My colleague Jessica Kitain wrote last month (2/14) about the basics of what goes into a premarital/prenuptial agreement. Today we fielded an inquiry about some of the stickier questions that often go unnoticed yet merit some attention in today’s mobile and affluent society.
The first issue relates to mobility. Americans like to move and in the U.S. states don’t all view prenuptial agreements in the same way. They range from places like Pennsylvania which has a fairly laissez faire approach to places like California which reserve the right to decide whether awaiver or limitation of alimony/spousal support made when entering into the prenuptial agreement is now “unconscionable ” at the time of divorce. The difference between these two approaches is like comparing a steel door with a screen door.
There is a way to try to address this with what lawyers call a lex locus (choice of law)clause. In an otherwise valid contract, the parties can designate what state law should apply in interpreting the agreement. The predicate rule is that the state law chosen must bear a reasonable relation to the parties who form the agreement or the place it will be performed.
Let’s give this principle a test drive. Boy and girl are currently finishing their law degrees at Georgetown’s Law Center in Washington, DC. Boy is from Pennsylvania and girl from North Carolina. They are engaged to be married in Martha’s Vineyard (Mass.) after graduation and they have taken jobs working at law firms in Boston which will start in September. So, we have three states and the District of Columbia in play. In theory, all of these jurisdictions could be said to be “relevant” to the transaction. But only two places (D.C. where they are living while in school and Massachusetts where they will marry and plan to live) have joint contacts between the contracting couple. Boy’s family wants the “family lawyer” in Erie to write the agreement and that lawyer likes using Pennsylvania as the law choice because the law here is pretty settled and doesn’t give credence to re-interpreting the contract after the document is signed. Yet future wife has no real contact with the Keystone state and that might produce a challenge to the choice of law provision. It’s not like Pennsylvania law can’t apply. After all, girl is marrying a Pennsylvania boy. But the choice of law provision is not as firmly grounded as a clause designating District of Columbia or Massachusetts law. Meanwhile, Massachusetts recently tossed a prenuptial after 27 years of marriage because it was ….unconscionable. Rudnick v. Rudnick 102 Mass. App. Ct. (2023). That Court affirmed the principle that “an agreement strip[ping] a spouse of substantially all marital interests is contrary to public policy and is thus unenforceable.” Thus we have an agreement choosing Pennsylvania law; law which seems to directly conflict with the laws of the state where our couple will marry and reside.
Next, suppose time and circumstance cause our young lawyers to move. Fast forward a decade and girl is now a partner at O’Melveny and Myers in Los Angeles. Boy grew tired of the law business and now operates a microbrewery in Burbank. Of course, if things don’t work out he will testify that he gave up his law career because girl was wooed to come to California by the lucrative partnership. So, today she outearns him by 10:1 on a gross income basis and he never got a California law license. He needs a divorce settlement that reflects the “current” state of things; not the positions of equality that existed when they were hitched in Edgartown in 2024.
In 2024 California was not even in the cards. Now it is where our couple lives, owns business interests, has children in school and pays outrageous taxes. Most importantly, it is where the divorce court is located that will interpret the prenuptial signed 10 years ago and 3,000 miles away.
Remember our family lawyer in Erie? One day he’s wandering to lunch or to check on the Battleship Niagara docked in Erie’s harbor when his assistant tells him that there was a call from California asking about a prenuptial signed in 2024. He descends into the basement of the law office and finds the Boy-Girl Prenuptial Agreement. It says the parties agree that Pennsylvania law will apply. All is well right? Pennsylvania is a solid “enforce the prenup” state. But wait, …. the last thing Boy needs today is an enforceable prenup. He needs a split of “community property” and the much feared California alimony under that state’s Family Code Section 4320. Time and circumstance have united with geography to make this innocent agreement into a major problem for Boy and his family. Meanwhile Girl is asserting that the California court should enforce the provision stating that Pennsylvania law applies no matter how onerous the agreement may be.
To be sure, this is not the Erie lawyer’s fault. No one told him about the move to California and the microbrewery or the equity position at O’Melveny. But, that’s not to say this won’t somehow be his fault. The lesson here is that parties to a prenup need to recognize (a) as you move, the enforceability of your prenup may change and (b) a prenup that made perfect sense in 2024 may be horribly inequitable by the time it comes to implement it.
A few years ago, I was contacted by the child of a client I had represented in the early 1990s. The kid was now a fast rising force in the tech world. He had met someone he wanted to marry. She was not from the U.S. and the plan was to marry and live in Asia where his next job assignment would be. He inquired about a prenuptial. My response was that I had no idea where to start in terms of deciding which law would apply. Then I added that his career path could take him a dozen places in the world where I could offer no assurance that anything I drafted would be enforced. My engagement letter and its associated disclaimer would be longer than the agreement he was contemplating. We decided that neither one of us needed an agreement that I was not certain would be enforceable.
While my head was still spinning with the possibilities where this prenuptial agreement would be interpreted, another consideration came into play. Twenty years ago I had received a call from a fellow family lawyer who wanted to refer a premarital agreement to me. This sometimes occurs in a setting where our client has retained us to draft an agreement but also wants us to provide the name of a reasonable lawyer for their intended spouse. Prenuptial agreements can be tough to negotiate under the best of circumstances, but we have all had situations where the other future spouse hires an attorney who wants to make trouble. There are times when “trouble” needs to be made as when the draft prenup involves young people but then says that they will share nothing and live independent lives “while married.”
In the case of the referral, the attorney making it was sending me his very affluent client. This I found especially flattering….assuming for the moment that this reflected my colleague’s respect for my skill. That perceived compliment was quickly corrected. “Ashton, I am sending this to you because your firm has insurance coverage that is probably 10x my coverage.”
Unless the agreement contains temporal limits restricting the effect or duration of the agreement, prenuptial agreements last ‘til death do you part. That’s a long time. And as we have learned, time and circumstance can make these agreements look completely inequitable. But in lots of states that doesn’t matter in the slightest. These agreements also tend to invite litigation to have them set aside or re-interpreted. In that litigation the scrivener lawyers often make cameo appearances as fact witnesses…a role for which they are rarely paid. Clients love to suggest that a prenuptial agreement is a simple document. Suffice to say a contract defining economic rights between two people for forty or more years is no bagatelle and the risk of litigation and economic claims are often reasons for lawyers to say “Thanks, but no thanks” when it comes to this corner of the family law world.
[Thanks to Seth Kramer, Esquire, a retired California divorce practitioner for his input on California law]
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