Drafting Premarital and Postmarital Agreements Strategies for - - PowerPoint PPT Presentation

Drafting Premarital and Postmarital Agreements

Strategies for Crafting an Enforceable Agreement

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WEDNES DAY, OCTOBER 2, 2013

Presenting a live 90-minute webinar with interactive Q&A

Christ opher C. Melcher, Part ner, Walzer & Melcher, Woodland Hills, Calif. Pet er M. Walzer, Part ner, Walzer & Melcher, Woodland Hills, Calif. Richard G. Kent , Part ner, 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 rkent@mbnllp.com Peter M. Walzer & Christopher C. Melcher Walzer & Melcher LLP Woodland Hills, California 818-591-3700 pmw@walzermelcher.com ccm@walzermelcher.com

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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

• r international couples

Getting retained and paid

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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

• bligations on divorce.

May increase trust about the other’s

intentions.

May reduce chance of litigation on

divorce.

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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.

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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

• f love and marriage.

Agreements demonstrate a lack

• f 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

• ver the less wealthy.

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LEGAL ENVIRONMENT

Marriage is a highly regulated

institution, so there are limits

• n 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?

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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

• n 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

• ther 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

• r 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.

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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

• n 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

• ther 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 ccm@walzermelcher.com

Contact Richard G. Kent for sample

CT prenup and retainer agreement

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HOW MUCH TO CHARGE

These agreements involve a lot

• f 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

• r 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

• f 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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pmw@walzermelcher.com ccm@walzermelcher.com Peter M. Walzer Christopher C. Melcher Richard G. Kent rkent@mbnllp.com

10/2/13