Volume 19, Number 6
DOMESTIC RELATIONS LAW
PRENUPTIAL AGREEMENTS FOR THE GOLDEN YEARS
By Stephen W. Schlissel and Jennifer Rosenkrantz
Almost every state allows couples to enter into premarital agreements. Each state has its own rules and requirements, but all mandate that such agreements be procedurally and substantively "fair." Determining whether an agreement is fair requires knowledge of basic principles of contract law such as capacity, duress, fraud, and undue influence.
Full and complete disclosure is required and generally entails that each party divulge information about assets, property, income, and financial condition. To alleviate a client's concerns about making full disclosure, a lawyer can provide that all copies of disclosure documentation will be returned to the attorney or the client who provided the documents, and that the information will be used under a protective order only for disputes concerning the agreement.
Common law requires that all prenuptial agreements are substantively and procedurally fair both at the time of execution and in terms of enforcement. By contrast, the Uniform Premarital Agreement Act (UPAA) requires only that agreements be procedurally fair at the time of execution. It is virtually silent as to substantive fairness, permitting substantive review upon enforcement if one of the parties would become a public charge by virtue of the agreement's terms and provisions.
Family lawyers must know whether their jurisdictions have adopted all or part of the UPAA. Courts will examine whether negotiations conducted prior to the agreement's execution were conducted fairly. For example, some courts are reluctant to enforce an agreement signed in a limousine on the way to the marriage ceremony, deeming such circumstances to be under duress. Most jurisdictions are hesitant to enforce an agreement between parties who were not represented or at least advised by independent counsel during negotiations and drafting. In the case of an elderly client, mental capacity to enter into a prenuptial agreement and comprehension of the consequences of signing it are particularly important.
Substantive fairness is a vague term. It implies that courts will consider the consequences of enforcing a prenuptial agreement and decide whether the enforcement of its specific terms would be "fair" to both spouses. To survive a court's scrutiny, the agreement must be reasonable and not unconscionable.
Who benefits? Typically, wealthier spouses initiate prenuptial agreements to protect property; but this may not hold true in cases involving older couples, where each party may have assets to preserve and protect. A prenuptial for senior clients is therefore often significantly different from the typical agreement.
Most older clients have a strong desire to care for children or grandchildren from a previous marriage; they do not want the new spouse to receive assets or monies earmarked for these children. An agreement must list and characterize the individual, nonmarital, or separate property of each intended spouse and provide that all property owned by a spouse as of the date of the marriage will remain his or her property throughout and after the marriage. The agreement should define joint or marital property and expressly state that any property not specifically delineated as joint or marital is individual or separate property.
A provision should allow for the distribution of separate property upon the titled spouse's death, as provided by his or her will or the agreement itself. The agreement also should incorporate a mutual waiver of each spouse's right of election and any other estate rights established by state or common law, including the right to act as the executor of the deceased spouse's estate. The agreement should specifically acknowledge by name children from a previous marriage and state that the spouse is entitled to transfer all or part of his or her separate assets to those children.
An older couple may have concerns about what happens to the parties' house once either party dies. Often, the children of the spouse who owns the house have been looking forward to inheriting it. The parties may specify that each spouse will execute a will allowing the surviving spouse to live in the home for life, free and clear of any claims of the surviving spouse's heirs or beneficiaries. Such a clause could include language governing the distribution of the house after the death of the second spouse, as follows:
Ms. X and Mr. Y each agree to make the following testamentary bequest to the other, and to execute and maintain in force and effect a Last Will and Testament, which will provide as follows with respect to the principal marital residence, if owned in whole or in part, by either of them at the time of his or her death:
(a) The said Last Wills and Testaments shall provide to the surviving spouse a personal right to reside in the residence, free of any claim for rent from any heirs or beneficiaries for the rest of his or her natural life, provided, however, that the surviving spouse will be solely responsible for all mortgage payments, interest, taxes, upkeep, maintenance, repairs, etc., for the said residence for as long as he or she lives there; and
(b) The said Last Wills and Testaments shall further provide that upon the death of the surviving spouse, all the rights, title, and interest in the residence shall pass to the heirs and beneficiaries of [the titled party] pursuant to and in accordance with [his/her] Last Will and Testament and that all rights, title, and interest of the survivor [nontitled party] in and to the residence shall pass to [Ms. X's/Mr. Y's] heirs and beneficiaries pursuant to and in accordance with the provisions made in [his/her] Last Will and Testament.
Retirement benefits. Most older clients will likely have some type of retirement benefit or soon be eligible for such benefits. It's therefore essential to let them know that prenuptial agreements purporting to waive a spouse's rights to retirement benefits constitute effective waivers only if the provision meets the requirements set forth under ERISA.
Generally, only a spouse has the right to waive rights to a spouse's retirement benefits. Because parties to a prenuptial agreement are not yet married, waivers made at this time are invalid. Matrimonial attorneys must draft agreements providing that additional waivers will be signed after the marriage. If a party fails to sign appropriate waivers and later recovers monies related to assets or benefits that should have been waived, the other party has a claim against the nonwaiving spouse in an amount equal to the monies received. Consider the following sample clauses:
(a) Each party waives any and all interest in the other party's pension, profit sharing, retirement, IRA, 401(k), or other such plan to the extent of the titled party's interest and any increase in its value as of the date of the parties' marriage.
(b) Fully recognizing that this premarital waiver may not be binding, the parties agree to execute, within ten (10) days after their marriage, documents to further waive all rights set forth in Paragraph (a) above. Should a party fail to execute such documents, then to the extent that the nonwaiving party recovers any sums as a result of the failure to confirm the waiver, the other party shall have a claim against the nonwaiving spouse in an amount equal to any sums recovered.
Spousal support. Finally, consider the issue of spousal support. An elderly client is more likely to become disabled, seriously ill, or unemployed and unable to pay spousal support in the event of a divorce. Moreover, many older clients are self-supporting when they enter into a second marriage and will not need spousal support should the marriage end in divorce. Thus, consider including in the prenuptial agreement a simple clause stating that both parties possess sufficient resources to support themselves and waive any right or claim to support from the other party.
In conjunction with the prenuptial agreement, consider drafting wills, health care proxies, living wills, powers of attorney, and the like for any senior client. Such documents can provide tremendous assistance, protection, and peace of mind.
Stephen W. Schlissel is a principal and Jennifer Rosenkrantz is an associate with Schlissel, Ostrow, Karabatos, Poepplein & Taub, PLLC, in Mineola, New York.
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This article is an abridged and edited version of one that originally appeared on page 28 of Family Advocate, Winter 2002 (24:3).