Attorney Jason V. Owens reviews how courts review prenuptial agreements that were entered in different state in a divorce.
The law of marriage and divorce differs from state to state. In the divorce context, some states only divide assets that spouses acquire during a marriage, while other states, like Massachusetts, will divide all property held by either spouse, regardless of when it was acquired. In Rhode Island, child support stops when a child turns 18 or graduates from college. In Massachusetts, child support can continue until a child turns 23. The point is, divorce laws differ widely from state to state.
One question we are frequently asked is how Massachusetts treats prenuptial agreements that were prepared in another state and were clearly based on the other state’s laws at the time of preparation. In general, out-of-state prenuptial agreements (also known as “prenups” or “antenuptial agreements”) will be enforced in Massachusetts based on the laws of the original state where the prenup was prepared. A few recent Massachusetts cases illustrate how this works.
Prenup Brings Pennsylvania Law into Massachusetts Divorce
In the recent unpublished Appeals Court decision in Marshall v. Marshall (2019), the parties executed a prenuptial agreement in Pennsylvania at the time of the marriage before eventually moving to Massachusetts, where they were divorced. When evaluating the effect of the prenup in the divorce, the Massachusetts court noted that “the parties entered into an antenuptial agreement (agreement), governed by Pennsylvania law, designating which property would be subject to equitable distribution in the event of a divorce”.
In Marshall, the Massachusetts court examined a provision of the Pennsylvania asset division statute that does not exist in Massachusetts law:
The agreement's language carves out an exception to the general rule under Pennsylvania law that any appreciation of assets (both separate and marital) during the marriage shall constitute marital property subject to equitable distribution. See 23 Pa. Cons. Stat. §3501 (definition of marital property includes "the increase in value of any nonmarital property").
The Court carefully examined the language of the agreement to determine that property that the prenup did not designate as falling under the “exception to the general rule under Pennsylvania” was marital property – at least insofar as that property had appreciated in value during the marriage – and found that this property was subject to division. Where the Massachusetts property statute does not specifically define marital property to include “any increase in value of any nonmarital property”, the Court’s decision on this issue may have been different if the prenuptial agreement was originally prepared in Massachusetts.
Choice of Law in Prenuptial Agreement Enforcement: An Ambiguous Question
As noted in Marshall, when interpreting the meaning of the specific provisions of a prenuptial agreement that was signed in another state, the Massachusetts court will look to the law of the original state to determine what the parties intended. Thus, in Marshall, the Massachusetts court relied on Pennsylvania law to determine which property the parties intended to divide as marital property vs. what the parties intended to keep as separate property.
A more complex question centers on “choice of law”, which has less to do with interpreting the specific terms within the agreement than the larger legal framework in which the court analyzes the prenup. As discussed on our Prenuptial Agreements service page [need link], Massachusetts uses a “two-look” test to determine the enforceability of prenuptial agreements:
Massachusetts courts employ a “two-look” test for prenuptial agreements, in which the court must determine that the agreement was fair and reasonable at the time it was made and remains fair and reasonable at the time of the divorce.
However, not every state employs a “two-look” analysis. For example, unlike Massachusetts, Rhode Island law provides for the enforcement of prenuptial agreements that were “unconscionable” (i.e. not “fair and reasonable”) at the time the agreement was executed. Thus, an agreement that might not survive the “first look” in the Massachusetts analysis may still be enforceable in Rhode Island. Rhode Island law is also less stringent when it comes to the “second look”; in Rhode Island, a prenuptial agreement will only be invalidated if the entry into the agreement was “involuntary” by one party and unconscionable at the time of the divorce and there was an incomplete financial disclosure.
Most attorneys will include a “choice of law” provision when preparing a prenuptial agreement, such that many prenups that are executed in Rhode Island may include language that states that in the event of a conflict of law, the agreement shall be interpreted under Rhode Island law. However, states are not required to enforce a “choice if law” provision if outcome would prove too unfair in the deciding state.
In the example above involving a Rhode Island prenup, a Massachusetts court could choose not to enforce the prenup if the court determined that the agreement was not “fair and reasonable” at the time of execution or “fair and reasonable” at the time of the divorce. Thus, even if the agreement passed muster under Rhode Island law, it could fail the enforceability test under Massachusetts law. Then again, the Rhode Island agreement could pass muster under the “two-look” test or the Massachusetts court could decide to follow the “choice of law” provision directing the court to apply Rhode Island law.
In truth, as of the time of writing this blog, Massachusetts law is simply unclear when it comes to “choice of law” issues involving prenuptial agreements. While a Massachusetts court will use another state’s law to determine the meaning of the specific provisions – i.e. the “intent of the parties” when they made the agreement – the court may choose not to enforce a foreign prenuptial agreement that fails the “two-look” test, even if the agreement would have passed the enforceability test used in the original state.
Best Practices for Creating an Enforceable Prenuptial Agreement Across Multiple States
It can be difficult for newlyweds to imagine where life may take a couple over ten or twenty of years of marriage. New spouses might imagine they will spend their entire marriage in one state, only to move halfway through the marriage. Because divorce law is determined on a state-by-state basis, it is impossible to know with absolute certainty whether a prenuptial agreement executed 20 years ago will still be enforceable at the time of divorce. (Indeed, this is somewhat true even if the party’s never leave the original state.)
Despite this uncertainty, there are certain common sense steps that individuals can follow to help ensure their prenuptial agreement is enforceable across multiple states. Here are a few:
- Maximize financial disclosures at the time of the prenup – The most common reason that Massachusetts prenuptial agreements are deemed unenforceable is a failure by one party to accurately disclose all of his or assets at the time of the agreement is signed. Not every state requires this level of disclosure, however. For example, New York and Illinois laws do not generally require that a prenup be “conscionable” at the time of execution, while Vermont and Michigan laws require conscionability. In determining if a prenuptial agreement was fair and reasonable at the time of execution, Massachusetts courts focus heavily on whether there was full and fair disclosure of assets by both parties. Thus, if an out-of-state attorney wants to ensure their prenup will be enforceable in Massachusetts, he or she should include strong disclosure provisions in the agreement – even if his or her state’s law does not require such provisions.
- Try to Avoid Extremely Unequal Outcomes – It can be tempting for a spouse (especially the wealthier spouse) to seek prenuptial terms that absolutely maximize protections for one spouse. However, states like Massachusetts can invalidate a prenuptial agreement that result in extreme asset/income disparities following a long-term marriage. While most states, along with the Uniform Premarital Agreement Act (UPAA), will not enforce that leaves one spouse wealthy and the other on welfare, some states are harsher than others when it comes to strict enforcement. To maximize enforceability across multiple states, drafters should consider “safety valve” provisions such as the following: if the length of the marriage is greater than 10 years; and total value of marital property is less than $250,000 at the time of the divorce; and the value of one spouse’s separate property exceeds $10 million; and the value of one spouse’s separate property is less than $250,000; then the wealthier spouse shall make a one-time payment to the less wealthy spouse equal to $25,000 for each full year of the duration of the marriage.
- Be Cautious with Assets Acquired During the Marriage – Most states offer strong protections for spouses seeking to protect their premarital assets – i.e. assets that a spouse brought into the marriage. There is more variation between states in terms of the enforceability of prenup provisions that assign assets acquired during the marriage to one spouse. Most states will favorably view a provision that assigns an inheritance or family gift to the receiving spouse in a divorce. However, some states may view provisions that assign ordinary employment related assets that earned during the marriage, such as 401Ks to one spouse. To ensure enforceability over multiple states, individuals should consider including at least some assets acquired during the marriage in the division of assets in the event of a divorce.
In states like Massachusetts, which does not follow the Uniform Premarital Agreement Act (UPAA), the law surrounding prenuptial agreements is determined by appellate court judges, rather than by statute. Judge-made law tends to be less stable and predictable, and more subject to unanticipated changes, than statutory law. This variability in the law makes preparing prenuptial agreements in Massachusetts more challenging than other states. Despite these challenges, prenuptial agreements are enforceable in Massachusetts, as are certain prenuptial agreements prepared under the laws of other states.
About the Author: Jason V. Owens is a Massachusetts divorce lawyer and family law attorney for Lynch & Owens, located in Hingham, Massachusetts and East Sandwich, Massachusetts. He is also a mediator for South Shore Divorce Mediation.