What is a Prenup?
Understanding Prenuptial Agreements in Minnesota: Key Insights and Guidelines
What is a prenuptial agreement? A prenuptial agreement is essentially a contract. It is something which both parties agree to and sign before marriage. Essentially, it is an opportunity for two people who are about to get married to address in advance how their assets and debts will be treated if they decide to divorce later on during the marriage. These agreements can provide many benefits, although there are some common misconceptions concerning prenuptial agreements.
A prenuptial agreement is sometimes thought of by the general public as a form of insurance policy. Like insurance, people may think prenuptial agreements are only for those who have many assets in order to protect their wealth. However, prenuptial agreements have utility for all engaged couples, even those "lovebird" couples who anticipate spending their lives together. Does a prenuptial agreement mean the couple does not trust one another? No , because the process requires both parties to voluntarily disclose their finances to one another. These agreements also afford each party the opportunity to identify property as separate or joint in nature. This can help avoid disputes during the course of divorce over what is joint property and what is separate property. Because of the fact that some people consider prenuptial agreements as an "insurance policy," they may neglect to enter into one which actually can be quite costly for them if their marriage does not last, and lawyer’s fees may exasperate this problem.
Minnesota, like most states, has adopted the Uniform Premarital Agreement Act. This act states that prenuptial agreements are valid, enforceable contracts, even if the marriage later occurs. In other words, a prenuptial agreement is valid regardless of whether or not the marriage takes place at all. For instance, if the couple enters into a prenuptial agreement but never actually gets married, each party is still bound by the agreement. Another consideration is whether any obligation amounts in the agreement are unconscionable or unreasonable. If the agreement requires one party to pay all of another party’s attorneys’ fees, this may be an unconscionable term.
Requirements Under Minnesota Law
Like most other contract types in Minnesota, prenuptial agreements are governed by the Minnesota Uniform Premarital Agreement Act (M.S. Chapter 519). Under this law, each party shall make "full disclosure to the other regarding the property or financial obligations of the other." It requires all the traditional prerequisites of a contract: capable parties, offer and acceptance, and a lawful object.
In order for the parties’ prenuptial agreement to be enforceable, the following conditions must be met: First, the agreement must be in writing and signed by both parties. The act states that it cannot be enforced "if it was not in writing and signed by both parties." Second, the agreement must be fair and reasonable at the time the parties signed the agreement. Third, the agreement cannot be unconscionable at the time the agreement was signed. Fourth, the agreement cannot be unconscionable at the time of enforcement. Fifth, the agreement must have been voluntarily entered into. There are two ways a premarital agreement may be found unconscionable. First, the premarital agreement is unconscionable on its face. Based on the four corners of the document, if the agreement is so unfair and one-sided, then it may not be enforced. The second way a premarital agreement may be found unconscionable is when an unconscionability issue exists because the party against whom the agreement is being enforced did not have a "meaningful choice" or was not provided with a "fair disclosure" or the opportunity to consult legal counsel. This "non-disclosure" argument is somewhat difficult to raise successfully.
The act requires each party to present financial disclosures to the other party. The disclosures shall be made in a fair and reasonable manner. While the act does not define the type of disclosures that need to be made, the comments to the act indicate that the party should disclose the type of information he/she would presume necessary to enter into a business transaction. Thus, the disclosures likely must (best practice) include any oral or written assets’ statements and/or a financial statement provided.
Advantages of Prenups
One of the most obvious benefits of a prenuptial agreement is that it protects the assets of a future spouse. It can also help clarify financial expectations within the bounds of the marriage. This can save time and money at the time of a divorce if both spouses know the value of specific accounts or property and how it will be treated, and it can also spell out how support will be handled should the couple get divorced. Another common benefit of a prenuptial agreement is the addition of a no-fault divorce clause. This says that the divorce will be based on irreconcilable differences, no matter how those differences play out. While Minnesota is a no-fault divorce state, having this clause guarantees that there is no question in that regard. If you own a business, a prenuptial agreement can also protect the other spouse from claims against the business and allows for the continuity of its operation. This can be an important consideration depending on how the business is structured.
Typical Terms Handled in a Prenup
Minnesota prenuptial agreements generally contain the same basic provisions. In asset division or property division provisions, couples will designate how they will divide their individual and joint assets in the event of divorce. Here the parties can set forth whether they will take an equitable approach to separating the assets or whether they will maintain sole ownership of their assets and property acquired during marriage. How the property is divided may vary depending on the characteristics of the assets and the length of the marriage. A court could potentially approve any arrangement made in this section of the agreement. A court will typically only intervene in determining asset division in a divorce if the couple does not provide a written agreement, if the division violates marital property laws, or if a court finds that one spouse does not have the capacity or inability to contract.
Another typical provision found in Minnesota prenuptial agreements is for spousal support or spousal maintenance. The spousal support section specifies whether the couple will use Minnesota’s statutory provision for support or whether they will make their own determinations of how spousal support should be calculated and set up any conditions that the agreement provides. Similarly to the statement regarding asset division, a couple can choose to contract around Minnesota support laws. However, a court will likely not enforce any spousal support award in a separation agreement if the award is not sufficient to support the recipient spouse and their children. Unlike a divorce, the court will not have the authority to provide spousal support at the time of dissolution of the marriage. Rather a spouse will need to petition the court at a later date for spousal support.
How to Compose a Prenup
The creation of a prenuptial agreement is best started far in advance of the marriage. It typically starts with an informal discussion between partners about one individual wanting a prenup. That leads to consideration of what should be included in the agreement. Close analysis of assets, debts, and income, and an outline of intentions for future changes to assets and debts, are then drafted in a rough form. For example, if the goal is to clearly demarcate separate property, a list of assets and debts should be created to differentiate what belongs to whom. Issues such as spousal support (alimony), inheritance rights, and other potential post-marital matters can also be analyzed and addressed. Once the basic terms are hashed out, an experienced attorney will begin the process of legal drafting. In Minnesota, both parties must have their own counsel reviewed by independent legal counsel. The agreement is then drafted to provide legal substance to the basic terms. It’s important to make sure that the requirements for a valid prenup under Minnesota law are followed. For instance , a clear statement of intent must be expressed with an eye toward avoiding any venue problems after the marriage. Also key, the agreement must be signed and notarized by a party that is not involved in the marriage. Of course, involving counsel does not automatically create the appearance of unconscionability or even threaten agreement enforceability. If the agreement is substantively fair to both parties and is not drafted in such a way that shocks the conscience, it stands a very good chance of withstanding scrutiny should it be challenged after the marriage. This is not to say that judges do not occasionally strike down agreements that seems to violate the law, or strain the meaning of a legal term; it is just to say that the vast majority of prenuptial agreements, and, for that matter, all other types of contracts, are not easily voided by parties who disagree with the outcome.
Possible Challenges and Disputes
The applicability of prenuptial agreements, while generally honored, is not always straightforward in every circumstance. Here are a few examples of challenges and disputes which may arise regarding a premarital agreement, as well as various ways these challenges may be addressed:
Child Support / Child Custody
While it is within the rights of two parties to contract regarding certain, and even many, issues divorce or dissolution, the custody and support of children should certainly be matters that are examined thoroughly and with due diligence. This is not only because the law favors the best interest of children over every other matter in a divorce action, but also because circumstances involving the children can change dramatically between the signing of a prenuptial agreement and the actual dissolution of the marriage. Oftentimes, even those amendments are not easily made. This is why many prenuptial agreements contain language that states if there are any children born of the marriage, or if a child is adopted, then the prenuptial agreement will not be effective with regard to child support or child custody. In addition, Minnesota law provides a mechanism for setting aside sections of a premarital agreement that relate to the support of a party’s children or parenting time or joint legal custody, if a court finds that specific provision to be unfair. The law also provides that parties still have an absolute right to agree, by a signed document, on the custodial arrangements of their children. However, courts are required to review that agreement to determine whether it serves the best interests of the children.
Concealed Assets
It is clear now based upon the Minnesota law from Metzger v. Drummond, that premarital agreements may be set aside and deemed unenforceable in the event either party intentionally misrepresents his or her assets at the time the agreement is signed. This merely is a matter of common sense, the same as if a spouse conceals assets or makes intentional misrepresentations during the divorce process after the marriage has ended. In both situations, no party should benefit from intentionally hiding assets. However, the treatments of such actions is different before and after the marriage.
Remedial Provisions
Because the rules that apply to premarital agreements are somewhat unique, often times an agreement will provide for what will happen in the event it does not pass muster under the law. For example, the agreement may provide in its remedial provisions that in the event a section of the agreement with regard to child custody or child support is set aside, then the provision of the agreement as it relates to the provision of spousal maintenance will be adjusted. Additionally, the remedial provisions may account for the unexpected birth of a child after the agreement is signed or that a marriage is void.
Finding an Attorney in Minnesota
Your contract with your spouse to be is very important to your life and your future as a married couple and, perhaps one day, a divorced person. Ultimately, what you set down as your agreement with your partner will govern your respective rights and obligations in the event of a divorce or the death of one of you. Choosing the right lawyer who manages Minnesota family law cases regularly to advise you in the creation of a prenuptial agreement, and who can assist you in the negotiation, drafting, and execution of the document, is vital to the process. In the best case scenario, the document will never see the light of day. However, in the event it does, you will know that the paternity and execution of the agreement were handled properly, that you have received good advice regarding its contents, and that it can be enforced to the maximum extent possible under Minnesota law.
FAQs
How long does it take to get a prenuptial agreement after the parties have discussed and agreed upon their terms? It can take anywhere from four to eight weeks, as it is difficult for both parties to find time on the same dates and at the same attorneys’ offices to review questions and get documents prepared and signed.
What is the cost of obtaining a prenuptial agreement? Just like your average legal project, it varies from case to case depending on the ease or difficulty of negotiation and drafting of the agreement, as well as the experience levels of the attorneys. I would say that the cost for a fairly straightforward prenup in Minnesota ranges from $2,000 – $5,000 .
Can you revise your prenuptial agreement in the future? Yes. However, it must be done in the same way as you executed it in the first place. In other words, if the agreement is unenforceable because one spouse did not have adequate legal representation at the time of execution, then the requirement of adequate legal representation can be waived if both spouses agree to that waiver, and then the agreement can be revised. In general, I advise clients to review their prenuptial agreements every 5-7 years or so, especially after major life events such as children, new job or career opportunities, or unexpected inheritance.