What is a prenuptial agreement?
A prenuptial agreement, also known as a settlement agreement, is an agreement entered into by parties intending to get married. Prenuptial agreements are used to pre-determine what will happen to the assets of a party in the event of a divorce.
What’s the law?
In New York the statute law governing the drafting and validity of prenuptial agreements is the Domestic Relations Law (1980) § 236, Part B, subdivision 3. This law will apply to any prenuptial agreement made after 1980.
Are prenuptial agreements enforceable under New York law?
Prenuptial agreements are only enforceable if they conform to the legal requirements set out in the Domestic Relations Law (1980). These requirements are:
- that the agreement be in writing;
- that the agreement is signed by the parties; and
- that the agreement is acknowledged or proven in the manner required to entitle a deed to be recorded.
Further to these statutory requirements, relevant case law discusses other reasons why a prenuptial agreement may be held to be unenforceable or invalid and set aside by a court. The following are the areas consistently highlighted by New York courts as those which may affect the validity of a prenuptial agreement.
Unfairness
The seminal case regarding the validity of prenuptial agreements in New York is Christian v Christian (1977), which identifies as the court’s chief consideration whether or not a prenuptial agreement is “manifestly unfair”. The key circumstance in which a court will deem an agreement manifestly unfair is if its terms are seen to be overreaching (that is trying to get an unfair benefit), or represent fraud, coercion, or unfair bargaining power on the part of one party.
A prenuptial agreement may involve the waiving of certain rights by one or both parties, something which does not seem to be prima facie unfair provided it is an educated waiver (with knowledge and usually legal advice). However cases such as Christian and Wile v Wile, show that prenuptial agreements which do not leave one of the parties with adequate financial support are unfair and will not be enforced.
It is also important that there has been no fraud, misrepresentation, duress, or coercion present when negotiating and signing a prenuptial agreement. In the case of Christian fraud was found to be present as a husband who knew that the value of his wife’s shares was significantly higher than the value of his own did not inform her of this and drafted an agreement splitting the shares 50/50. Courts will also look at the circumstances in which an agreement has been made to ensure that there is no inherent inequality of bargaining power: DM v KM (2006).
Christian however also shows that offensive provisions of a prenuptial agreement may be severable, thus not invalidating the entire agreement. Thus, if in doubt it may be advisable to include terms which allow for a prenuptial agreement to be severed.
Full Disclosure
Another important factor discussed by case law is that in the negotiation stages of a prenuptial agreement there should be full disclosure by both parties of their assets and their true worth: Battista v Battista (1984). Full disclosure should also be made of the meaning of the terms of an agreement, and what effect they really have on the rights of the parties: Battista.
Independent Legal Advice
Another factor which may affect the fairness of a prenuptial agreement is whether or not both parties obtained independent legal advice. It is important that both parties have access to a lawyer in order to receive independent counsel, and to have the terms of any proposed prenuptial agreement explained to them. As to how independent legal counsel must be, in the Matter of Grieff the fact that the husband had selected and paid for his wife’s attorney was held by the court to show that even though she was represented there was unequal bargaining power between the parties. It is therefore important for both parties to select and pay for their own solicitors.
Timing
The 2006 case of DM v KM has highlighted the circumstances of the signing of an agreement as another factor to consider. In DM the wife was presented with an amended version of a prenuptial agreement for the first time by her fiancé and his lawyer present and told her the attorney was there to notarise her signature. This is an extreme example; however it is advisable in any case that sufficient time is left before a marriage to ensure that both parties have had an opportunity to read, understand, and be independently advised on the provisions of any draft prenuptial agreement.
What can be included in a prenuptial agreement?
According to the Domestic Relations Law (1980) § 236 the following can be included in a prenuptial agreement:
(1) a contract to make a testamentary provision of any kind, or a waiver of any right to elect against the provisions of a will;
(2) provision for the ownership, division or distribution of separate and marital property;
(3) provision for the amount and duration of maintenance or other terms and conditions of the marriage relationship…provided that such terms were fair and reasonable at the time of the making of the agreement and are not unconscionable at the time of entry of final judgment; and
(4) provision for the custody, care, education and maintenance of any child of the parties, (subject to the provisions of § 240).
Why should you have a prenuptial agreement?
Prenuptial agreements offer certainty and protection in the event of a divorce. They allow the parties to have their wishes and interests understood during the legal process of a divorce. When considering drafting a prenuptial agreement it is important that both parties seek independent legal advice, don’t rush into an agreement, fully disclose their assets, and an agreement is not unconscionable and doesn’t leave one party without any means of support in the event of divorce.
If done right a prenuptial agreement can be invaluable.
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