Prenuptial agreements — sometimes referred to as “prenups” or antenuptial agreements — are increasing in popularity. When properly executed and fairly applied, prenuptial agreements are enforceable in Michigan.
However, there are many complexities associated with the preparation, enforcement and validity of Michigan prenuptial agreements. Oftentimes, the enforceability and validity of the agreements are the focus during divorce litigation because of their potential effect on the outcome of various issues. Therefore, it is critical that you understand the law regarding prenuptial agreements in Michigan.
Prenuptial Agreements Are Legal Contracts
Persons who are contemplating marriage may consider entering into a prenuptial agreement.
A prenuptial agreement is a legal contract whereby the parties to the anticipated marriage agree to modify, or give up, certain rights in the property of their prospective spouse that they may otherwise receive by virtue of their marriage. These rights may include a right to their prospective spouse’s real estate or inheritance, rights to inherit property from their spouse in the event of death and certain other rights given to a husband or wife as a result of the marriage alone.
In the past, prenuptial agreements made only in contemplation of divorce or separation were deemed contrary to public policy and not enforceable. The reasoning for this was that, if the parties to an agreement (the prospective husband and wife) knew the outcome of a divorce if one were to occur, they would be less likely to remain in the marriage and divorce would be encouraged.
However, given the increasing divorce rate in recent decades, and the fact that divorce no longer carries the social stigma that it once did, prenuptial agreements are now recognized as an acceptable method of dividing the assets of matrimony.
Common Uses Of Prenuptial Agreements
Prenuptial agreements may be used by anyone who is contemplating marriage. However, the agreements have found particular importance in situations where couples wish to enter into a marriage but maintain their rights to certain premarital assets.
Prenuptial agreements are particularly useful: 1) for people who have been previously married; 2) when one or both of the spouses to the marriage have children from a previous marriage, whom they wish to protect financially from the potential claims of their new spouse; and 3) for individuals who have acquired sizeable assets before the contemplated marriage, and who wish to keep those assets segregated from their new marital estate.
For the above individuals, and others, a properly drafted and executed prenuptial agreement can serve to reduce the controversy in the event that a divorce should occur.
The Validity Of A Michigan Prenuptial Agreement
In the early 1990s, the Michigan Court of Appeals held that a properly drafted and executed prenuptial agreement is enforceable in the event of a divorce. (See, Rinvelt v Rinvelt, 190 Mich App 372 (1991).) However, in so holding, the Court also established certain guidelines for the enforceability of prenuptial agreements in Michigan.
Specifically, the Court of Appeals has said that when the proponent of a prenuptial agreement seeks enforcement of its provisions, a court must examine both the document and the facts surrounding its creation and execution. A court must determine: 1) the agreement was not obtained by fraud, duress, mistake, or misrepresentation, or by non-disclosure of material facts; 2) the agreement was not unconscionable (grossly unfair) at the time that it was executed; and 3) the facts and circumstances since the signing of the agreement have not changed so substantially or dramatically so as to render the enforcement of the agreement at the time of the divorce unfair, even if it was fair at the time of the signing of the agreement.
Importantly, in January 2017, the Michigan Court of Appeals ruled in Allard v Allard that a court retains authority to award a party’s separate property to the other party in a divorce proceeding, despite a valid prenuptial agreement protecting such assets.
Thus, in order to maximize the likelihood of a prenuptial agreement being enforceable in the event of a divorce, the following measures should be observed.
- Each party to the agreement should be represented by their own independent attorney. While it is not essential that each party be represented by a separate attorney (in separate law firms or practices), claims of duress, fraud or undue pressure or influence from one spouse upon the other will be more readily avoided if each party has individual legal representation.
- The agreement should be made and executed as far in advance of the wedding as time will allow. Agreements executed on the wedding day or the week preceding the wedding can be declared void.
- There should be complete disclosure of all assets of the parties. The assets should be listed in the agreement or in exhibits that are attached to the agreement. This allows each party to make an informed choice as to what they are giving up and avoid claims of misrepresentation or omission of assets.
- The technical aspects of preparing the agreement must be followed, including the method of execution, whether adequate consideration is given, whether qualified individuals witnessed the execution of the agreement, and the like. Accordingly, the agreement should be prepared by legal counsel and its signing formalities carefully observed.
Proposing A Prenuptial Agreement To A Potential Spouse
From a practical standpoint, a prenuptial agreement can be a difficult issue to address and requires mature, adult consideration. In many cases, the prospective husband or wife may believe the consideration of a prenuptial agreement represents something less than a full commitment to the marriage.
Parties should approach the issue from a mature viewpoint and recognize that other factors, such as the interests of children from a previous relationship or a prior unsatisfactory experience from an earlier marriage and divorce, make the consideration of a prenuptial agreement valid. Parties should recognize that a prenuptial agreement can be a way of addressing financial matters in advance, so that the new husband and wife can focus on the important non-financial aspects of their marriage.
Note that, even if a court determines that a prenuptial agreement is not enforceable, the court may still consider the prenuptial agreement as an expression of the intentions of the parties upon its execution. This could have a considerable effect on the ultimate distribution of property by the court, even when the court is not applying the agreement as it was written.