Massachusetts Prenup Primer
Prenuptial agreements are sticky business. Just raising the issue of a prenuptial agreement can trigger a slew of difficult conversations between the future spouses, particularly if they disagree as to whether a prenuptial agreement is necessary in the first place. Questions that may arise include: Does this mean the marriage won’t last? Does this mean we don’t trust each other? How will the prenuptial agreement influence my daily decisions regarding money and property? Current or possible future children add yet another layer of complexity. The future spouses can find themselves traveling down an uncomfortable path, trying to anticipate all the things that could go wrong in the marriage.
If you and your partner do want a prenuptial agreement, you will want to make sure it is handled properly, to increase the likelihood it will be enforced in the unfortunate event that your marriage ends. In Massachusetts, the key case to know of regarding prenuptial agreements is DeMatteo v. DeMatteo, 436 Mass. 18 (2002). In DeMatteo, the Supreme Judicial Court (SJC) held that to be enforceable, a prenuptial agreement (also referred to as an antenuptial agreement or premarital agreement) must be both valid at the time of execution (that is, when the parties sign it) and “fair and reasonable" at the time of enforcement.
VALID AT THE TIME OF EXECUTION
Under DeMatteo, a prenuptial agreement is valid at the time of execution if:
1. The agreement “contains a fair and reasonable provision as measured at the time of execution for the party contesting the agreement."
Simply put, this means that if the prenuptial agreement were enforced the moment after signing, its provisions would be considered “fair and reasonable." However, a prenuptial agreement can be “fair and reasonable" even if it results in a severe financial imbalance between the parties, and even if a judge would have awarded significantly more in the absence of a prenuptial agreement. In DeMatteo, the SJC held that a prenuptial agreement is not “fair and reasonable" only if “the contesting party is essentially stripped of substantially all marital interests." This is strong language that should compel anybody entering into a prenuptial agreement to be very careful about the terms to which they are agreeing and rights they are giving up.
2. “[T]he contesting party was fully informed of the other party’s worth prior to the agreement’s execution, or had, or should have had, independent knowledge of the other party’s worth."
The future spouses are encouraged to make full disclosure to each other of their net worth. While the law does not require the disclosure to be “detailed," I advise clients to make and request full disclosure of all income, assets, and liabilities. Without such disclosure, it could be argued that the decision to consent to the prenuptial agreement was not a reasonably informed decision, thus rendering the prenuptial agreement invalid.
3. “[A] waiver by the contesting party is set forth."
The waiver in question is a waiver of all spousal rights that are not specifically provided for in the prenuptial agreement; it indicates that the parties understand the rights they would have without the prenuptial agreement and agree to be bound by the terms of the prenuptial agreement instead. As stated in DeMatteo, the waiver “underscores that each party is making a meaningful choice when he or she agrees to give up certain rights in anticipation of marriage." In determining whether the waiver was properly made, the judge may look at factors such as “whether each party was represented by independent counsel, the adequacy of the time to review the agreement, the parties’ understanding of the terms of the agreement and their effect, and a party’s understanding of his or her rights in the absence of an agreement."
FAIR AND REASONABLE AT THE TIME OF ENFORCEMENT
If the court finds that the prenuptial agreement is valid, it will then take a “second look" to determine whether the agreement remains “fair and reasonable" (the court also uses the term “conscionable") at the time of enforcement. Again, a prenuptial agreement can be “fair and reasonable" even if it is one-sided or different from what a judge would have ordered in the absence of the prenuptial agreement. Under DeMatteo, a prenuptial agreement is “fair and reasonable" at the time of enforcement unless “due to circumstances occurring during the course of the marriage, enforcement of the agreement would leave the contesting spouse ‘without sufficient property, maintenance, or appropriate employment to support’ [himself or ] herself." This is a difficult test to satisfy, and parties entering into a prenuptial agreement should take great care to understand the terms to which they are agreeing and rights they are giving up.
The DeMatteo case has since been cited in numerous other cases, including another SJC case, Austin v. Austin, 445 Mass. 601 (2005). The upshot is a legal landscape in which future spouses have considerable freedom to determine the terms of their prenuptial agreements, even if those terms would leave one party severely disadvantaged upon divorce. Thus, before entering into a prenuptial agreement, I encourage parties to seek independent legal counsel and make sure they fully understand the implications of the agreement they are considering.