Prenuptial Agreements in the United States By Gary A. Debele and Susan C. Rhode I. Introduction Prenuptial agreements, sometimes also referred to as “antenuptial agreements” or “premarital agreements,” are agreements between parties contemplating marriage that alter or confirm the legal rights and obligations that would otherwise arise under the laws governing marriages that end either through divorce or death.1 These agreements are fraught with controversy as to their appropriateness and their enforceability. Prenuptial agreements and the accompanying controversy are not unique to the United States. The purpose of this article is to give the non-American lawyer an overview of this rather complex area of American family law and estate planning, and also to highlight some of the common procedural and substantive requirements and issues currently in play in the United States today. At one time in American legal history, courts in the United States did not enforce prenuptial agreements that addressed what would happen upon divorce because courts viewed them as agreements that contemplated divorce, and hence encouraged divorce.2 In an era when most states had fault based divorce, divorce was not allowed simply by mutual consent; thus, these agreements that contemplated divorce were also seen as efforts to generate false evidence of fault grounds, and therefore forbidden—but the agreements could address what was to happen upon death. 1 See AMERICAN LAW INSTITUTE, PRINCIPLES OF THE LAW OF FAMILY DISSOLUTION: ANALYSIS AND RECOMMENDATIONS § 7.01 (2001). 2 Brooks v. Brooks, 733 P.2d 1044, 1049 (Alaska 1987). See also Crouch v. Crouch, 385 S.W.2d 288, 293 (Tenn. Ct. App. 1964)(“such [a] contract is promotive of divorce and void on grounds of public policy. Such contract[s] could induce a mercenary husband to to inflict on his wife any wrong he might desire with the knowledge that his pecuniary liability would be limited. In other words a husband could through abuse and ill treatment of his wife force her to bring an action for divorce and thereby buy a divorce for a sum far less than he otherwise would have to pay.”). 1 717363v1 The nationwide abandonment of traditional fault divorce starting in the 1970’s eliminated at least one of the significant barriers to prenuptial agreements. However, the acceptance and enforcement of such premarital contracts between spouses has not been uniformly accepted throughout the United States, nor have the requirements by the state legislatures and courts been consistent or even coherent. Under American law, prenuptial agreements are not simply garden variety contracts as between persons in a simple business transaction. This is an important aspect of the American law of prenuptial agreements given the unique history of individualism and individuals rights in American legal history and culture. The United States, as a general matter, highly values contractual freedom—so much so that the concept of the right to contract and to have those rights enforced is enshrined in the United States Constitution.3 However, the intimate relationship of the parties to these agreements, the underlying caring and nurturing union that is presumably being contemplated, the fact that children may be produced of the union, and the significant role the state has in regulating this relationship and protecting the spouses and children have led to rules prohibiting certain issues from being addressed, a unique set of procedural requirements, tests for substantive fairness both at the time of execution and at the time of enforcement—all making these contracts unlike any standard commercial contract. Unlike other countries that prohibit or refuse to enforce prenuptial contracts, most courts and legislative bodies in the United States now take the general position that prenuptial agreements are enforceable if they meet certain formal procedural requirements and are otherwise valid contracts under general contract principles.4 However, factors that will also be 3 U.S. CONST., art. I, § 10. 4 See, e.g., UNIF. MARITAL PROP. ACT §§ 3, 10, 9A U.L.A. 115, 131 (1998); Hrudka v. Hrudka, 919 P.2d 179, 186 (Ariz. Ct. App. 1995). See also Allison A. Marston, Note, Planning for Love: The Politics of Prenuptial Agreements, 2 717363v1 considered are the length of the marriage, the foreseeability of various developments in the marriage, the existence of children, and the general substantive fairness of the agreement both at the time the contract is executed and when it is to be enforced—and each state’s courts and legislature will promulgate these factors in its own unique way. This article shall attempt to give an overview of American rules regarding prenuptial agreements for foreign practitioners who encounter an American prenuptial agreement. Married American citizens increasingly are living in more than one country or moving from one country to another, and are marrying persons from other countries. Not only do American attorneys now have to advise clients how their foreign-drafted prenuptial agreement will be treated in the United States, but often the foreign practitioner will need to consider how to enforce an American prenuptial agreement in a foreign country or how a foreign prenuptial agreement would be construed in the United States. The purpose of this article is not to provide a definitive and lengthy treatise on these issues, but rather, to give the foreign practitioner a very basic overview of the laws of prenuptial agreements in the United States and to discuss briefly enforcement and construction issues involving agreements drafted in other countries. The law surrounding prenuptial agreements in the United States is complex and changing rapidly as a result of demographic and cultural trends. What is particularly challenging for the foreign practitioner seeking to understand American laws regarding prenuptial agreements is that there are fifty states within the United States, and each has its own laws and practices with regard to the laws of prenuptial agreements—and sometimes the differences are dramatic. To add to the complexity of fifty states, each with a different set of both statutory and case law addressing prenuptial agreements, there may also be interplay with federal statutes and federal case law. 49 STAN. L. REV. 887, 898 (1997)(noting that “prenuptial agreements that include divorce provisions are now generally enforceable in all states”). 3 717363v1 Given that most states have enacted statutes addressing prenuptial agreements, there is also the complex interplay between the common law and statutory law.5 Furthermore, states within the United States have their own property regimes, some of which are community property states, while others are common law property states.6 This affects the presumptions regarding marital and non-marital property and the division of such property on the termination of a marital relationship. Even the United States Constitution is implicated in the laws of prenuptial agreements, especially with regard to the right of persons to enter contracts, notions of equal protection and enforcement, and also notions of procedural and substantive due process. While these agreements are largely governed by state law, in the United States even that proposition has its complexities. As with any family law matter within the Untied States, the use of prenuptial agreements is also dramatically affected by the significant discretion that is given to family court judges when addressing family law matters. Given this discretion and the wide latitude in interpretation of such agreements, the individual views of the trial judge on these issues have significant importance. While it is enormously difficult to advise a client with any certainty as to the enforceability of a prenuptial agreement over the long term duration of a marriage, much of this is the result of the various approaches to the agreements taken by state courts, the whole concept of substantive fairness of the agreement, and whether such fairness will be contemplated at the time of execution of agreement or the time of enforcement. It is especially difficult to find certainty in this complex area of the law in a rapidly changing international and interconnected world. 5 See P. André Katz & Amanda Clayman, When Your Elderly Clients Marry: Prenuptial Agreements and Other Considerations, 16 J. AM. ACAD. MATRIM. LAW. 445, 462 n.2 (2000)(listing state statutes). 6 Hanoch Dagan, The Craft of Property, 91 CAL. L. REV. 1517, 1541 (2003). 4 717363v1 II. Unique Aspects of American Demographics One legal commentator writing in the area of prenuptial agreements noted that such agreements used to be a rather rare occurrence in a family law attorney’s practice. Today in the United States these agreements are much more common.7 One of the significant demographic trends driving this increase in prenuptial agreements is that at the present time, people from a variety of age groups and economic backgrounds are now seeking such agreements. Parties to these contracts may be relatively young and about to enter their first marriage, but one or both may be positioned to inherit wealth or a family business in the near future and family members may wish to keep the assets in the family. Either one or both of the parties may have been married before, and they have pre-existing children they want to provide for, or their divorce was such a horrific experience they want to resolve property division and spousal maintenance before a divorce occurs. Given that people now live longer, it is more common for both men and women to marry several times in a lifetime and to have accumulated significant income and assets that need protecting. Such older persons are candidates for the protections of such agreements. These agreements present special challenges to the drafters, not the least of which are concerns as to the capacity of such persons to enter into these complex agreements.8 All of these trends are affected by current demographics.