire process, as opposed to one spouse preparing the agreement with the help of a lawyer and then presenting it to the other spouse for signature.

The best contracts usually contain some element of compromise, and premarital agreements follow that general rule. When meeting with a lawyer for the first time, be prepared to discuss general objectives as opposed to specific details. After the initial draft is complete, it may be a good time to bring the other spouse up to date on your plans and invite him or her to the next appointment to carefully review the document.

In addition to having plenty of time to review the premarital agreement document and participate in the process, at least to some extent, the signing party must have separate counsel who also has ample time to review the document and render an opinion.

The Specifics of Premarital Agreement

In 1983, a group of family law attorneys drafted the Uniform Premarital and Marital Agreements Act; the most recent version was released in 2012. California and most other states have adopted some form of the UPMAA, which controls contract provisions such as:

• Spousal Support Limits: In divorce actions, property division has an emotional as well as a financial aspect, and it is perfectly reasonable for a spouse to give up some alimony, or even waive rights to spousal support payment, to further this emotional element. In fact, this idea is one of the most frequently-cited reason for limiting spousal support obligations, and it is even stronger if there are minor children involved.

• Property Classification: Labeling property as community or separate takes out the troublesome commingled property/financial reimbursement issue, a result that is maybe the best example of the “ounce of prevention” idea, because costly and time-consuming litigation is replaced with the stroke of a pen.

• Inheritance: Divorce is the same thing as death in probate court, so in the event of divorce, stepchildren have absolutely no inheritance rights as a matter of law, in most cases. That’s not necessarily the result that all families want.

Child support and child custody provisions are beyond the scope of premarital agreements. Such arrangements are against public policy, because premarital agreements reflect the best interests of the spouses but not the best interests of the children.

Sustaining Premarital Agreements

Laying the proper foundation of working together to form the premarital agreement, or at least respecting the signing party’s input, greatly helps forestall future arguments that the contract was involuntary. In basic contract law, a signature is a presumption of voluntariness, and the challenging party has the evidentiary burden to overcome that presumption.

• Coercion: The law is a little unclear as to how much coercion challenging parties must show to overturn premarital agreements. Traditionally, many courts have almost required physical coercion (e.g. “you’re not leaving this room until you sign.”) Recently, however, some have taken the view that any coercion that creates immediate pressure to sign may be sufficient (e.g. “the wedding is next week and you must sign before then.”)

• Unconscionable: In addition to being so one-sided that it leaves people aghast, to establish unconscionability, challenging parties must also show involuntariness.

Additionally, the premarital agreement must have been unconscionable when it was made, and if the challenging party claims the agreement was coerced because the presenting party withheld data, the challenging party could not have had any other means of gathering this information.