What Is a Prenup?
A prenuptial (or premarital) agreement is a contract between two people in anticipation of marriage. They are generally utilized by couples seeking to avoid later complication in case of divorce or death. They can address a wide range of different topics, but they principally focus on the disposition of property and debt in case of death or divorce. They can also indemnify one spouse from the debts of another incurred during the marriage. Often, because they are difficult to break , these agreements address distribution not just in the event of a divorce, but also in the event of a death. Marital property laws differ by state, although there is a common law framework governing them across the U.S. which allows states to deviate from their own rules. While it is not possible to determine a single law that applies in all states, nearly all states regard prenuptial agreements as enforceable, provided that both spouses enter into the agreement freely and knowingly.
Do Prenups Have an Expiration Date?
It is a common misconception that prenuptial agreements, once signed, remain in effect forever. In California, the law does not include a "sunset clause," a provision by which an agreement automatically expires after a certain period of time. There are, however, some caveats.
The Uniform Premarital Agreement Act (UPAA), under which California operates, does not set an expiration date for prenuptial agreements. The Act merely provides that an agreement can be modified after marriage in writing and signed by both parties.
Generally speaking, if a prenuptial agreement meets the requirements of UPAA, and has been signed willingly and voluntarily by both parties, a court will uphold its provisions. These requirements include (among other things) the following: However, the validity of one particular provision in the agreement could be challenged, and found unenforceable, on the grounds of unconscionability. For instance, if the agreement required a spouse to relinquish all rights to his or her separate property, and the spouse, at the time of signing the agreement, was unaware of the existence of any separate property owned by the other spouse, a court could determine the provision to be unconscionable, and refuse to enforce it. A court could similarly find unconscionable an agreement to pay no support, either during marriage or in the event of divorce.
One could argue that the passage of time, by itself, makes an agreement unconscionable, especially if circumstances have changed so dramatically since the time of signing that the unchanging application of the agreement would result in a severe, and perhaps unintended, hardship on one party. Under the right circumstances, a court could find an agreement unconscionable and not enforce its expiration date.
What Can Affect a Prenup’s Validity Over Time?
While the terms of a prenuptial agreement are meant to be enforceable during the marriage and after its termination, circumstances may arise that impact its validity. Subject to provisions of domestic law, these changes include, but are not limited to: changes in the law in response to public opinion, subsequent agreement of the parties to amend the document, and any specific clauses in the agreement that allow for expiration with the passage of time or change of circumstance.
Where an issue arises as to the enforceability of a particular provision of an agreement, often, the courts will review each individual provision to determine whether the balance of the agreement as a whole should be enforced to the extent possible without inclusion of the invalid provision. Cases involving child support, custody and visitation on the other hand, implicate the shorter term and short-lived nature of a marriage’s duration, thus rendering the applicability of any particular provision questionable after a relatively short passage of time and considerable change of circumstance. Issues regarding property distribution, however, deal more directly with the issue of changing circumstance and the impact on the parties to a divorce proceeding. While prenuptial agreements, by their very nature, cannot anticipate every possible change of circumstances during the course of a marriage, if adequately constructed, preventative measures can be built into the agreement in the event of a change of circumstance. For example, it is suggested that the holder of a lucrative professional position stipulate to the annual income generated by such a position for a particular tax year. Thereafter, if that same person enters the field of endeavor which provides the financial benefit and advantage, the contract can work to protect the other party and provide for equitable distribution of the value contained in such a pre-existing contract. Quite simply, the same formula that worked in 2003 to arrive at a particular result or monetary distribution should similarly apply to future payments and distributions to be made in 2004, 2005 and beyond. Additionally, while the courts harbor a general preference for the enforcement of agreements entered into between two parties, the parties should ensure that they are not overlooking the fact that such agreements can be susceptible to ongoing change due to a fundamental alteration in economic circumstance.
Common Provisions and Their Implications on Duration
Specific clauses in a prenuptial agreement can influence how long the agreement is valid. For example, utilizing a sunset clause can both influence the duration of a prenuptial agreement as well as the date the prenuptial agreement becomes effective. A sunset clause has not been tested in Nebraska but may provide another avenue for a prenuptial agreement to terminate upon the happening of a specific event or a specific date. A sunset clause is a provision that limits the term of a contract, agreement or policy. Most often it is set for a certain event or time period. In the context of a prenuptial agreement the most common terms are: After a specified date or number of years after marriage, a sunset clause could release either person from their obligations to the other under the prenuptial agreement. However, it cannot be used to nullify any child support obligations that were made as a part of what had previously been a valid prenuptial agreement. Other possible events that could end a prenuptial agreement might be death of a spouse, a divorce, or separation.
Regulatory Concerns Through Time
As indicated in the introduction, there are challenges to the validity of prenuptial agreements after they have been executed. A party can take a myriad of approaches to challenging the validity of a prenuptial agreement post-execution. In one New Jersey case, the appellate division held that when a person challenges a prenuptial agreement years after it was executed based upon unconscionability, the court should consider: When determining whether an agreement is unconscionable, relative fairness at the time of execution is measured by the following: (1) the parties’ respective ages; (2) physical conditions; (3) amount and liquidity of their wealth; (4) priorities and economic circumstances in light of their age; (5) understanding of their legal rights; and (6) the opportunity to review the agreement with personal legal counsel. As a practical matter , people execute prenuptial agreements at a young age when they have not had the opportunities to build much wealth. This, however, does not mean that a basic prenuptial agreement providing for separate property could not be enforceable even many years after its execution. It will be a fact sensitive inquiry based upon the circumstances of each case. The law regarding post-nuptial agreements and the standards for setting them aside have not kept pace with the exponential growth of the marital estate in most modern marriages. A young couple with very little wealth should be treated differently than a second marriage couple, each with accomplished careers, who possesses substantial wealth and all the accoutrements of modern life (i.e., second and third homes, excessive assets in the stock market and retirement investments, luxury vehicles, etc.). To try to use the same standard for all of these people is inherently and intuitively unfair.
Modifying Prenups
When issues arise with the efficacy of a prenuptial agreement, revisions might be necessary. In some cases, a revision might even be required. A prenuptial agreement that was fair and/or reasonable at the time of marriage might no longer be so if a significant change in circumstances occurs. What constitutes significant can be subjective and may vary from person to person. Think of it as a move toward rebalancing relative economic strengths and resources in the context of the marriage. The point is to ensure that your prenuptial agreement doesn’t have an expiration date, but, is instead, a living breathing document that is capable of evolving as changing circumstances call for these adjustments. A significant change in circumstances might be recognized as: Layman’s terms? A prenuptial agreement should be adjusted to reflect these changes, all-the-more to protect both spouses through the length of their marriage. Doing so not only provides each spouse with peace of mind, it also decreases the likelihood of costly divorce litigation and protects children from the fallout of all-too-frequent court appearances over the years. To revise a prenuptial agreement, the process begins simply enough. It can begin with any spouse initiating a conversation with the other to discuss the feelings that the agreement is unfair or inequitable under the current circumstances, particularly when being constrained by its terms. This discussion should include whether there are provisions that need to be tweaked or whether the entire agreement requires retooling. Consideration of this dialogue is necessary. In some instances, you may want to seek counsel (as mentioned before) on how best to approach the subject. In many ways, broaching the topic of the revision of a prenuptial agreement is like the discussion of whether to divorce . . . it must be handled carefully.
Examples of Every Day Situations
Case 1: A couple in their early 30s signs a prenuptial agreement that outlines asset distribution in the event of divorce, but it neglects to address spousal support calculations. When the couple divorces ten years later, one party experiences a considerable financial downturn and requests a modification that seems fair under the circumstances. The court awards a support modification, leaving the original agreement in question. In fact, one party spends years paying amounts that exceed what would have been reasonable at the time of the divorce. Eventually, court enforcements of the original agreement get thrown out and the parties settle on modified terms.
Case 2: An engaged couple decides to get a prenuptial agreement just a few weeks before marriage. They make an impulsive decision to sign quickly rather than invest time to review its terms carefully. The agreement outlines a fair distribution of assets based on a general understanding of the law and each other’s needs. However, months after the honeymoon, they discover new sources of income and are impacted by unforeseen changes in tax law that affect the spousal support calculation in the document. They want to renegotiate the agreement to include these new facets of their financial lives, but they are unable to agree upon a new approach to the formula and don’t want to pay the lawyers for further work. It takes many more years and lawyers to finally settle on reasonable numbers.
Case 3: A couple enters into a prenuptial agreement after a long engagement. Because they are both financially savvy, the agreement includes protections defining how financial windfalls, such as lottery winnings, will be included when calculating income for spousal support. When they marry, those assets provide the couple a significant income boost. Years later, the couple decides their wealth is pulling them in different directions. One party has become financially independent and wants to retire early; the other is looking to take a financial risk with a new business endeavor. A few years later, they are separated and challenge the terms of the prenuptial agreement. The prenuptial agreement goes to court and ends up getting invalidated based on a finding that one party was able to predict and outline likely future events and outcomes at the time of signing. Months of costly legal and court fees ensue.
Ten Suggestions for Couples
The reality is that many couples do not look at their prenuptial agreement the day after their wedding. Often, the agreement is put away with a wedding gift or in a drawer and never discussed again. Some couples forget about the agreement because they are too busy building their lives together to focus on the terms of the agreement. Others simply want to move on from their negotiations and avoid the subject entirely.
How can you ensure your prenuptial agreement will be valid and enforceable in the event of divorce or death? First, you need to understand the need to review the agreement periodically to ensure its terms are still valid and consistent with your current circumstances. For example, if one spouse gives up a lucrative job or changes employment, it would be prudent to revisit the agreement to determine whether it is still in line with the spouse’s new income stream. As another example , if you have children, the terms of the agreement should be compared to your current parenting plan to determine whether its terms are fair and equitable. Second, every prenuptial agreement should contain provisions concerning the process by which the agreement can be amended or revoked should terms change in the future. Every good contract should be able to adapt to changing circumstances and set forth a procedure for doing so. Finally, always be open and upfront with your spouse about the agreement after your marriage. In other words, try to avoid placing it in a drawer and forgetting about it, and, instead, discuss the agreement in relation to your current circumstances. If a substantial change occurs in the future, be proactive and offer to discuss the agreement with your spouse. Invite your spouse to discuss the agreement periodically or as the need arises.
