Prenuptial Agreements

Who has a prenuptial agreement?    The rich and famous:   Tom Cruise, Donald Trump, Andrew Carnegie, to name a few.   But many folks who fly under the celebrity radar also have them, or at some time will consider them.    Courts in Washington have reviewed them for many years, and a December 31, 2012 opinion by the Division One Court of Appeals is the most recent pronouncement.      Here’s a link to the opinion which provides interesting reading about the factual circumstances and the judicial review.     Keller v Estate of Keller

The Court took the opportunity to recite a few general principles.   “Prenuptial agreements are contracts subject to contract law, but also subject to special rules formulated by the legislature and the courts.  In re Marriage of Burke, 96 Wn. App. 474, 477, 980 P.2d 265 (1999).  The parties to a prenuptial agreement are unique, because they do not deal with each other at arm's length.  Friedlander, 80 Wn.2d at 301.  Their relationship is one of mutual confidence and trust which calls for the exercise of good faith, candor and sincerity in all matters bearing upon the proposed agreement.  Id.   The validity of a prenuptial agreement is based on the circumstances surrounding the execution of the agreement.  In re Marriage of Bernard, 165 Wn.2d 895, 904, 204 P.3d 907 (2009).”

The husband/widower’s estate sought to uphold the prenuptial agreement.   One of its arguments was that the wife/ widow waived any objection by “ratifying” the agreement over the years.    The Court disagreed.   “We rely on the reasoning in Flannery, Crawford, and Hollett in holding that a prenuptial agreement that is substantively and procedurally unfair is void from the inception and is incapable of ratification.”     

The wife/widow also asserted the agreement was unfair, which prompted the Court to recite the law:  "A prenuptial agreement is substantively fair if it provides a fair and reasonable provision for the party not seeking enforcement of the agreement.  In re Marriage of Matson, 107 Wn.2d 479, 482, 730 P.2d 668 (1986).  If it is substantively fair, the inquiry ends.  Id. If it is substantively unfair, then the court considers whether it is nevertheless procedurally fair.  Id. at 482-83.  To determine whether a prenuptial agreement is procedurally fair, we consider (1) whether there was full disclosure by the parties of the amount, character, and value of the property, and (2) whether the agreement was entered into freely and voluntarily, upon independent advice, and with full knowledge by both spouses of their rights.  Id. at 483.  Thus, a prenuptial agreement is valid if it is either substantively fair or procedurally fair.  The party seeking to enforce the agreement has the burden of proving its validity.  Crawford, 107 Wn.2d at 496."

The wife/widow claimed that a short period of negotiation was a reason to invalidate the agreement, but the Court wasn’t receptive to the argument.   "Donna claims that the negotiation process was "wholly inequitable and per se fatal to the agreement," because of the short period of time that passed between the date of the proposal, the date the prenuptial agreement was signed, and the date of the wedding.  Specifically, she asserts that she and Ken married 17 days after Ken's proposal, 13 days after the mediation, 8 days after Donna first saw the prenuptial agreement, and 5 days after she signed the prenuptial agreement.  But, issues of timing are relevant only to the extent they inform whether the agreement was entered into freely and voluntarily, upon independent advice, and with full knowledge by both spouses of their rights.  There is nothing inherently fatal about signing a prenuptial agreement five days before the wedding."

Next on the wife/widow’s list of complaints was that her attorney hadn’t provided effective legal counsel so the agreement should be thrown out.   That argument didn’t work either.

"First, we cannot say that effective independent counsel is required when independent counsel is not even required in all cases.  Matson, 107 Wn.2d at 483.  The Washington Supreme Court has stated that, in some circumstances, a requirement for independent counsel would be arbitrary and unnecessary.  Id.  The precise standard should be applied on a case-by-case basis.  Id. Likewise, counsel's presence at any mediation or negotiation is not a prerequisite to procedural fairness.  Here, the parties to the prenuptial agreement decided to negotiate the terms of the agreement with a professional mediator without the presence of counsel.  They negotiated further with the benefit of independent counsel and revised the agreement after the mediation.  The fact that counsel was not present at the mediation is not a valid basis to find that the prenuptial agreement is procedurally unfair.

Second, Donna's proposed subjective test for effective assistance is untenable.  The procedural fairness test directs us to consider "'whether the agreement was entered into fully and voluntarily, upon independent advice, and with full knowledge by [both spouses of their] rights.'"  Id. at 483 (alteration in original) (quoting Witney v. Seattle-First Nat'l Bank, 90 Wn.2d 105, 110, 579 P.2d 937 (1978)).  Accepting Donna's argument would require us to separately consider whether there was competent independent advice and whether there was full understanding of those legal rights.  A prospective spouse could not have confidence that an agreement was valid without inquiring  into, weighing, and evaluating  the adequacy of the other spouse's independent counsel.  To do so would eliminate the independence of that independent counsel and require an invasion of attorney-client privilege.  In addition to evaluating the independent counsel's performance, the prospective spouse would have to inquire into the other spouse's actual understanding of the legal issues.  Otherwise, in any subsequent challenge, the challenging spouse would only have to assert that her counsel failed to mention a legal right or that she lacked full understanding of her legal rights to defeat an assertion of procedural fairness.

Knowledge of one's legal rights is a conclusion that flows from the opportunity to obtain independent counsel. Donna had that opportunity in this case.  She obtained independent counsel, participated in a mediation in which counsel was not present for either side, and her attorney negotiated on her behalf for revisions after the mediation. It is not a requirement that she attain a lawyer's understanding of the nuance of family law. Our inquiry is not whether she failed to understand her rights or whether her counsel failed to adequately inform her.   It is sufficient that she had adequate opportunity to consult independent legal counsel.

A spouse who receives ineffective assistance during prenuptial negotiations and is not made fully aware of her legal rights may have a claim against her attorney, but she does not have a basis to invalidate the prenuptial agreement itself.  To the extent that our decision in Bernard conflicts with this conclusion, we decline to follow it."

Read into this case and situation what you will, but, for sure, prenuptial agreements are complex, complicated and very significant legal contracts.