Two 2015 Massachusetts Appeals Court Decisions, Schechter v. Schechter, 88 Mass. App. Ct. 239 (2015), and Kelcourse v. Kelcourse, 87 Mass. App. Ct. 33 (2015), Demonstrate When Such Agreements Are Unenforceable.
Parties getting married can agree in advance how their property will be disposed of upon termination of the marriage, and about how much is to be paid in alimony. Courts have enforced prenuptial agreements even where they result in a massive disparity in the former spouses’ wealth and living conditions. But a pair of 2015 Massachusetts Appeals Court decisions demonstrates that not all prenuptial agreements are enforceable, and that simply getting your future spouse to sign on the dotted line is not enough.
In Schechter v. Schechter, 88 Mass. App. Ct. 239 (2015) and Kelcourse v. Kelcourse, 87 Mass. App. Ct. 33 (2015), the Massachusetts Appeals Court, for different reasons, determined that prenuptial agreements that would have allowed the husbands to retain the vast majority of the assets and, in one case, to pay very little in alimony, were unenforceable.
The lessons, for those intending to sign prenuptial agreements before getting married, are that they must be careful and thorough in negotiating their agreement and, as demonstrated in the Schechter decision, they cannot use the agreement to take unfair advantage of their spouse. A prenuptial agreement (also known as a marital agreement or an antenuptial agreement) will be enforced only if it meets particular requirements, both at the time of the marriage and when a divorcing spouse asks a court to enforce it. Even if a prenuptial agreement was valid at the time it was executed, the Kelcourse decision stands as a warning that circumstances that arise during the marriage could make the agreement unenforceable at the time of divorce.
The institution of marriage involves important rights that may not be casually given up. In the words of Massachusetts’ highest court:
The State has an interest in protecting the financial interests of spouses when they divorce. Marriage is not a mere contract between two parties, but a legal status from which certain rights and obligations arise. It was for this reason that we determined that the freedom to limit or waive legal rights in the event of divorce is not appropriately left unrestricted.
DeMatteo v. DeMatteo, 436 Mass. 18, 26 (2002).
Decided by the Supreme Judicial Court in 2002, DeMatteo v. DeMatteo explains what is needed in order for a prenuptial agreement to be binding. The Probate and Family Court had found the parties’ prenuptial agreement to be unfair to the wife and therefore unenforceable. The Supreme Judicial Court disagreed. The prenuptial agreement was binding even though it would leave the wife, after a 10-year marriage that had produced two children, with less than 1/200 of the couple’s money and property.
The Court explained how the Probate and Family Court must analyze a prenuptial agreement in deciding whether it is binding on the parties at the time of divorce. First, the judge must determine whether the agreement is valid, focusing on the time it was signed (the “first look”). Second, the agreement must not be unconscionable at the time of the divorce (the “second look”).
On the first look, for a prenuptial agreement to be valid,
- it must contain a fair and reasonable provision for the contesting party at the time of its execution;
- there must be full disclosure of each party’s financial circumstances; and
- the agreement must set forth a waiver of all spousal rights except those specifically provided for in the agreement.
The wife in DeMatteo argued that the terms of the prenuptial agreement had not been “fair and reasonable.” The Court rejected that argument, explaining that “fair and reasonable” does not mean that the agreement must give the parties approximately what a court would give them in the absence of a prenuptial agreement.
Many valid agreements may be one sided, and a contesting party may have considerably fewer assets and enjoy a far different lifestyle after divorce than he or she may enjoy during the marriage. It is only where the contesting party is essentially stripped of substantially all marital interests that a judge may determine than an antenuptial agreement is not “fair and reasonable” and therefore not valid. Where there is no evidence that either party engaged in fraud, failed to disclose assets fully and fairly, or in some other way took unfair advantage of the confidential and emotional relationship of the other when the agreement was executed, an agreement will be valid unless its terms essentially vitiate the very status of marriage.
The DeMatteo prenuptial agreement met the standard of “fair and reasonable.” It required the husband to continue to provide for the wife’s support and health insurance until her death or remarriage, and it provided that she would have a home and transportation. The wife would be in a better economic position than she would have had before the marriage, even though she would be getting far less than she would have received without a prenuptial agreement and her standard of living would be inferior to the one she had enjoyed during the marriage.
The “second look” gives the probate and family court the authority to deviate from the terms of a prenuptial agreement at the time a divorcing spouse seeks to enforce a prenuptial agreement. The Supreme Judicial Court explained in DeMatteo that “conscionability” is the standard to be applied at that time. Divorcing spouses will be held to the provisions of a valid prenuptial agreement unless, due to circumstances occurring during the course of the marriage, enforcement of the agreement would leave the contesting spouse without enough property, maintenance, or appropriate employment to support herself/himself. For example, the contesting party might have suffered unanticipated health problems, or inflation might have devalued the agreed support payments. The Court stated that the second look is “to ensure that the agreement has the same vitality at the time of the divorce that the parties intended at the time of its execution.”
With that backdrop, the Massachusetts Appeals Court relied on DeMatteo in refusing to enforce two prenuptial agreements in 2015. Schechter failed the first look test and Kelcourse failed the second.
The Schechter case involved questions of visitation, child custody and removal, in addition to the enforceability of the prenuptial agreement. During the marriage, the husband had engaged in extensive economic, emotional and physical abuse of the wife, and his assertive and controlling nature appears to have influenced the negotiation of the prenuptial agreement.
Among other factors bearing on the prenuptial agreement’s invalidity,
- The agreement had been signed just days before the wedding, when the wife was seven months pregnant;
- Although both parties had lawyers, the negotiation was brief and one-sided, with the husband refusing to agree to any of the wife’s requested terms;
- The husband had failed to disclose his assets to the wife fully and truthfully;
- The provision for alimony, $5,000 per year for each full year of marriage, was well below fair, given the enormous disparity in the parties’ worth;
- The asset division provision, which gave the wife one half of any increase in equity of the marital home occurring during the marriage, less mortgages and encumbrances, could result in the wife receiving no assets (e.g., if the parties rented a home, if they mortgaged their home to the maximum extent possible, or if there was no increase in equity).
Upholding the Probate and Family Court’s rejection of the prenuptial agreement as invalid, the Appeals Court reasoned that:
The combination of the father’s failure to make a complete disclosure of his assets and income, the circumstances surrounding the negotiation and execution of the agreement, and the meager provision for alimony, satisfies the requirement in DeMatteo that an agreement is unfair and unreasonable and thus invalid ab initio when “the contesting party is essentially stripped of substantially all marital interests.”
By contrast, the prenuptial agreement in Kelcourse v. Kelcourse passed the first look test but failed the second. The Probate and Family Court found, and the Appeals Court agreed, that although valid when executed, the prenuptial agreement was unconscionable and therefore unenforceable at the time of the divorce. When the parties were married, they had lived together in a home owned by the husband for five years, they had one child together and the wife was pregnant with their second child. The husband owned a business. The wife was a homemaker without substantial assets or income. The agreement stated that the principal residence, if purchased during the marriage, would be deemed the wife’s separate property regardless of how title was held. The agreement left open the question of alimony.
After nearly 20 years of marriage, when the parties were divorced, the home the parties had owned and resided in together was in severe disrepair and heavily mortgaged. Enforcement of the prenuptial agreement would have left the wife with a house with negative equity and in need of more than $300,000 of repairs and renovations and without appropriate employment to support herself. The husband, by contrast, owned real estate free of mortgage or other encumbrance valued at $1.7 million. The trial court found, and the Appeals Court agreed, that the purchase of this residence and its subsequent neglect constituted a change in circumstance that had not been anticipated when the parties executed their prenuptial agreement, and that enforcement of the agreement would be unconscionable.
So what might a party do to increase the chances of his or her prenuptial agreement being enforceable in the event of a divorce?
There is no absolute guaranty that a prenuptial agreement will be airtight, and there is no one-size-fits-all form of prenuptial agreement. Rather, the prenuptial agreement must be tailored to the unique circumstances of the parties signing it.
There are steps those negotiating prenuptial agreements can take, however, to maximize the chances of the agreements being enforced. First, the parties must be completely open and forthcoming with one another about their finances. A prenuptial agreement will not be enforced if one of the parties was in the dark as to the other’s worth.
Second, the parties must understand the rights they would ordinarily have in a divorce in order for their waiver of those rights to be binding. This is why it is essential that both parties have the benefit of legal advice. If one spouse’s lawyer prepares the agreement and gives it to the other spouse to sign, it would be difficult, years later, to prove that the signing spouse understood the rights he or she was waiving. An attorney for one spouse cannot impartially and objectively advise the other spouse of his or her rights.
Third, the parties must think ahead and ask themselves whether, ten or twenty years from now, they would be able to prove that they had made full disclosure of their assets and income and that they had a complete understanding of the marital rights they were waiving. Their financial disclosures should be in writing and the fact that both are represented by attorneys can help to prove that they understood what they were doing. Many lawyers will take the additional step of making a video recording of the parties’ signing of the agreement. In the DeMatteo decision, the Supreme Judicial Court noted that the signing of the agreement had been recorded on video and that the recording showed the husband’s attorney reciting the agreement’s terms and the parties communicating their understanding of and agreement to those terms. Making this kind of record is easy to do now that a high definition video recording can be made on a smartphone.
Fourth, the parties should ensure that, as of the time they are entering into marriage, their agreement is fair and reasonable in its proposed division of their money and property and in its provisions relating to alimony.
Fifth, the parties should conduct their financial affairs during the marriage in the way they contemplated in their agreement. If one party manages to render the other’s share of the property valueless, the agreement will not be enforced. The Kelcourse decision shows that the prenuptial agreement will not be enforced if it would leave one spouse penniless and unable to support himself or herself. This makes the negotiation of a prenuptial agreement different from the negotiation of other kinds of contract. The objective must be an agreement that meets the needs of both spouses. This is not one of those negotiations where party A wins only if party B loses. A spouse who secures particularly advantageous terms in a prenuptial agreement, and who manages the marriage in a way that leaves the other spouse unable to make ends meet, may well find that he has negotiated himself out of a binding agreement.
If you are contemplating a prenuptial agreement or are questioning the enforcability of your prenuptial agreement, please reach out to the experienced family law attorneys at Wilchins Cosentino & Novins LLP at 781-235-5500 or schedule a phone call today.