UPDATES IN MICHIGAN FAMILY LAW

Post-nuptial Agreement Unenforceable | Against Public Policy

An Illinois appellate court affirmed a trial court ruling that a postnuptial agreement was unenforceable as against public policy where the agreement gave a third party “counselor” sole power to determine custody and other issues including property and support. In the words of the appellate court, the agreement was so one-sided and “draconian” that it was substantively unconscionable. In the parties' agreement, the counselor was given sole authority to declare that the reasons for filing for divorce were not "reasonable." If the reasons were "unreasonable," then the “counselor” had sole power to determine custody of the children and to deprive the wife of her property rights set out in the agreement. The vagueness of the term “unreasonable divorce” raised a possibility that the mother would lose her property rights if the third-party “counselor” who was empowered to make that determination withheld approval for a divorce for any reason.

Prenuptial Agreements | Are they Worth the Cost?

The New York Times has what, for me, is a new feature in the Opinion section called "Room for Debate." The debate posted yesterday has to do with whether or not people should have a prenuptial agreement. The case that sparked the debate? Elizabeth Petrakis, a New York resident, recently announced that she’d had her prenuptial agreement voided after she claimed she was coerced into signing it four days before her wedding.

The Petrakis case sparked a lot of discussion among family lawyers, especially members of the American Bar Assn Family Law Section. In some states, prenups are upheld if properly executed with full disclosure. In other states, prenups can be voided if unfair or "inequitable." Other grounds to void a prenup are fraud, duress and non-disclosure.

The debate posted by the New York Times is well-worth a read--both for family lawyers and for people who are contemplating a prenup or who are contemplating a divorce with a prenup in place.

Michigan Court of Appeals Gets it Wrong Again on Post-Nuptial Agreements

Today's guest author is Scott Bassett, a Michigan Family Law Appellate lawyer.

Once again a panel of the Michigan Court of Appeals misunderstood the facts of Lentz v Lentz, 271 Mich App 465 (2006), and improperly relied on it to declare a post-nup agreement void as against public policy because the parties "were not separated" when the agreement was signed.  This perspective is, of course, contrary to the clear trend in Michigan case law recognizing that adults are free to enter into binding contracts on property, spousal support, and even child support (with some limitations) issues. Download Lentz_v_Lentz Postnup

Yesterday the C of A decided Cheff v Cheff, which you will find here: Download Cheff_v_Cheff

The Cheff panel quoted from the "bad facts make bad law" Wright v Wright, 278 Mich App 291 (2008), decision, stating:

Prenuptial Agreements on the Rise

According to a 2010 survey of the American Academy of Matrimonial Lawyers, 73 percent of divorce lawyers reported increased demand for prenuptial agreements in the past five years. Middle-class couples were reported as most often seeking a prenuptial agreement.

The survey was disclosed amidst speculation that Britain's Prince William may ask his fiancée, Kate Middleton to sign a prenuptial agreement. The rumor was sparked by an October 2010 decision by the U.K.'s Supreme Court ruling in favor of enforcement of a prenuptial contract for the first time.

Pre-Nups | Tiger Woods case sparks interest

A recent article sparked by Tiger Woods' marital problems discusses the importance of prenuptial agreements today.

"The prenup seems so utterly unromantic — or just plain wrong — but it's also become so right for so many these days: those keenly aware that a marriage may end up in a legal separation, divorce or death. Most prenups tackle financial issues such as real estate, division of bank accounts and potential spousal support in the case of divorce or separation."

$19 million in divorce attorney fees . . . and counting?

Good grief! A divorce with $19 million dollars in attorney fees? According to
the  LA Times, the divorce between the Dodgers' owner Frank McCourt and his wife Jamie McCourt has already cost that much and the parties haven't even had a trial yet! Teams of lawyers and accountants are working on the case.

According to the Times:

More men marrying wealthier women. What does that mean?

According to the New York Times, an analysis of census data to be released by the Pew Research Center found that women are victims of a role reversal that is profoundly affecting the pool of potential marriage partners. Key points from the New York Times:

“Men now are increasingly likely to marry wives with more education and income than they have, and the reverse is true for women,” said Paul Fucito, spokesman for the Pew Center. “In recent decades, with the rise of well-paid working wives, the economic gains of marriage have been a greater benefit for men.”

“We’ve known for some time that men need marriage more than women from the standpoint of physical and mental well-being,” said Stephanie Coontz, a professor at Evergreen State College in Olympia, Wash., and research director for the Council on Contemporary Families, a research and advocacy group. “Now it is becoming increasingly important to their economic well-being as well.”

Whenever there is economic or educational disparity between spouses, a prenuptial agreement should be at the top of the list of pre-marriage things to do.  You can read more about prenuptial agreements on this blog here.

The New York Times article More Men Marrying Wealthier Women may be read here.

Prenuptial agreements | The importance of full disclosure

Last week someone on the State Bar of Michigan Family Law Listserv inquired about whether a lawyer should approve a prenuptial agreement to which no financial disclosures were attached.  Many members of the Listserv weighed in on the topic. Most cautioned that a prudent lawyer would make sure the financial disclosures are attached to the prenup to prove full and fair disclosure of assets, liabilities and income. They also cautioned that lawyers should provide good documentation of that disclosure, for example by videotaping the execution of the prenup to eliminate arguments of duress or coercion.

Prenuptial agreement voided because of fault

In an unpublished decision, the Michigan court of appeals voided a prenuptial agreement based upon findings that Husband had subjected Wife to years of mental and physical abuse. Hutchison v Hutchison, Docket No. 284259 [Muskegon County, July 28, 2009]

The trial court held that the prenup could be voided because the facts and circumstances are so changed since the agreement was executed that its enforcement would be unfair and unconscionable, citing Reed v Reed, 265 Mich App 131, 142-143 (2005).

 

The court of appeals also upheld the award of alimony to Wife and the award of 55% of the marital estate. Given the highly fact-specific nature of this case and the fact that it is unpublished and therefore not binding upon other trial court's, the case lacks value as precedence.

You may read the Hutchison case here.

You may read an earlier discussion of the Reed case here. In Reed, despite a draconian result, the prenup was upheld, allowing Husband to walk away with $8 million is assets accumulated during the marriage, exceeding those awarded to WIfe by about 800%. That case was decided on the grounds that it was foreseeable that the parties would accumulate significant assets during their lengthy marriage.

Collected articles on this Blog about Prenuptial and Postnuptial Agreements may be accessed here.

Enforceability of prenuptial agreements

People ask: “Would we ever have to go to court to enforce a prenuptial agreement?”

There are times that one party challenges the validity of a prenup. If that occurs at the time of a separation or divorce (or sometimes after death), there may be a trial. The judge will weigh the evidence and the credibility of the witnesses before deciding whether to enforce the agreement. These cases are fact-dependent. The judge will decide if the agreement is enforceable only after resolving any disputed facts.

Will state courts uphold prenuptial agreements?

Postnuptial Agreement that Encouraged Separation Declared Void

Postnuptial and prenuptial agreements are becoming ever more popular. Guidance was provided from the Michigan Court of Appeals today for practitioners and laypersons contemplating entering into a postnuptial agreement. In Wright v Wright, 279 Mich App 291, 761 NW2d 443 (2008) decided on April 22, 2008, Plaintiff husband challenged the trial court's decision to void the postnuptial agreement. The court of appeals disagreed.

Here, both parties had consented the the agreement prepared by H's attorney. The couple was not separated at the time and had never separated during the marriage. H filed for divorce roughly eight months after defendant signed the agreement.

Alimony | Imputing income & impeachment

In Andrews v Andrews, decided by the Michigan court of appeals on March 11, 2008, Husband claimed that the trial court erred in not enforcing a prenuptial agreement that limited alimony to his net income as reflected by his federal tax returns. The trial court imputed income of $300,000/year to H after he transferred his interest in a partnership to his parents, allegedly to repay a $340,000 debt to them.

H wanted the trial court to believe that his transfer of the interest to his parents, which had been reduced to a sum certain in a default judgment, was not a voluntary or bad faith reduction in income that justified imputation. He also claimed that since Wife had not produced evidence directly impeaching his testimony, the trial court had to believe his testimony.

Postnuptial agreement | Can it save your marriage?

According to Nate Helperin, of TheStreet.com, a postnuptial agreement might save your marriage. For his theories and advice, see A Postnuptial Agreement Can Save your Marriage.

Do not, however, regard his advice as the last word in your case. His comments are generalized and not state-specific. He suggests, for example, that a postnup cannot address a waiver of alimony or spousal support. While that may be true in some states, it is certainly not true in Michigan.

For an earlier comprehensive discussion, see Will a postnup be enforced it it's not fair? posted on this Blog on December 13, 2007 and the series of earlier articles linked there.

Will a prenup be enforced if it's not fair?

While fairness is, under the case law in some states, a requirement for enforcement of a prenuptial agreement, the court of appeals established in Reed v Reed, 235 Mich App 131 (2005) that little fairness is really required in Michigan.

In Reed, the parties executed a prenuptial agreement abut 6 weeks prior to the marriage. Mr. Reed was a recent law school graduate. Mrs. Reed had no independent counsel. Their combined net worth at the time of the marriage was less than $20,000. The marriage lasted about 20 years.
 

Postnups on the rise?

According to the New York Times on December 9, 2007 postnups are becoming more popular. Dr. Phil has featured them on TV, and lawyers belonging to the American Academy of Matrimonial Lawyers who were polled state that they are being asked far more frequently to draft postnups. Usually, say these lawyers, the postnup is entered into after discovery of some marital infidelity and perhaps only props up a marriage for a while. The postnup does allow the parties to define their rights and obligations in the event of a divorce or separation.

Mahr and other religious marriage contracts: Enforceable or not?

Recently, the issue of Islamic marriage contracts and other religious marriage contracts was discussed on the State Bar of Michigan Family Law Listserv. These contracts are common, particularly among family-arranged marriages. Essentially, they provide for payment of a small sum of money to the woman if the parties divorce.

Often, there is unequal (or no) bargaining power between the parties. Sometimes, the bride is a teenager whose marriage is arranged by her parents in way that is not usual by Americans standards, but one that is the normal course of family business in Islamic families.  The question then becomes, once a marriage breaks down, should the husband, often the titled owner of everything, walk away with everything? What if it's a long-term marriage? What if the husband is educated and has a high earning capacity and the wife is incapable of supporting herself and the children?   

When doees a prenup make sense?

Prenuptial agreements are often proposed and negotiated between parties when either or both are entering a second marriage, where one or both have children from a first marriage, and/or where one or both have substantial premarital assets--separate property--over which each wishes to retain control and possession.

The Boston Globe publishes an article on May 6, 2007, however, pointing out that a prenup may also be something to be considered by a couple intending to enter a first marriage, particularly if the parties do not share the same financial goals or ideals.
You can read the Globe article here: Anxieties surface as couple considers tying the knot

Visit Jeanne Hannah's website

Technorati tags: prenuptial agreement, prenup, postnuptial agreement, postnup

More on PreNups Invalidated for Unconscionability

Diana Skaggs commented in response to my last post about the Michigan Court of Appeals unpublished decision in Trudeau-Chene v Chene, Docket No. 260734 (10/26/2006) in her excellent Kentucky family law blog, Divorce Law Journal.

Thanks, Diana, for providing commentary and a link to a recent Kentucky Supreme Court decision where the high court reversed the Kentucky court of appeals' decision that upheld the prenuptial agreement. As in the Trudeau-Chene case, the overriding consideration was the court's look at the specific facts and circumstances involved. To my surprise, the facts in the Kentucky case, Lane v Lane, were far more similar to Reed v Reed, the Michigan court of appeals case upholding a prenup against a claim of unconscionability, which the Trudeau-Chene court distinguished.

In Michigan, a prenuptial agreement may be voided (1) when obtained through fraud, duress, mistake, or misrepresentation or nondisclosure of material fact, (2) if it was unconscionable when executed, or (3) when the facts and circumstances are so changed since the agreement was executed that its enforcement would be unfair and unreasonable.

The trial court in Reed found that the length of the parties' marriage and each party's acquisition of substantial assets during the marriage were unforeseeable changed circumstances rendering it unfair and unreasonable to enforce the parties' prenuptial agreement. But the court of appeals held that the trial court erred in not enforcing the parties' contract, stating that the trial court was charged with enforcing the parties' agreement, not construing their clearly stated contract. The argument in Reed turned on the question of "foreseeability." According to the Reed panel:

"Having agreed to [be captains of their own destiny during the marriage], it was clearly foreseeable at the time the agreement was entered that the parties would
acquire separate assets over the course of the marriage. Further, that the parties' separate assets could grow at disparate rates and that one party's assets might grow significantly more than the other party's would have been readily apparent. In sum, the fact that the parties' assets grew significantly over many years can hardly be considered an unforeseeable changed circumstance that justifies voiding the parties prenuptial agreement. Similarly, the benefit accruing to one party from the disparate growth of his assets is simply not a changed circumstance rendering the agreement unfair and unreasonable to enforce."

At this point, Diana, all I can say is "Lucky Mrs. Lane!" You can read Diana's blog here. The case is interesting, as well, with one dissenter who would have been comfortable on the Reed panel.

To contact Jeanne Hannah with your questions or to view her Family Law website, click here.

What Constitutes a Change in Circumstances that would Cause a Trial Court to Invalidate a Prenuptial Agreement?

In an unpublished decision on October 26, 2006, the Michigan court of appeals distinguished Reed v Reed, 265 Mich App 131 (2005), holding that the particular facts of the case warranted invalidating the parties' prenuptial agreement on the grounds that circumstances had changed making enforcement of the agreement inequitable. Trudeau-Chene v Chene, Docket No. 260734 (10/26/2006)

Counsel for parties who have a prenuptial agreement will want to compare the factual situations in these two cases for guidance in when it may be possible to set aside a prenuptial agreement on these grounds. This is particularly relevant where the divorcing parties have had a long-term marriage and there have been significant accruals of property -- or as in Trudeau-Chene, where there have been substantial depletions in a parties' separate property benefiting the other (combined albeit, with other changes in circumstances).

You can read Trudeau-Chene v Chene here.

Do you need help with a divorce / pre-nuptial agreement case? Find a Michigan Family Lawyer near you.