The last 30 years will likely not be known as the “age of romance.” The popularity of prenuptial agreements between marrying couples has cast a somber, business-like pall over this otherwise emotion-driven arrangement. As simple as a prenuptial contract may be, some legal flies have recently appeared in the ointment.
With the divorce rate approaching 50%, it seems logical to agree at the outset how the pie will be divided if the marriage comes unglued. In its simplest form this is what a prenuptial contract does. In addition to dividing the wealth in the event of divorce, prenuptial contracts have also been used to agree on where the couple will live and which religion the children will be raised in.
Prenuptials have been around for ages. Typically they are used by couples who have been married before and have children by their previous marriage. They have also long been used when one party comes into the marriage with accumulated wealth or anticipating a significant inheritance.
For most of the past century, premarital contracts were simply guided by the local laws governing all types of commercial contracts. As the popularity of the agreements increased and interpretative problems arose, there was a move in the 1980s to create a uniform statute for states to adopt. The Uniform Premarital Agreement Act has now been adopted by 26 states, however, Mississippi is not among the adopting states.
The problems with prenuptial agreements usually arise because one of the signers did not have legal representation at the time of the signing. This issue usually surfaces years later when one of the parties has amassed a fortune and the poorer partner is hesitant to depart the marriage without a chunk of the loot, regardless of what was agreed to before the wedding. This is particularly problematic in community property states, like California and Louisiana, where the law prescribes that wealth accumulated during a marriage is owned equally. Mississippi is not a community property state.
If there is no proof of legal representation of both parties prior to signing the agreement, the poorer signer can assert that he signed the document under duress and it is therefore invalid. The courts have frequently been sympathetic with the duress allegation and have set aside some otherwise properly drawn agreements.
Some prenuptials make provisions for compensation to one of the parties for a career sacrifice. In an interesting twist of circumstances, the wealthier party tried to have this provision of the agreement set aside to the detriment of the poorer party. The courts refused to go along and upheld the agreement.
Another interesting slant is for the prenuptial agreement to last for a term of years and then be invalid if the couple is together at the end of the specified period. Some groups have suggested that this provision, the so-called “sunset clause”, is actually a built-in incentive to end the marriage.
So, what does all this mean? If you are going to do it, do it right. The American Law Institute has just completed a decade-long evaluation of divorce law. That study recommends that prenuptial agreements should clearly and convincingly demonstrate that both parties were fully informed of the terms of the agreement, that it was not signed under duress and that everyone was encouraged to consult legal counsel.
Not surprisingly, the courts will attempt to side with the weaker party if there is wiggle room in the agreement. This is particularly true where the parties have children or if the agreement was executed more than 10 years previously. With that in mind, a valid prenuptial agreement should show incontrovertible evidence that both parties were aware of the provisions and were encouraged to seek legal counsel.
ON A PERSONAL NOTE
Thanks to all my friends who “bailed me out” of jail several weeks ago to benefit Muscular Dystrophy. The “lock-up” raised over $12,000 and will be used to benefit over 600 children and adults in Mississippi.
To those few scoundrels who offered to increase their pledge amount if MDA would keep me incarcerated for a week or more, I know who you are and, just remember, I buy ink by the gallon.
THOUGHT FOR THE MOMENT
The Seven Deadly Sins:
1. Truth, if it becomes a weapon against people
2. Beauty, if it becomes vanity
3. Love, if it becomes possessive
4. Loyalty, if it becomes blind, careless trust
5. Tolerance, if it becomes indifference
6. Self-confidence, if it becomes arrogance
7. Faith, if it becomes self-righteous
— American columnist Ashley Cooper
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. His e-mail address is firstname.lastname@example.org.