Nature and Purpose of Prenuptial Agreements
Prenuptial agreements are also referred to as premarital agreements or antenuptial agreements. Regardless of the name used, they are legally identical.
Prenuptial agreements are contracts entered into by prospective spouses to fix their property rights and spousal support obligations in advance of marriage. That is, they are executed prior to marriage and are enforceable after the wedding of the contracting parties. The definition of “premarital agreement” in the Uniform Premarital Agreement Act is in accord. Pursuant to the Act, a premarital agreement is “an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage.” A prenuptial agreement is enforceable during a marriage and, if its terms so provide, upon the dissolution of the marriage or the death of one of the parties.
Prenuptial agreements should be distinguished from post nuptial agreements, which are contracts entered into by spouses after the marriage that fixes all or some of their property rights and support obligations. They are also different from marital settlement agreements, which establish property rights, support obligations and other matters including custody and support of children. Marital settlement agreements are entered into upon the final separation of the parties or upon dissolution of the parties’ marriage. Although dealing with similar issues, it is important to understand the distinctions that apply to the drafting and enforceability of each type of agreement. As a practical matter, marital settlement agreements are easier to draft since the property to be distributed is in existence and known to the parties, and a spouse’s entitlement to and need for support is known. On the other hand, a prenuptial agreement necessarily deals with events that will occur in the future. The assets, liabilities, income and support needs of each spouse cannot be known until the marriage terminates. In other words, a prenuptial agreement determines the terms and conditions for entering into marriage, while a marital settlement agreement generally describes the conditions of its termination. And, while prenuptial agreements are primarily used to delineate the property rights and duties of the parties, marital settlement agreements have the additional paramount purpose of fixing the parental rights and duties of the parties with respect to the children of their marriage.
Postnuptial agreements, although entered into after the marriage are usually similar in nature to prenuptial agreements. They both make provisions for the spouses in the event of the termination of the marriage by dissolution or by death, at a time that the parties intend to remain married. As a general rule, the law which applies to determinations concerning the enforceability of interpretation of pre- and postnuptial agreements is the same.
Prenuptial agreements generally are entered into because one or both parties wishes to establish and/or limit the economic rights and responsibilities of each party in the event of the death of a spouse or the dissolution of their marriage. A prenuptial agreement may deal exclusively with issues concerning the termination of the marriage as a result of the death of a prospective spouse or exclusively with issues concerning the rights and obligations of each prospective spouse in the event of a divorce or dissolution of marriage. However, the majority of prenuptial agreements include provisions concerning the rights and obligations of the parties whether their marriage terminates by death or divorce. Some prenuptial agreements also address personal rights and obligations such as choice of abode, pursuit of career opportunities, and the upbringing of children. The Uniform Premarital Agreement Act expressly authorizes parties to contract as to any matter, including personal rights and obligations. However, the Act also expressly states that an agreement may not adversely affect the obligations of a party to support a child.
A prenuptial agreement may be made in contemplation of the death of one or both of the parties. Although a will can be changed at any time prior to the death of a competent decedent, a valid and enforceable prenuptial agreement waives and /or establishes rights which then become irrevocable. Thus, when a party agrees in a prenuptial agreement to bequeath specific property to the other party, the agreement is deemed to supercede a prior or subsequent will that contains contrary terms. Similarly, when an agreement provides that one party waives all rights to share in the estate of the other, its terms annul such rights as, for example, homestead and exempt property, which a spouse acquires by operation of law. For example, a prenuptial agreement in which a party waives his or her right to homestead and exempt property is made in contemplation of death. Thus, a prenuptial agreement may be used to settle a spouse’s ownership rights in real or personal property and his or her right to receive support as well as other payments in the event of the death of the other spouse. The Uniform Premarital Agreement Act, which is applicable to prenuptial agreements executed on or after October 1, 2007, expressly provides that the parties to a prenuptial agreement may contract regarding the disposition of a death benefit from a life insurance policy. Any such provision should be clear and specific and the insurer should be notified of the agreement. Otherwise, a contrary designation of beneficiary in the policy may prevail. The Uniform Act also expressly states that it does not alter the rights or obligations of parties to prenuptial agreements with respect to Probate Code Sections 732.701 or 732.702, which govern contracts to make wills and waivers of spousal rights, respectively.
A prenuptial agreement may also be made in contemplation of divorce. The only method available to avoid the application of Chapter 61 to the dissolution of the parties’ marriage is by entering into a valid and enforceable prenuptial agreement. Prenuptial agreements can provide substantial economic protection for a spouse with significant assets by limiting or eliminating the amount of equitable distribution and/or alimony to which the other spouse would otherwise be entitled in the event of a dissolution of the parties’ marriage. For example, a prenuptial agreement may provide that a spouse is entitled to no distribution of any marital assets and no alimony regardless of the term of the marriage, or may limit the amount of equitable distribution and alimony regardless of the size of the marital estate. However, pursuant to the Uniform Premarital Agreement Act, a trial court may refuse to enforce an alimony provision if its operation at the time of separation or divorce will render a spouse eligible for public assistance. The court may refuse enforcement to the extent necessary to prevent the eligibility.
A prenuptial agreement might also be beneficial to the prospective spouse who is in a financially inferior position in the economic relationship. By setting forth the support rights of the spouse should the marriage fail, a prenuptial agreement may provide a sense of security that will be an inducement to entering into the marriage. This is especially important when one spouse intends to devote all or a large segment of time to the home at the risk of loss of wage-earning capabilities. When a supported spouse knows that support will be forthcoming until his or her job skills are reacquired after the marriage, the spouse might be more receptive to interrupting a job or career. In this regard prenuptial agreements are said to promote marital tranquility and harmony.
A prenuptial agreement can create property rights in a person who is not a party to the agreement. For example, it may provide that specific property is to be bequeathed to a third party. Or, the agreement may contain provisions for the support of a party’s child by a prior marriage. In both instances, the named third-party beneficiary has standing to enforce the agreement.
A prenuptial agreement cannot be used to defeat the property rights of third parties. When a third party has a legal right or claim to the property of a prospective spouse, the property cannot be conveyed under a prenuptial agreement. Similarly, the legal obligations of a party to others cannot be waived in the agreement. For example, a party to a premarital agreement cannot waive the legal duty to support his or her minor children by a prior marriage.
As a form of contract, a prenuptial agreement is governed by the general principles of contract law. Thus, it will not be enforced when it is shown to have been procured by fraud, mistake, coercion, or duress, or when there is a lack of adequate consideration. However, the relationship between the parties to a prenuptial agreement is one of mutual trust and confidence and they do not deal at arm’s length. Therefore, each party must exercise a high degree of good faith and candor in all matters bearing on the prenuptial agreement. The Uniform Premarital Agreement Act is in accord in providing that a prenuptial agreement may be found unenforceable based on fraud, coercion, or duress. The Act also allows a prenuptial agreement to be found invalid if it was “unconscionable” at the time it was executed and prior to its execution, the complaining party did not receive full disclosure or have independent knowledge of the other party’s property. This unconscionability basis for invalidating an agreement is similar to unfairness in case law as a ground for refusing to enforce a prenuptial agreement.
As with other contracts, a prenuptial agreement is void if its terms are contrary to public policy. Thus, an agreement that promotes the divorce of the parties is contrary to the public policy that promotes marriage, and is therefore void and unenforceable.
As with other types of contracts, a prenuptial agreement generally must be interpreted and applied according to the laws of the place where the agreement was made. Nevertheless, Florida courts may depart from this rule of comity if it is necessary to protect Florida citizens or to enforce a paramount rule of public policy. For example, a citizen’s right to homestead protection under the Florida Constitution is a paramount rule of public policy that justifies a departure from the rule of comity. Thus, a spouse’s homestead rights may be determined according to Florida law rather than the law of the place where the prenuptial agreement was made if the homestead property is located in Florida. In addition, the Uniform Premarital Agreement Act provides that a prenuptial agreement may contain a choice-of-law clause in which the parties select which jurisdiction’s laws will govern construction of the agreement.