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February 1 2017

Court of Appeals Decision Affects Enforceability of Prenuptial Agreements

By: Elizabeth K. Bransdorfer

On January 31, 2017, the Michigan Court of Appeals held that a valid prenuptial agreement[1] may not waive the trial court’s power to invade one spouse’s separate property and award some of it to the other spouse in their divorce.  For some, this means that their Prenuptial Agreement is not as iron clad as they had hoped or expected.  The case is Allard v Allard, which was before the Court of Appeals for the second time, on remand from the Michigan Supreme Court. 

There are two statutory sections that are involved in this case.  One provides that separate property may be invaded if the other spouse’s share of the marital estate is insufficient for their suitable support and maintenance, including consideration of the needs of any children in their care.  This is MCL 552.23(1) and is often described as permitting invasion of separate property on the basis of need. 

The second section is MCL 552.401, which provides that separate property may be invaded if the non-owner spouse contributed to the acquisition, improvement, or accumulation of the property.  This section is often described as permitting invasion of separate property on the basis of contribution. 

The Court’s rationale was based on the weighing of two different rules of law – the recognition of the parties’ right to enter into enforceable contracts and the need for courts of equity to be able to afford whatever relief “is necessary to see done that which, in good conscience, ought to be done.” Prior to the Allard decision, there was no clear statement about whether parties to a valid prenuptial agreement could restrict a court’s equitable power to invade separate property under these statutes by their contractual agreement.  It was clear that they could agree to forgo their own statutory rights to petition the court for alimony (spousal support) because it was their own statutory right and that they could not agree to waive or relinquish the right to seek child support for the support of their children.  It was also clear that the parties could not agree to set venue (the place where a law suit may or must be heard) to a place that was contrary to the express terms of relevant statutes. 

In reaching its result, the Court of Appeals determined that the Legislature gave the power to invade separate property to the court, in the exercise of its equitable discretion, and that people may not take this power away from the court by their agreements. 

So, is there any point is having a prenuptial agreement after Allard?  The answer is a resounding “yes.” 

  • A majority of marriages do not end in divorce, and prenuptial agreements are still enforceable in the event of death and serve an important purpose in the context of estate planning. 
  • Prenuptial agreements are enforceable during the marriage and allow parties to deal with their separate assets as if there were no marriage.  While the elimination of dower set to go into effect in mid-March removes the limits on a married man’s ability to transfer real estate without his spouse’s consent, having an enforceable agreement verifies that both spouses may deal individually with all of their separate assets listed in the agreement. 
  • Discussing and negotiating prenuptial agreements helps engaged couples be sure they can discuss money respectfully and allows them to see where they agree and where they have different beliefs about money.  This can be very important to their future ability to communicate, as well as to set common expectations for spending, saving and communicating during their marriage.
  • Prenuptial agreements are critically important to maintain separate property classification for assets that are used by the family or otherwise might be deemed “commingled” and reclassified as marital property.  Case law seems to be trending toward less protection of the separate property classification in the absence of a prenuptial agreement.  If the property is reclassified from separate to marital, the presumptive 50/50 division arises.  If the property remains classified as separate, the non-owner spouse only gets so much as he or she can prove is necessary or that he or she contributed to.  Usually, this is a much smaller share than half. 

If you have a prenuptial agreement and want to review it in light of this clarification of the law, your lawyer can help.   It is always better to address potential problems when you and your spouse are getting along and in agreement.  You can discuss the reasons for the prenuptial agreement in the first place, see if it is still meeting your needs, and make any necessary amendments and modifications to the prenuptial agreement based upon the changes in your situation.  

[1] Prenuptial agreements are the same as Antenuptial agreements and premarital agreements.  Agreements entered into after the marriage has taken place are called postnuptial or post-marital agreements.  Their validity is governed by different law than a prenuptial agreement, but there is no apparent reason to believe the holding in this case would not apply equally to them.