Prenuptial Agreements in Arizona
Introduction to Prenuptial Agreements in Arizona
No one enters a marriage expecting it to fail. However, a marriage that does end in divorce can result in severe disadvantages to one spouse. This is especially true if one spouse has children from a previous marriage, owns his or her own business, or has a significant amount of assets and expects to obtain more during the course of the marriage. For individuals who are in situations such as these and who are contemplating marriage, a prenuptial agreement may provide them with the legal protection they need in the event “happily ever after” does not happen.
Defining Prenuptial Agreements
A prenuptial agreement (or premarital agreement) is a contract or agreement between two soon-to-be spouses entered into in contemplation of the parties’ upcoming marriage. There are certain requirements in order for the premarital agreement to be valid and enforceable:
- The parties to the agreement must be contemplating marriage with one another;
- The agreement must be reduced to writing and signed by both parties;
- The parties must be afforded an opportunity to review the agreement (with legal counsel, if they so choose);
- The signing of the agreement must be free of fraud and duress;
- The agreement must contain legally enforceable terms and conditions;
- The spouses must actually marry one another after the agreement is signed.
Parties entering into a premarital agreement have some degree of latitude in crafting the terms of the premarital agreement. In most premarital agreements, the spouses will agree who is to receive what property or assets in the event of a divorce. Parties to a premarital agreement cannot agree to custody arrangements (these are determined according to what is in the child’s best interests), to waive child support (every parent has an obligation to provide support and care for his or her children), or to commit illegal acts.
Avoiding Potential Problems with Your Prenuptial Agreement
Merely having your future spouse sign the prenuptial agreement is no guarantee that a court will enforce the agreement when called upon to do so. An Arizona court that is presented with a prenuptial agreement may look into the agreement itself to determine if it is enforceable. A court has one of several options when presented with a prenuptial agreement: (1) the court can enforce all provisions of the prenuptial agreement, holding you and your spouse to the terms and conditions agreed to as expressed in the agreement; (2) the court can find that the entire prenuptial agreement is unenforceable, releasing both you and your spouse from any obligations you agreed to in the prenuptial agreement; or (3) in some cases, the court may find that parts of the agreement are enforceable while others are not – any provision found to be enforceable will be enforced by the court.
The party who wishes to invalidate a portion or all of the prenuptial agreement will have the burden of producing evidence and/or testimony to the court showing why the agreement (or the disputed portion thereof) should not be enforced. Some of the common reasons why part or all of your prenuptial agreement may be determined to be unenforceable can include:
- Failure to make a “reasonable disclosure”: Like any contract, a party to a prenuptial agreement must have been afforded an opportunity to make a knowing decision to enter into the agreement before a court will bind that party to the agreed-upon terms. In the context of a prenuptial agreement, each party must be afforded a reasonable opportunity to inform him- or herself of the terms of the agreement and how the agreement impacts any legal rights he or she might otherwise have. If either party wishes to review the terms of the agreement with an attorney before signing the agreement, then that party must be afforded a reasonable opportunity to do so. A prenuptial agreement presented to your future spouse on the day of your wedding mere hours before the ceremony is about to begin will not (in all likelihood) be enforced by the court.
How would a court know whether reasonable disclosures have been made aside from the testimony of you and your spouse? A court may look at the date on the agreement and consider the date of your wedding to estimate the length of time that actually passed between the signing of the agreement and the wedding. Witnesses who have knowledge about the circumstances surrounding the signing of the agreement (especially witnesses who are determined to be disinterested, that is, who are not exclusively your friends or friends of your spouse) may also be called upon to help the court determine whether reasonable disclosures were made. A prenuptial agreement may also contain a specific clause wherein each party must sign underneath a statement that indicates that, by signing, each party affirms that they have been afforded a reasonable opportunity to review the prenuptial agreement before signing and obtain legal counsel if they desired to do so.
- Fraud: There can be no “meeting of the minds” – an essential element of any valid and enforceable contract – if one party deliberately deceives or conceals material facts from the other party. Fraud can be found to exist where either (1) one party deliberately misled the other party about a material fact; or (2) one party failed to correct a misunderstanding he or she knew the other party held. So, for example, if Spouse A tells his future spouse at the time she signs the prenuptial agreement that he is only worth $100,000 when in fact he has $10,000,000 in assets, this would be considered fraud. Likewise, if Spouse A has reason to know his future bride-to-be is mistaken about an important fact – suppose, for example, the bride-to-be says “I don’t mind signing this agreement because I know you only have $100,000 in assets: the same as myself” – but fails to correct this misunderstanding, this too could be considered fraud. In the preceding example, for instance, Spouse A would have an obligation to point out that his true worth is $10,000,000.
Not all lies or mistruths will constitute sufficient “fraud” to invalidate the agreement. Instead, only where one spouse was deceptive concerning “material facts” will the court invalidate the prenuptial agreement. A material fact is one that a reasonable person would rely upon in determining whether he or she should sign the prenuptial agreement. In the examples above, one spouse’s net worth or assets would be considered a material fact as the other spouse may decide it is not in his or her best interest to sign if the spouse is worth a certain amount of money or has a certain amount of assets. Conversely, a spouse who misleads another spouse about which day of the week the present day is when the spouse is signing the prenuptial agreement has not committed “fraud” requiring invalidation of the agreement as the date or time is typically not a “material fact.”
Fraud is difficult to prove as it almost always involves some measure of deliberate action or inaction: an intention to deceive the other person, in other words. If the prenuptial agreement sets forth the relative assets and liabilities of each party and this disclosure is obviously false, this can provide evidence of the other spouse’s deceit. Likewise, a court may infer an intention to deceive if it is shown that the deceptive spouse had a significant amount of assets or another motive to lie and the terms of the prenuptial agreement clearly favor the deceptive spouse or work to shield his or her assets.
- Undue influence / duress: Not only must a prenuptial agreement be knowingly signed, but signing the agreement must also be a free and voluntary choice made by each party to the agreement. When one spouse unduly pressures or coerces the other spouse into signing the agreement and this coercion overcomes the free will of the other spouse, the prenuptial agreement may be invalidated. The coercion or pressure must be such that a reasonable person in the position of the pressured spouse would have his or her free will overcome and feel that he or she had no other reasonable alternative but to sign the prenuptial agreement. Simply telling one’s future spouse that he or she would be “ruined” if he or she did not sign the prenuptial agreement is not likely sufficient to constitute undue influence or duress. However, putting a gun to the future spouse’s head, or threatening to cause injury to someone in the spouse’s family, would likely constitute undue influence and/or duress. Pressuring the other spouse to sign the agreement when he or she is obviously in an emotional state (perhaps over the recent loss of a loved one, for example) can also constitute undue influence or duress.
Like most other grounds for invalidation, it can be difficult to prove undue influence or duress if there are no other witnesses who can testify as to the circumstances surrounding the signing of the prenuptial agreement. It can be even more difficult to prove duress if the agreement contains an explicit provision that each party must sign, whereby they indicate and affirm that they were not subjected to undue influence or duress in signing the agreement.
- Unenforceable/illegal terms: Finally, a court cannot enforce provisions that are factually impossible to carry out or that are illegal to carry out. A term directing that Spouse B receives the family residence at 111 Main Street cannot be enforced if the family residence at that location burned down two years ago and has not been rebuilt. Similarly, a property division provision stating that Spouse A receives the couple’s collection of guns will not be enforced if Spouse A does not have a legal right to own or possess the guns.
Conclusion to Prenuptial Agreements in Arizona
For soon-to-be spouses who are concerned about how a potential divorce might affect them financially, prenuptial agreements offer one way by which they can protect their assets and exercise some measure of control over how property division and other similar issues will be handled in the event of a divorce. Prenuptial agreements are essentially contracts between soon-to-be spouses: to be enforceable, the agreement must be in writing and signed by both of the parties. Each party must be given an opportunity to review the contents of the agreement before signing and obtain legal counsel if they desire to do so. In addition, the execution of prenuptial agreements must be free from fraud or duress and must be a free and voluntary act of each of the spouses. For more information check out this articles in Forbes on prenuptial agreements.
When presented with a prenuptial agreement during a divorce proceeding, the family law court will determine whether the agreement is enforceable in whole or in part. A court can choose to enforce the entire agreement, only a part of the agreement, or a court can invalidate the entire agreement as if it did not happen. The party looking to have a prenuptial agreement invalidated or declared unenforceable bears the burden of providing the court with evidence showing why the agreement should not be enforced.