Prenuptial agreements are often considered by individuals who own businesses, or other valuable assets, prior to marriage, and parties who are getting married for a second time and want to preserve their estate for their children. To remain enforceable, prenup lawyers in Minnesota must present an agreement that is substantively fair, and executed in a procedurally fair manner.
The Purpose of a Prenuptial Agreement
Prenuptial agreements allow engaged parties to “re-write” the law, and determine how the financial issues will be addressed should their marriage end prematurely – either by divorce, or death.
Prenuptial agreements are sometimes referred to as “prenuptials,” “nuptials,” “antenuptials” or “antenuptial agreements.”
Such agreements, by definition, must be entered into prior to marriage. If executed by the parties following marriage, the document is known as a “postnuptial agreement,” and different standards apply.
The Nature of a Prenuptial Agreement
Many parties to a pending marriage are concerned about finances in the event that the marriage terminates early because of a divorce.
Our prenuptial agreement lawyers in Minnesota can work with you to help protect your pre-marital assets, along with increased value in pre-marital property, even if due to what would otherwise be defined as “marital efforts.”
Common situations involving a prenuptial agreement include business interests owned prior to marriage (including partnerships and family-owned corporations), along with a desire for investment returns on pre-marital assets to remain pre-marital.
Many couples will agree to keep all of their finances separate, utilizing a joint bank account only for those purchases they wish to be considered “marital” in nature.
Some couples get married for a second time, later in life, and want to ensure that their pre-marital assets are preserved, for the benefit of their children.
In addition to asset protection, a prenuptial lawyer in Minnesota can help address the issue of spousal maintenance. Limits, both in terms of duration and amount, can be imposed. In many situations, the parties agree in advance that each will waive the right to seek spousal maintenance in the event that the marriage of the parties fails.
Most couples opt to treat the division of their assets differently if the marriage ends because of a death of one of them, as opposed to a divorce. It is not uncommon, for example, to preserve all pre-marital retirement assets if the marriage ends in divorce, but to give a spouse full interest in the pre-marital retirement assets if the marriage ends because of death.
Enforceability of Prenuptial Agreements
In order for a prenuptial agreement to be valid in Minnesota, two tests apply. First, the document must be substantively fair. Second, the document must have been executed in a procedurally fair manner.
In terms of substantive fairness, the Court will explore the inherent fairness of the provisions of the agreement itself. Do the parties find themselves in a situation contemplated at the time they entered into the prenuptial agreement? If so, it is likely to be enforced. If not, the Court may elect to re-write the provisions of the prenup on “fairness” grounds.
As to procedural fairness, the question is whether the document was executed in a way that was appropriate. Did each party have the opportunity to consult with prenuptial attorneys in Minnesota? Was either party put in a position of duress, coercion or undue influence? Was the agreement signed at the last minute, or did the litigants have an opportunity to think critically about the agreement in advance of execution?
Postnuptial Agreement Requirements
In terms of postnuptial agreements (signed after marriage), each litigant must be represented by counsel in order for the agreement to be enforceable. Moreover, should the parties petition to dissolve their marriage anytime within two years following the execution of a postnuptial agreement, the agreement is presumptively unenforceable.
Contact our expert prenuptial agreement attorneys in Minnesota today for a consultation.
Podcast: Prenuptial Agreements in Minnesota
This is Jason Brown. I’m one of the founding partners with the Brown Law Offices, a Northwest Twin Cities law firm handling primarily divorce and family law cases. Now, today’s show is going to focus on prenuptial and postnuptial agreements. This is a subject that comes up frequently in family law, in particular in dissolution cases. One of the initial questions we must ask all potential clients are whether or not there is actually a pre or postnuptial in effect that may affect the rights of the parties. In this brief 10-minute overview of pre and postnups, we’re going to first talk about the law in relation to these contracts, which is really all they are, and in addition we’ll try to walk through the typical contents that you’ll find within a pre or a postnup agreement.
Prenuptials as a Contract
A couple of key points to keep in mind before we dive into procedural and substantive fairness. First, the prenup itself or postnuptial agreement, depending upon when it’s executed, is a contract, and all three of the basic elements of a contract must be satisfied in order to have a valid and binding agreement between the parties. Those three elements are offer, acceptance and what’s known in the legal community as consideration. In addition, keep in mind that the typical prenup will address one of two things. It will address either non-marital property, in other words, property that is going to be defined as not divided between the parties should the marriage dissolve or terminate due to death. The other thing that it can do often is limit the scope of spousal maintenance.
Prenups, Prenuptials and Antenuptials
Now, throughout this show, I’m going to use the terms prenup and antenuptial agreement and postnuptial agreement interchangeably. Understand that a prenup and an antenuptial agreement are one and the same. A postnuptial agreement is basically the same as a prenup with the exception of the fact that number one, it’s signed by the parties after the marriage as opposed to before, and second and most importantly, there are a series of specific criteria that must be satisfied in order for the court to find that the postnuptial agreement is valid and binding. The key element there involves the fact that both parties must be represented by a lawyer as opposed to a prenup where only one party or actually neither party technically needs to be represented by a lawyer.
So let’s say that you and your soon-to be-spouse go ahead and sign a prenuptial agreement and the marriage is ultimately dissolved years later. The first thing that the court is going to ask if one of the parties wants to contest the validity of disagreement is whether the agreement was entered into in a procedurally fair manner. In order for the agreement to be valid and enforceable, the court must ascertain whether or not the document was entered into voluntarily with full and fair disclosure of all of the earnings and liabilities and property of each party after each party has had an opportunity to speak with a lawyer of their choosing about the meaning of the terms within the prenuptial agreement.
The Need for an Attorney
Although the relevant statute, Minnesota statute, 519, does not mandate that either party be represented by counsel during the negotiation process and execution of a prenuptial agreement, we do strongly advise that both parties be represented as just one additional layer of protection for the parties. I mean, the parties have entered into this agreement at the time with the full intent that it be enforceable at some time in the future, and so I think it makes good sense for both parties to have a lawyer despite the requirement or the lack of requirement that they have one at the time. It allows each party to basically argue that the other side not only understood what they signed, but had the opportunity to speak with counsel, did in fact speak with counsel and fully understood the nature and consequences of the agreement.
There are several ways to overcome a presumption of procedural fairness. Basically, one party can claim that there was some sort of fraud or misrepresentation, coercion, duress or ambiguity within the document. And again, if both parties have had the representation of a lawyer, it’s awfully difficult to argue that there was some sort of coercion or ambiguity. Any questions they may have had at the time of execution would certainly have been answered. In addition, sometimes there can be a claim that not all income assets or liabilities were disclosed at the time of the execution, and so we take extra careful precaution to make sure that we’ve put together a comprehensive set of exhibits that we will attach to a prenuptial agreement to ensure that, again, that procedural fairness element has been satisfied.
In terms of substantive fairness, what the court is going to do is look beyond the mere procedural aspects of when the agreement was crafted and signed and take a look at the overall picture of fairness both at the time the agreement was entered and in addition at the time that the court is being asked to review the document. This is a defense to contracts that is usually asserted with the claim that somehow the contract in its present form is unconscionable, unduly oppressive or against public policy. And this is a little more difficult to protect against because nobody knows what the future is going to hold. But again, assuming both parties have counsel at the time of execution, it is more difficult to have a postnuptial or prenuptial agreement thrown out. In terms of a burden of proof, it is up to the party who’s actually contesting the validity of the agreement in order to demonstrate that the agreement is neither substantively nor procedurally fair.
Schedule of Assets, Liabilities and Income
All right, so now that we’ve had an opportunity to briefly discuss, and I mean very briefly discuss, the relevant legal concepts that involve a prenup or a postnup, the fact that it must be procedurally fair, substantive fair, the fact that counsel is recommended prior to the execution of the prenup mandated if you’re going to be executing a postnup, let’s just walk through a typical pre or postnuptial agreement and talk about typical contents. Now, article one to an agreement almost always starts with a general purpose provision and generally speaking, what we’re trying to do is privately as opposed to using the traditional statutes or case law, we’re privately determining what the rights and obligations are of the parties to certain assets or liabilities as determined by the attached exhibits. In other words, we will attach an exhibit that addresses real estate, personal property, bank accounts, investment accounts, maybe loans, other items.
Marital v. Non-Marital Assets
So what we’re going to try to do is just privately, as opposed to using case law or the relevant statutes, determine who’s going to receive what in the event of a marital dissolution. The next article will often address the definition between marital and non-marital property. In another podcast on property issues, we go through a thorough analysis of what is marital and what is non-marital. For our purposes, we’ll just say the non-marital properties, property you bring into a marriage or property that basically grows in value during the marriage that was premarital. Let’s say it’s an investment that you bring in and there’s earnings on that investment. Let’s say it’s a business interest you bring into the marriage. It’s the growth on the value of that business.
And so what we’ll often do is to find the non-marital property through an exhibit and then we will indicate who’s going to receive what portion of the non-marital property. Quite often, the party who owns the property prior to the marriage receives 100% of the value of that property in the event of a marital dissolution or termination of a marriage through death. The second part that we will do is define then what the marital property will be. This is a clear way to decipher what is going to remain separate and what is going to be allocated jointly or equally between the parties. So once we’ve defined marital versus non-marital property, we also want to break down what’s going to happen to that property in the event that the marriage ends through the death of one of the parties as opposed to ending through a dissolution action. Quite often, there is a very different outcome because the marriage ending by death is sort of an involuntary event quite often that a party will allow their ex-spouse to take their non-marital property because it didn’t end in divorce.
Actions to Enforce Prenuptial Agreements
If it does end in divorce, if there is an action commenced to dissolve the marriage, the prenups that we often draft will include something to the effect of each party acknowledging under oath that the prenup or postnup is valid and enforceable. It’s attached to all of the pleadings, and then there’s a mandate that loser pays in the event that one party tries to challenge the validity of the agreement and the agreement is held to be enforceable. Following that initial breakdown and the initial provisions concerning the obligations of each party if a divorce action has commenced, we include several pages worth of discussion legally in terms of procedural and substantive fairness. I won’t repeat the legal summary I presented just a couple of minutes ago, but needless to say, we put together a very lengthy exposition concerning the fact that each party had the right to visit with counsel, understands that each party has fully and fairly disclosed all income, assets and liabilities and so forth.
Construction of the Contract
Following the legal summary, we will then put together a series of provisions that relate to the construction of the agreement itself. The fact that if one part is found to be unenforceable, the remaining provisions of the agreement will be deemed to be held enforceable. The fact that if one party decides they don’t want to enforce a particular part of the agreement, that does not mean that the entire agreement will remain unenforceable. We will note that Minnesota law will govern the enforcement and interpretation and validity of the document and also address the fact that quite often if parties have property located outside the state of Minnesota, not withstanding the law of that particular state or country, the laws of the state of Minnesota are going to determine the enforceability of the agreement.
Moving to Another State
We will then spell out what’s to happen if the parties move from the state of Minnesota. They’ve got a valid prenuptial agreement under Minnesota law. We want to make sure that wherever they move, all of the laws relatively similar from state to state, that it remains an enforceable agreement. And so we will mandate that the parties should they move from Minnesota will promptly visit with a lawyer in the state that they have moved to, present the document to that lawyer, make sure that the lawyer has the authority necessary to redraft the document to remain compliant with whatever local laws there are relating to the agreement. Then we’re going to go ahead and outline how the circumstances giving rise to the agreement, outline the fact that we’ve attached some rather lengthy exhibits that outline the income assets and liabilities of the parties, outline who the lawyers were that represented the parties, outline general facts about the parties, their age and employment status and so forth.
Executing the Agreement
And then finally, we’re going to have a series of signature provisions. The document itself will be signed in front of a notary and both attorneys will sign an attorney certification form that indicates that they had a chance to consult with both parties to answer all their questions and that they believe the document itself is procedurally and substantively fair. We’ve breezed through all this pretty quickly today and the typical pre or postnuptial agreement is anywhere from 15 to 20 pages long. So don’t think for a moment that this stuff is simple. There’s a good amount of language that we require be contained within the documents that we draft to give it the very best chance to be enforced at the time that the marriage ends, either by death or by dissolution.
Reasons for a Prenuptial Agreement
You may be wondering whether a prenup is the right thing for you, and I can tell you that the clients that we have worked with fall into two very broad categories. The first category involves individuals who are getting married for a second time and have children. Quite often, folks who are remarried in their 60s or 70s have children in their 30s or 40s, and they want to make sure that they are cared for in the event that the marriage ends. And so what they will do is put together a pre or postnuptial agreement to ensure that their new spouse doesn’t inherit the entire estate in the event that they pass away prior to the other, or in the event that there’s a divorce, that half of their accumulated earnings throughout their life aren’t given to their soon-to-be spouse.
The other rather broad category of folks that we work with involve people who are business owners, folks that are getting married whether young or old own an interest in a business, and they want to make sure that that business interest remains protected. We’ve worked with folks who are owners of a family farm, who are owners of a family business, who are part owners of a law firm, or those who have brought substantial amounts of money into the marriage. They want to just make sure that in the event that the marriage ends, that there is some protection afforded for the continuance of that particular business. Quite often, what we’ll do is have their soon-to-be spouse or if they’re already married, their spouse, waive their interest in the business, but then we will secure some sort of life insurance policy on their behalf so that in the event that there is a premature death, they will be taken care of financially. But at the same time, the family business can continue in an uninterrupted fashion.
So there’s about 13 or 14 minutes on the concepts of pre and post nuptial agreements. If you have any questions about whether you’re an inappropriate candidate for a prenup or postnup, whether you think that a particular provision is enforceable or not, or just have any other concern about these types of agreements in Minnesota, I do invite you to give us a call. You’ll find our contact information throughout the blog or website.