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Marital Agreements in Michigan – Useful Tools In A World of Until Divorce or “Debt” Do Us Part

Marital Agreements in Michigan – Useful Tools In A World of Until Divorce or “Debt” Do Us Part

“I love you, now sign here.” Most of us were taught the art of self-preservation at a young age, and that art should not be abandoned once we reach adulthood and begin to make life-changing economic, social and psychological decisions. Premarital (prenuptial) and post-marital (postnuptial) agreements are firmly rooted in contract law and are recognized in Michigan. Both simply afford some security in this age of increasing multiple marriages. Such agreements should not kill the romance, but should quell your fears about marriage and love.

Financial advisors are encouraging engaged and married couples to protect their current and future assets and also to protect themselves if one of them gets into substantial debt. A greater number of these agreements are being signed as a greater number of average people desire to protect their assets and/or income. The agreements are prepared by both family law and estate planning attorneys and are most important to people who are getting remarried, have children, own a business, or have significant wealth. As marriage connotes intimacy, both spouses should fully and freely exchange financial information and credit reports both before and after marriage.

The time for financial planning is not at the time of crisis, but rather before. According to a recent Harris interactive poll, almost 40% of divorced Americans say they would ask their significant other to sign a prenuptial agreement if they remarried. The poll also confirmed an increase in the number of couples who are executing prenuptial agreements before they marry. While only 3% of couples sign marital agreements, that figure has tripled since the similar Harris study conducted in 2002. Thirty-six percent of the people polled agreed that prenuptial agreements are wise and 15% of divorced people reported regret for not having a prenuptial agreement drawn up. Postnuptial agreements are not as common, and the data as to their usage is not as readily available.

Prenuptial agreements have been valid in Michigan since 1991. Such agreements are binding if made in contemplation of death as well as in contemplation of divorce. Couples who enter into a prenuptial agreement that both sides negotiated have a greater chance of a successful marriage because they actually communicated and reached agreement on important issues, such as goals and money, that would otherwise have caused problems in the marriage. Marital agreements also serve to avoid some of the emotional difficulties involved in divorce litigation and rights of inheritance upon death because the couple made important decisions when not under extreme stress.

Admittedly, emotional conflict is involved in preparing for divorce while planning for marriage and in entering into a formal financial agreement pertaining to dissolution of marriage while still desiring to remain married. Nevertheless, marital agreements provide protection while at the same time, imposing limitations. If you intend to be practical and fair, there should not be hesitation about broaching the subject of a marital agreement with your significant other.

Prenuptial agreements do not have to just be about money. They can also cover such things as spousal behavior, sentimental heirlooms, infidelity, intimacy, housekeeping, and pets. You can’t insure against heartbreak, but you can protect your assets. However, agreements regarding child custody and child support are not binding under Michigan law. Provisions regarding education and religious upbringing may be. Agreements also cannot violate the law or public policy. Prenuptial agreements do not encourage a spouse to dissolve the marriage and need not necessarily prevent a spouse from seeking spousal support upon divorce.

If you failed to implement a formal exit strategy prior to marriage, all is not lost. Postnuptial agreements are also generally enforceable in Michigan. The postnuptial agreement is one that is signed after the marriage takes place.

The responsibilities taken on by each spouse with regard to the other due to the marriage is sufficient consideration (that is, thing or promise of value exchanged) to make the prenuptial agreement legally enforceable. However, for a postnuptial agreement, since the two parties are already married, there must be other, legally sufficient consideration in the postnuptial agreement.

The court determines the validity of a marital agreement by considering numerous factors, including the totality of the circumstances surrounding the execution of the agreement, whether the parties made full disclosure, whether the parties knew the value of the property to which they waived their rights, and whether both parties were advised by competent counsel and intelligently waived their rights. Any marital agreement is void unless it is in writing and signed by both parties.

Prenuptial agreements are fair only if they meet the following criteria:

  1. The agreement was not obtained through fraud, duress, mistake or misrepresentation, or nondisclosure of material facts;
  2. The agreement was not unconscionable when it was executed; and
  3. The facts and circumstances have not changed since the agreement was executed in such a way that makes its enforcement unfair and unreasonable.

Postnuptial agreements have the same general objectives as prenuptial agreements, but they are made after the parties have entered into marriage. Similar to prenuptial agreements, postnuptial agreements must satisfy various requirements to be valid including:

  1. They must be fair and equitable, and supported by sufficient consideration; and
  2. They must not be made in contemplation of divorce or separation.

Postnuptial agreements have been entered into especially where older persons are involved or instead of a proceeding for separate maintenance where loss of health insurance coverage by a non-employee spouse is a concern. In addition, parties may employ a postnuptial agreement where one spouse wishes to protect the property he or she brought to the marriage from disposition during a divorce proceeding or to protect the inheritance rights of that spouse’s children from a prior marriage.

Because a postnuptial agreement supersedes already-existing rights, at times, a spouse’s motivation to enter into such an agreement may be questionable. Since postnuptial agreements have to meet the same threshold requirements of prenuptial agreements, a spouse cannot sign such an agreement as a result of his or her implied fraudulent promise that he or she would attempt to preserve the marriage. If one spouse enters into such an agreement with an interest solely in his or her own financial security and financial gain, then those intentions would be contrary to those set forth in the agreement and/or the intent of the parties. If one spouse signs the agreement as a result of the other spouse’s fraudulent and/or deceptive promise to attempt to maintain the marriage, the agreement would be unenforceable.

If all else fails and you have missed your opportunity for a marital agreement, be aware that persons can now “protect” themselves against a marriage gone wrong by purchasing divorce insurance. The benefits of such insurance do not compare with those of a well drafted marital agreement. Only the marital agreement promotes understanding, increases the chances of a successful and harmonious marriage, and presents an opportunity for a couple to engage in planning for their future in an honest and open manner.

For more information regarding prenuptial and postnuptial agreements or other related issues please contact John J. Schrot, member of Berry Moorman’s family law practice group located in Birmingham, Michigan.