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Drafting Premarital and Postmarital Agreements Strategies for Crafting an Enforceable Agreement
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WEDNESDAY, OCTOBER 2, 2013
Presenting a live 90-minute webinar with interactive Q&A
Christopher C. Melcher, Partner, Walzer & Melcher, Woodland Hills, Calif.
Peter M. Walzer, Partner, Walzer & Melcher, Woodland Hills, Calif.
Richard G. Kent, Partner, Meyers Breiner & Kent, Fairfield, Conn.
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DRAFTING PREMARITAL AND POSTMARITAL AGREEMENTS Strategies for Crafting an Enforceable Agreement
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PRESENTERS Richard G. Kent Meyers Breiner & Kent Fairfield, Connecticut 203-255-9410 [email protected] Peter M. Walzer & Christopher C. Melcher Walzer & Melcher LLP Woodland Hills, California 818-591-3700 [email protected] [email protected] 6
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OVERVIEW
Differences between premarital agreements and postmarital agreements.
How to discuss and negotiate these agreements
Structuring the agreement Choice/conflict of laws for multistate
or international couples Getting retained and paid 7
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WHO NEEDS A PRENUP? A party who wants to protect
separate assets, such as family wealth from disputes on death or divorce.
A party who has a professional practice or other service business, and wants to avoid or limit a community interest.
The other party has substantial debt, or a support obligation from a prior marriage.
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BENEFITS OF A PRENUP
Promotes communication about finances and expectations of each party before marriage.
Provides certainty as to their rights and obligations on divorce.
May increase trust about the other’s intentions.
May reduce chance of litigation on divorce. 9
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WHAT A PRENUP CAN DO
Keep premarital property off limits Fundamentally change the default
rules re community property or equitable distribution.
Limit or waive spousal support/alimony.
Specify rights on death and to life insurance. 10
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RISKS OF PROPOSING ONE Neither party appreciates an
attorney’s intrusion into their idyllic expectations of love and marriage. The subjects of death and divorce
are the antithesis of expectations of love and marriage. Agreements demonstrate a lack
of trust. Agreements dampen romance.
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SOCIETAL VIEWS
Premarital agreements place emphasis on the individual over the couple.
May hurt women more than men. The wealthy may have an advantage
over the less wealthy.
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LEGAL ENVIRONMENT
Marriage is a highly regulated institution, so there are limits on freedom of contract with respect to marital agreements.
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HOW TO DISCUSS A MARITAL AGREEMENT
Talk to your fiancé Work with a marital counselor Use a mediator Collaborative method Have the lawyers broach the topic
for the first time
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3 KEY ELEMENTS TO A PRENUP
Timing Disclosure Independent Counsel
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TIMING
How far in advance must the agreement be presented?
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DISCLOSURES
What must be disclosed? Can the right to disclosure be waived? Attach disclosures to the agreement so there is
no question what was disclosed. The disclosure should give meaningful
information about the party’s income, assets, and obligations.
Serve disclosures while agreement is being negotiated with sufficient time for review.
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INDEPENDENT COUNSEL
Does the attorney have to certify the agreement?
Is an attorney certification a waiver of the attorney-client privilege?
Is the attorney “independent” if paid by the other party?
Can a party waive the right to counsel? What is required to show that an
unrepresented party understood the prenup? 18
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GENERAL LEGAL REQUIREMENTS
Must be in writing and signed by both parties.
Statute of frauds exception? Consideration not required (but is a good
idea). May agree on any matter regarding rights
on death or divorce, not in violation of public policy.
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PUBLIC POLICY LIMITS Child support. Child custody. Religious upbringing of children. Support of a spouse during marriage. Penalties for spouse not performing marital
duties. Unfaithfulness. Immigration marriage? Interspousal fiduciary duty?
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BUILDING A STRONG AGREEMENT
Avoid last-minute agreements. Allow for changes. Do not include provisions which violate
public policy. Follow the law in your state (e.g., the
Uniform Premarital Agreement Act).
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STRUCTURING THE DEAL
Create a real bargain. Is there incentive to challenge the
agreement because there’s nothing to lose?
No contest clause? Importance of recitals.
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PROPERTY ISSUES
No property vs. limited property rights during marriage.
Lump sum payment? Payment for each year of marriage? Waiver of property rights in loan
proceeds. Waiver of rights resulting from efforts of
spouse during marriage.
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DEATH Clients often forget that the property provisions
don’t just apply on divorce – they also apply equally at death.
Does the client really intend to disinherit the other spouse if the client dies while the marriage is intact?
Life insurance can be provided as a means of security.
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RETIREMENT BENEFITS
Federal law controls Need to have waiver of those
rights executed after marriage.
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SPOUSAL SUPPORT/ALIMONY WAIVERS OR LIMITATIONS Waiver vs. limitation? Will the waiver be tested at time of execution of
the agreement or at time of enforcement? There may be a greater protection under the law
for spousal support rights than marital property rights.
Include severability clause.
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ALIMONY CHOICES Allow court to set amount and duration, subject
to provisions in agreement. Limit duration of support payable based on
length of marriage? Cap the amount which may be ordered by the
court? Requiring a minimum amount is risky because
there may be no ability to pay.
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CHOICE OF LAW
Be aware of interstate and international law issues when parties are living in separate places or where they contemplate moving.
Complex area. Consult with local counsel as to whether the agreement would be enforceable in that jurisdiction.
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ENFORCEMENT IN OTHER JURISDICTIONS
Every state and country different. Some countries do not honor
premarital agreements. Most countries have premarital
regimes. Advise client in writing to client you
can only give advice on the law of your state. 29
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DEFENSES Unfairness is typically not a defense. Duress. Unconsionability
Procedural: The agreement was presented in a one-sided, take-it-or-leave-it fashion.
Substantive: The terms are so one-sided as to shock the conscience of the court.
Promotive of divorce? Mistake of fact or law.
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RECISSION
Failure to comply with agreement. Does consideration have to be
returned before challenging the agreement?
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BURDEN OF PROOF
The burden of proof is typically on the party challenging the agreement. California has a presumption of
invalidity if certain preliminary facts are established.
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OTHER TRIAL ISSUES
Introducing a copy into evidence when the original is not available.
What happens when a party claims that his or her signature was forged?
Requesting a trial on the validity of the agreement separate from the other issues in the case.
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AMENDING PRENUPS
Not a good idea, especially if your state recognizes interspousal fiduciary duties.
Better to keep the prenup intact and do a postnup.
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HOW POSTNUPS ARE DIFFERENT
Treated with stricter scrutiny than prenups.
In some states, any postmarital agreement in which one party received property without consideration in an interspousal transaction is presumed to be the product of undue influence.
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RETAINER AGREEMENT
May include advice to client about the limits of prenups in the retainer agreement.
Contact Chris Melcher for a sample prenup CA form and sample retainer agreement at [email protected]
Contact Richard G. Kent for sample CT prenup and retainer agreement
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HOW MUCH TO CHARGE
These agreements involve a lot of risk. What is that risk worth to you? Typical fee arrangements.
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ETHICAL ISSUES
Representing a party in litigating an agreement you drafted?
Unconsionable fee for preparing an agreement.
Conflict of interest. Signing an agreement you feel is a
terrible deal for the client.
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THE FUTURE OF PRENUPS & POSTNUPS The Uniform Premarital and Marital Agreements
Act (UPMAA) Enacted in Colorado and North Dakota Pending in Nevada and the District of Columbia Background
All states allow prenups 26 states enacted some version of the UPAA In those states uniformity has declined No uniformity in how various states handle
postmarital agreements; some states have no case law or legislation
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MORE ON THE UPMAA Act Treats Premarital and Marital Agreements
Under the Same Rules States can elect an option to refuse enforcement
if there is substantive hardship at the time of enforcement
There is alternate language regarding who has the burden of proof to set aside the agreement
The Act also establishes the for terms waiving or modifying rights at divorce and for terms waiving or modifying rights at the death of the other spouse
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UPMAA The UPMAA does not apply to separation
agreements, nor does it affect the rights of third parties when a spouse is involved in a transfer of property in which the other spouse’s waiver of rights is required
Choice of law and conflict of laws apply to premarital agreements and marital agreements. Following the Uniform Commercial Code, choice of law provisions are limited to jurisdictions with a “significant relationship to the agreement or either party.
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UPMAA Both premarital agreements and marital
agreements are enforceable without consideration. This may depart from the existing law for marital agreements in some states, but it reflects the modern approach that the concerns generally policed indirectly by a consideration requirement are better policed directly through procedural requirements and tests of unconscionability
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UPMAA Unconscionability and failure of disclosure are
alternative grounds for making an agreement unenforceable, each of them adequate on its own.
Enforcement will be refused if was entered involuntarily or as the result of duress, if the party challenging the agreement did not have
access to independent legal representation, and if an unrepresented party did not receive a notice of
waiver of rights or a clear explanation of the effect of the agreement
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CONCLUSION
Questions?
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