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Minnesota: The Wisdom of Prenuptial Agreements

Posted by attorney Maury Beaulier

Asking serious questions about how you see finances in the marriage partnership may save you pain and money later - and might even save your marriage.

A premarital agreement may also be called an antenuptial agreement. The terms are synonymous. Prenuptial or antenuptial agreements refer to a contract between two persons planning to marry which governs the rights and liabilities of the parties if they should happen to get divorced or in the event one spouse dies. In short, a prenuptial agreement determines the rights of parties to property, responsibility for debt and may even determine whether spousal maintenance (alimony) is paid. Prenuptial Agreements, however, cannot affect rights to custody or child support since such determinations must be made based on a best interests of the child standard and subject to court review.

Prenuptial Agreements are valid in all 50 states and the District of Columbia. It doesn't matter whether the state is a community property state or an equitable distribution state.

Why Prenuptial Agreements are Prudent

A premarital agreement acts as a safeguard for both you and your spouse-to-be. It protects your assets and may prevent expensive and acrimonious litigation if a divorce should occur by defining the rights and responsibilities of the parties in advance. With today's divorce rate hovering around 50%, a prenuptial agreement may be one of the most prudent decisions in your life. This is particularly true for business owners who may wish to preserve what they have worked so hard to build.

In order to ensure that your prenuptial agreement is binding there are certain key ingredients you should include in your prenuptial agreement.

List all assets, liabilities, income, and expectations of gifts and inheritances. A full disclosure is a critical element of a prenuptial agreement to ensure that it is binding.

Describe how premarital debts will be paid. This will help to identify which debts will be satisfied by marital resources or premarital resources.

Resolve what happens to your premarital property in reference to changes in value including appreciation, gains, income, rentals, dividends and the proceeds of such property in the event of death or divorce.

The marital residence is often an issue that can become contested in the event of divorce. Decide who, or if both of you, will own the marital residence and secondary homes in the event of death or divorce. How will any proceeds from those homes and real estate assets be divided in the event of a divorce.

Clarify what will happen to each type of property, whether jointly or individually owned, such as real estate, art work, collectibles and jewelry.

Alimony, maintenance, or spousal support, is another particularly contentious issue. Prenuptial agreements allow parties to allow for a waiver or property settlements instead of support. Some states are reluctant to limit recovery in this regard and, as a result, it is very important to understand your State laws.

Decide what will happen in the event of a divorce with regard to medical, disability, life or long-term-care insurance coverage

Prenuptial agreements have certain requirements. Generally, they are as follows:

there is a full and fair disclosure of the earnings and property of each party, and

the parties have had an opportunity to consult with legal counsel of their own choice.

As a general rule, the agreement must also be:

in writing;

executed in the presence of two witnesses; and

acknowledged by the parties before a person authorized to administer an oath (notarized).

In most cases prenuptial agreements are upheld. It is only in cases where there was not full disclosure or the agreement becomes substantively unfair at the time of the divorce that Court's strike down the validity of such agreements. An agreement may deemed substantively unfair if the circumstances on which the agreement was based have changed so drastically that enforcement would not comport with the reasonable expectations of the parties at inception.

Prenuptial Agreements & Spousal Maintenance

Courts most sometimes find antenuptial agreements substantively unfair with regard to provisions seeking to limit or eliminate spousal maintenance (alimony) payments. Some Courts have ruled that there is sound public policy rationale for not strictly enforcing such provisions which, even though entered into in good faith and reasonable at the time of execution, may have become unreasonable or unconscionable as to its application to the spouse upon divorce. The Courts are essentially attempting to prevent ex spouses from becoming wards of the state. If one spouse's health and employability have greatly deteriorated during a marriage, Courts may be reluctant to enforce the maintenance provisions of an antenuptial agreement.

Some cases that have been decided:

Invalidated an antenuptial agreement which sought to preclude spousal maintenance where the lesser earning spouse contracted a venereal disease from he husband resulting in medical expenses;

Invalidating an antenuptial agreement which sought to preclude spousal maintenance where the marriage was long term (more than 20 years) and the wife had been out of the work force for some time and suffered from an emotional disability. The trial court concluded that unforeseen circumstances invalidated the antenuptial agreement by rendering it unconscionable.

To avoid problems with your prenuptial agreement, it is important to contact an experienced lawyer in your State. Remember, as Benjamin Franklin stated, "an ounce of prevention is worth a pound of cure."

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