Why do people enter into prenuptial agreements?Prenuptial agreements are generally entered into when at least one of the parties has a substantial estate that he/she wishes to keep separate from the marital community. This estate could be a long time family business, an inheritance, or anticipated substantial future earnings.
I thought Washington was a community property state. How can you have separate property when you are married?Separate property is generally that property you bring to the marriage. In addition, gifts and inheritances are considered separate property. Finally, parties are free to enter into agreements determining the character of property as separate or community.
If separate property stays separate property, why do I need a prenuptial agreement?Separate property does not always stay separate. There are numerous factors that can change the character of property. An example of the character of property being changed by the actions of the parties is an inheritance being placed in a joint account where community funds are also deposited and withdrawn, and it becomes impossible to determine community funds versus separate funds. In that event all funds may be deemed to be community funds. Another example is the marital community investing substantial funds remodeling a home that was owned by one of the parties prior to the marriage. In that instance the community may have a lien against that property. There are numerous circumstances where separate funds may be partially or completely characterized as community property as a result of the actions of the parties. A prenuptial agreement will explicitly set forth those items that will retain their separate character.
I have heard stories of prenuptial agreements being determined invalid. How do I make sure an agreement I enter into is valid?The preeminent case on validity of prenuptial agreements is In re the Marriage of Foran, 67 Wn.App. 242, 834 P.2d 1081, (Wash.App. Div. 1 1992). In Foran, supra, the court found:
“The validity of a prenuptial agreement is evaluated by means of a 2-prong analysis: First, the court must decide whether the agreement provides a fair and reasonable provision for the party not seeking enforcement of the agreement. If the court makes this finding, then the analysis ends and the agreement may be validated…. The second prong of this analysis involves two tests … (1) whether full disclosure has been made by [the parties] 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 spouses of their] rights. In re Marriage of Matson, 107 Wash.2d 479, 482-83, 730 P.2d 668 (1986).
What this means is that the court must first determine if the contract is fair and reasonable. It does this by deciding if each party is fairly compensated for the resources brought to the marriage and the time and resources contributed to the marriage. If so, the court will determine the contract valid and there will be no further review.
However, if the court feels the contract is not fair, then it must determine two additional matters set forth above.
Determining if both parties disclosed assets and debts is a fairly simple process as a list of debts and assets is usually included in each agreement. However, determining if both parties entered into the agreement with full knowledge of their rights is a more difficult finding. Usually the courts will look to make sure both parties were represented by independent counsel. After all, how can a person have full knowledge of his/her rights unless they know what their rights are. Additionally, the courts will make sure that both parties were given sufficient time to review the contract. The infamous stories of being handed a prenuptial agreement to sign in the limousine on the way to the wedding with the threat of “sign it, or no marriage” will almost always result in an invalid contract.
What happens if a prenuptial agreement is declared invalid?If the parties are going through a dissolution proceeding, the courts are free to award property in a fair and equitable manner without regard to terms of the contract.