U.S.

Prenuptial & Post-Nuptial

Agreements

Jeremy D. Morley
230 Park Avenue
Tenth Floor,
New York, NY 10169

www.international-divorce.com
The Basic Test as to Substance

Unconscionable?
or

Unfair?
Unconscionable: The Best Definition

You know it when you see it.

 Unconscionability in New York
Shocks the conscience and confounds the judgment of any person of common sense.

Very high burden of showing that it is manifestly unfair and that this unfairness was
the result of overreaching
 
Public policy of this State favors individuals ordering and deciding their own
interests through contractual arrangements.
 
Same presumption of legality as any other contract.
 
An unconscionable bargain is one that no person in his or her senses and not under
delusion would make
 
Requires fraud, duress, overreaching or incompetence.
 
Just because provisions are improvident, one-sided or unequal is insufficient.
 Unconscionability in Missouri
There are two aspects to unconscionability: procedural
unconscionability and substantive unconscionability.

If "gross procedural unconscionability," an agreement may be voided

though there is not great substantive unconscionability.

W was given too short a time to review the prenup = & she denied
understanding the terminology and the consequences.

Also the prenup contained elements of substantive

unconscionability.

It allowed H to categorize all assets generated in the future as his

separate property while limiting W to a formula in lieu of
maintenance, even after a 20 yr. marriage in which W had raised the
Potts v. Potts,
children & run303the
SWhousehold.
3d 177 - Mo: Court of Appeals, Western Dist. 2010
 Fairness in Wash. State
A prenup that is “disproportionate to the respective means of
each spouse, which also limits the accumulation of one
spouse's separate property while precluding any claim to the
other spouse's separate property” is substantively unfair.

A prenup was “grossly disproportionate” where all value,

income, and earnings from separate property would remain
separate upon dissolution.
 
A prenup which waived any claim of right to separate property
in the event of death or dissolution and effectively prohibited
the growth of community property was substantively unfair.
 Pre-Nup Validity: Washington State
2-prong analysis:
 Spouse seeking enforcement must prove:
1. Substantive fairness;
or
2. Procedural fairness.
a. Was there full disclosure of amount, character & value of
property; &
b. Was agreement freely entered w/ independent advice
from counsel & full knowledge by spouses of their rights?
** Procedural fairness validates substantive unfairness **
 Marriage of Bernard, 165 Wash.2d 895, 902-03, 204 P.3d 907 (2009).
Uniform Premarital Agreement Act
Defenses:

1. Lack of voluntariness.
 
2. Unconscionable when executed PLUS
 
No fair & reasonable disclosure PLUS
 
No voluntary and express written waiver of disclosure
PLUS
 
Inadequate knowledge of other’s finances.
 Voluntariness
• Sufficient time
• Independent counsel
• Lack of understanding
• Fraud and misrepresentation
• Duress:
– Pregnancy
– Refusal to marry
 California’s UPAA
 Additional Requirements:

1. Representation by independent legal counsel when

sign agreement or express waiver after such advice
 
2. Wait 7 days before signature
 
3. If unrepresented , must receive specified advice and
must execute declaration of receipt of information
 Public Policy Trumps All
• Scheme to circumvent immigration laws.
• Waiver of attorney’s fees (?)
• Raise children in a certain religion
• Forbearance from having children
• Child support
• Waiving or limiting spousal support (??)
• Encouraging divorce:
– Escalator clauses
– Sunset provisions

• BUT in many states the public policy favors prenups

 Choice of Law Clause
“This Agreement shall be construed and given effect, now and
in the future, in accordance with the statutes, case law and
decisions of the State of New York as they exist on the date
of this Agreement, notwithstanding any future changes to
said statutes, case law and decisions, without giving effect to
that body of law applicable to choice of law, and
notwithstanding the domicile of either Party at the time that
enforcement is sought, whether such domicile is in the State
of New York or anywhere else in the world, and even if a
divorce, separation or other proceeding is instituted
anywhere in the world in the courts of a jurisdiction other
than the State of New York. This provision is of the essence
of this Agreement.”
 Choice of Law Clause in CT
• Ret’d partner major NY lawfirm marries Brazilian W.
• Live in CT.
• NY choice of law clause.
• Prenp signed 5 days before marriage; complete
separate pty except $50,000/yr.
• CT ct applies N law (unconscionability) not fairness.
• Agt upheld.
McKenna v. Delente, Conn: Appellate Court 2010
 Choice of Law If No
Choice of Law Clause
 Choice of Court

“The Parties agree that any action for Legal

Dissolution will be brought in the courts of the
State of New York and that they will not be
bring such a case in any other country or U.S.
state unless and until a New York court has
finally determined that New York does not
have jurisdiction.”
 Choice of Court: But Contract Can’t
Create Jurisdiction

U.S. courts require:

1. In rem jurisdiction
2. In personam jurisdiction
3. Child jurisdiction
Recognition of Foreign Prenups

• Choice of law applies

• Forum state public policy applies
• Does forum’s prenup statute declare
forum’s public policy?
Drafting Guidelines if U.S. Connection

• Disclosure

• Independent representation.

• Time gap prior to marriage.

• Voluntariness.

• Specific execution requirements.

 Drafting Guidelines

• Retirement waivers

• Regulation of conduct during marriage

• Religious issues
• Change of domicile provisions
• Recitals 
• Pre-Marital Transfers
 Drafting Guidelines
Identify current & future separate property:

• Detailed schedule

• Active assets as well as passive?

 
• Future business activities?

• What if a spouse contributes separate property to other’s business?

• Reinvestment into business?

 
• Expected inheritance?
 Drafting Guidelines
• No-commingling provisions.

• Licenses & qualifications

• Income

• Tax planning

• Specifically define marital property

• Assets acquired during cohabitation

• Marital residence
 Drafting Guidelines

• Medical issues

• Spousal support

• Provisions to enhance “fairness”

• Define marriage termination

• Death provisions

• Publicity

• International relocation
 No Challenge
“Neither Party shall attempt to have this
Agreement or any portion hereof set aside or
determined to be null and void or otherwise
invalidated. Any such attempt by either to
dissolve this Agreement or any portion hereof
shall be deemed to be a breach of this
Agreement. The Parties acknowledge that the
permanency of this Agreement is part of the
consideration for the execution hereof by each
Party.”
Can one limit claims for counsel fees?
 Waiver of Counsel Fees.

“Each Party waives the right to claim counsel

fees, expenses or costs from the other
Party in the event of termination of
marriage.”
Indemnification for Enforcement Costs
“Should either Party fail to abide by the terms of
this Agreement, the defaulting Party will
indemnify and hold the other harmless for all
reasonable expenses and costs, including
attorney's fees and disbursements, incurred in
successfully enforcing this Agreement or
successfully defending his or her rights under
this Agreement in a court of competent
jurisdiction.”
Drafting Guidelines

Severability clause
Can you limit claims for spousal maintenance?

• UPAA

• NY

• NM
 Can parties agree custody,
visitation and child support?
Post – Execution Developments

• Abandonment

• Modification
• Estoppel
• Ratification
 Post- nups
• Not covered by UPAA
• Many specific state statutes
• Invalid in some (e.g. Ohio)
• Some states require more proof of
fairness (Calif)
• Some states have same standards as
for prenups (NY)
 Post- nups
Post-nups often raise fraud in the
inducement issues:

“Honey, I love you.

Honestly.
So just sign here.”
 Mass. Case
He Said:
After post-nup was signed, H
worked “hard” in the areas W
“felt needed improvement.” H
& W traveled together
extensively. They purchased &
renovated a new house
together. Not until 2 yrs. later,
after W asked H to leave home
& after W had an affair, did H
file for divorce.
She Said:
W testified that several
weeks after agreement was
signed, H indicated that the
marriage was over, and they
discussed this with marriage
counselor & their son’s doc.
Judge excluded her
testimony on grounds of
“spousal disqualification.”
 Post-Nup Statutes
Minnesota
M.S.A. § 519.11

Valid if:

(1) Full disclosure; &

(2) Procedurally & substantively fair and equitable at time of execution and at time
of enforcement; &

(3) Doesn’t cover child support, child custody; &

(4) Each is represented by separate legal counsel.

But is presumed unenforceable if a spouse seeking separation / dissolution within

2 years establishes that it is fair & equitable.
 Post-Nup Statutes: Ohio
Ohio Rev. Code, 3103.06 Contracts affecting marriage.

A husband and wife cannot, by any contract with

each other, alter their legal relations, except
that they may agree to an immediate
separation and make provisions for the
support of either of them and their children
during the separation.
 Post-Nup Statutes: California
California Family Code Part 5, Chapter 1, §1500

"The property rights of husband and wife prescribed by

statute may be altered by a premarital agreement or
other marital property agreement.”

§1502 provides that such agreements are to be

"executed and acknowledged or proved in the
manner that a grant of real property is required to be
executed and acknowledged."
 Post-Nups: California
• The fiduciary relationship between husband and wife imposes a duty of the highest good
faith and fair dealing on each spouse, and neither shall take unfair advantage of the other…

• Thus, when spouses enter into an agreement in which one party gains an advantage, the
advantaged party bears the burden of demonstrating that the agreement was not obtained
through undue influence…

• The predicate for applying the presumption of undue influence in an interspousal

transaction is that one spouse has obtained an advantage over the other in the
transaction…

• The advantage must be an unfair advantage; mere benefit is not enough.

In re Marriage of Burlingame
2010 WL 4657237
Cal.App. 4 Dist.,2010
 Post-Nups: New York
A postnuptial agreement which ''is fair on its face will
be enforced according to its terms unless there is
proof of fraud, duress, overreaching, or
unconscionability'' …bearing in mind that an
agreement is not unconscionable ''merely because,
in retrospect, some of its provisions were
improvident or one-sided.”
Rauso v. Rauso, 73 A.D.3d 888, 902 N.Y.S.2d 573 N.Y.A.D. 2 Dept.,2010.
 Post-Nups: Virginia

Court invalidated a postnup that transferred all marital assets

to the wife and all marital debts to the husband because the
agreement was signed on the husband's weekend furlough
from a psychiatric ward.

Bailey v. Bailey, 677 S.E.2d 56 (Va. Ct. App. 2009).

 Post-Nups: Iowa
Reconciliation agreement stating that if H’s “indiscretions” lead to a

separation or divorce W would receive $2,000+ / mo. + ½ of H’s future

retirement was unenforceable since it violated Iowa's no-fault policy.

“The relationship between spouses cannot be regulated by contracts

that are plead and proved in the courts as if the matter involved the

timely delivery of a crate of oranges.”

In re Marriage of Cooper, 769 N.W.2d 582 (Iowa,2009).