May 2016 Bar Bulletin
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May 2016 Bar Bulletin

The Pressures and Perils
of Prenuptial Agreements

By By Kim Schnuelle and Brien Galbraith

 

Mary, a worried potential client, comes into your office. She is separating from her husband and is concerned about the terms of a prenuptial agreement she signed a week prior to their wedding 10 years ago. At the time, she was a young college student in love and she barely glanced at the documents.

Her fiancé, George, was an older, successful business owner with an estated worth of $1.2 million. George was and still is a workaholic and since they have been married all of the business’s proceeds have been funneled directly back into the business or into an account in his name only.

Mary was told she should seek her own attorney to review the prenuptial contract’s terms, but she never followed through with this suggestion. George told her he would postpone their Jamaican beach wedding if she didn’t sign off on the document then and there. Mary’s parents and extended family were all very excited to attend the destination wedding and had bought non-refundable tickets. Mary felt pressured and so she signed as indicated.

Mary and George have since had three children and she is a stay-at-home mother. As Mary looks over the agreement now, she notices that both George’s business and all of the proceeds from the business are deemed his separate property, that she waived the right to seek any maintenance and that she also waived the right to seek college educational expenses for any potential children of their marriage.

Mary tells you that during the marriage George occasionally took funds out of “his” account to pay for various home remodels. Although George also gave her an allowance during the marriage, and jokingly called it her “maintenance payment,” Mary is scared that she will be impoverished by this divorce while George will be able to keep nearly all of their now almost $3-million estate. What can you advise her regarding challenging the terms and/or validity of her prenuptial agreement?

It is a longstanding tenet of Washington law that parties are not prohibited from “entering into prenuptial agreements that alter the status of community property.”1 However, a court must examine with great care agreements that affect property rights between spouses.2 Spouses thus not only owe a duty to contract in good faith, but also to deal with each other fairly so that each spouse may obtain benefit from the other’s performance.3

In entering into a prenuptial contract, parties “do not deal with each other at arm’s length.” Rather, 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.” Separate property agreements are held to a higher standard than community property agreements because the law favors the creation of community property.4 Prenuptial agreements may be oral or written but, as oral agreements are more difficult to prove, a court will overturn an oral agreement if the parties do not consistently adhere to the agreement during the relationship.5

Initially, it is important to assess whether any portion of the prenuptial agreement violates public policy. As a general rule, prenuptial agreements cannot concern the rights of children in the litigation.6 This provision has been read broadly by the court.

Thus, if a prenuptial agreement purports to limit or waive attorney’s fee requests as regards to subsequent parenting plan litigation, such a provision is an express waiver of a party’s rights under RCW § 26.09.140 and, as such, is not binding upon the court as it violates public policy.7 In the example above, Mary’s “waiver” of her children’s college educational funding would likely violate public policy and thus be unenforceable.

Written prenuptial contracts can be as varied and different as the individual case facts and as the drafter’s writing skills. A simple prenuptial contract, which merely states that a party’s separate property remains his or her separate property, will be affected by the overarching requirements of RCW § 26.09.080, which allows both community and separate property to be divided by the court in a “just and equitable” manner.

Statutory law would thus control all asset and debt allocations and effectively render the prenuptial agreement ineffective and useless. However, when a prenuptial agreement seeks to waive a spouse’s right to a “just and equitable” distribution, then the court undertakes a heightened and different analysis.8 In doing so, the burden of proof lies with the spouse seeking enforcement of the prenuptial contract.9

Although this analysis has been outlined in numerous cases, it has become referred to as the Foran analysis pursuant to the 1992 case In re Marriage of Foran.10 The prenuptial contract considered in Foran was signed one day prior to the parties leaving for their wedding trip to Las Vegas. The parties were a middle-aged, trucking-firm owner worth approximately $1.2 million and his 22-year-old employee/fiancée worth approximately $8,200.

The parties had lived together prior to marriage and Foran had committed significant domestic violence in the relationship. Foran’s business counsel prepared the prenuptial contract and although Ms. Foran was advised to obtain independent counsel, she did not do so prior to signing. By signing the prenuptial contract, Ms. Foran waived any and all equitable liens that the marital community may have acquired via the expenditure of community funds and/or labor for the benefit of Foran’s separate property, waived her rights as a surviving spouse, and waived her rights to make any claim against Foran’s separate estate in the event of divorce.

In analyzing the validity of the parties’ prenuptial contract, the court utilized a two-prong analysis. First, the court had to decide “whether the agreement provides a fair and reasonable provision for the party not seeking enforcement of the agreement.”11 If the court finds that this provision was met, the analysis ends and the agreement is then upheld.12

If this provision is not met, then the court must determine: 1) whether the parties have made a full disclosure of the amount, character and value of the property involved; and 2) whether the agreement was entered into fully and voluntarily on independent advice and with full knowledge by both parties of their rights.13


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