Valid Prenuptial Agreements Require Full Asset Disclosure
Dec. 24, 2011
Prenuptial agreements, contracts executed in the anticipation of a marriage, have long been validated in Michigan courts. Generally, there are two contingencies covered in a typical prenuptial agreement: a) the divorce of the contracting parties; and b) the death of one of the parties.
A primary requirement to enforcing a prenuptial agreement is the “special duty” of full disclosure of all assets by both contracting parties. This requirement was recently examined in a key (but unpublished) decision of the Michigan Court of Appeals.
The case, In the Matter of Kenneth Waller, originated right here in the Waterford & Clarkston Probate Court. The case illustrates the risk of executing a “do-it-yourself” prenuptial agreement.
The contract at issue in the Waller case waived the Wife’s interest in a statutory share of her husband’s estate in favor of the Husband’s adult children. The Wife challenged her Husband’s estate at his death, despite her execution of the antenuptial agreement.
The contract was upheld by the probate court judge. In reversing the probate court, the Court of Appeals focused on the asset disclosure and lack of evidence that any proper disclosure had been made by either party:
Accordingly, fair disclosure is required under statute and caselaw in the context of
determining whether a prenuptial agreement can be deemed valid and enforceable. The record
indicates that there was no formal disclosure of assets by either decedent or Waller at the time of
or before the execution of the prenuptial agreement, such as through the presentation or
exchange of written asset lists or through a verbal communication or declaration electronically
recorded so as to preserve proof of disclosure. The prenuptial agreement itself did not contain an itemization of assets and values, nor did it indicate that disclosure of assets had taken place.
Indeed, there is no evidence of even an informal, off-the-cuff discussion between Waller and
decedent regarding the nature, extent, and value of each other’s assets prior to the execution of
the agreement. The probate court essentially found that Waller was sufficiently familiar with the
assets held by decedent, making it unnecessary for decedent to redundantly disclose his assets to Waller before the agreement was signed, where the assets had already been effectively
“disclosed” to her simply through the evolution of their relationship in which familiarity with
each other’s property naturally occurred. We agree with the principle that if a party challenging
a prenuptial agreement was fully aware of the other party’s assets and their value at the time of
execution, an argument that there was a failure to fairly and formally disclose assets should fail;
the purpose of a disclosure is to make a party aware of what he or she may be giving up in
signing a prenuptial agreement.
The Court of Appeals held that under such a record, the (rebuttable) presumption of non-disclosure should have been applied to invalidate the prenuptial agreement in that case.
Also, the Court of Appeals placed significance on the lack of a financial statement or schedule of assets. These are typically attached to the antenuptial agreement. This way, there can be no claim, as in the Waller case, of a failure to disclose, or a triggering of the presumption of nondisclosure.