Prenuptial Agreements: The Five Requirements + Forseeability

In a recent case, Reed v Reed, the Michigan Appellate Court made a decision that strengthened the enforceability of prenuptial agreements especially in long-term marriages.

Before Reed, there were five basic factors to determine whether a prenuptial agreement is enforceable:

1. Was the agreement obtained through fraud, duress or mistake?
2. Was the agreement unconscionable/unfair when signed?
3. Have the facts and circumstances changed since then so as to make it unfair and unreasonable?
4. Did both parties enter into the agreement voluntarily?
5. Did both parties disclose all assets and facts before signing the agreement?

In enforcing prenuptial agreements in long-term marriages, the Courts have typically found that the facts and circumstances had changed since the date of the agreement and refused to enforce them.

This has been generally true until the case of Reed v Reed. Mr. and Mrs. Reed married in 1975. When they married, Mr. Reed was in law school and Mrs. Reed was studying for her degree in business. They had approximately $20,000 worth of assets.

Mr. and Mrs. Reed were married for thirty years. During the marriage, they accumulated several million dollars worth of assets. They shared some of their assets and bank accounts jointly and titled other assets and bank accounts in their own names.

The trial court decided not to enforce the agreement. The trial court believed that it would be unfair to enforce the agreement at the time of the divorce based upon the length of the marriage and the accumulation of assets.

The Appellate Court disagreed with the trial court and ordered the trial court to enforce the agreement despite the length of the marriage and the accumulation of assets.

The Appellate Court included an element of "foreseeability." It indicated that at the time of the agreement, it was foreseeable that the parties may accumulate significant wealth and that a long-term marriage was as foreseeable (and actually what most people hope for) as a short-term marriage.

The court indicated that because of the "foreseeability" of the long-term marriage and accumulation of assets, enforceability was fair. It indicated that Mr. and Mrs. Reed could have foreseen the long marriage and accumulation of assets when they entered into the agreement.

The Court stated a very strong preference for upholding prenuptial agreements. It stated that the parties to the prenuptial agreement had "agreed to be captains of their own financial ship and to decide their own destiny." Therefore, if a future event is foreseeable, it is not a change that would make enforcement unfair.

This decision has strengthened the enforceability of prenuptial agreements, especially in long-term marriages. If parties that are marrying would like to maintain their own separate assets and income into the future, it appears that prenuptial agreements are a very strong way to do so.

In writing a prenuptial or making changes to one, both people should be represented by an attorney due to the serious effects it will have on their rights. Prenuptials are particularly important for small/family business owners or partners.

I am Cameron C. Goulding, a North Oakland County Divorce Lawyer, serving primarily Rochester, Rochester Hills, Bloomfield, Troy, Lake Orion and Oxford for over fourteen years. For more information or to contact me please visit my website at http://www.camerongoulding.com/ or call my office at (248) 340-0900.