The Second Look Test Assures a Fair Prenuptial Agreement
Every year, thousands of people get married with a plan to live happily together for the rest of their lives. In reality, between 40 and 50 percent of those couples will eventually divorce. This is just one of many reasons why couples should consider entering into a prenuptial agreement.
Massachusetts law specifically recognizes prenuptial, or antenuptial, contracts concerning the division of assets and liabilities in the eventuality of a divorce. If the contract meets certain legal requirements and a divorce does take place, courts will deem it valid as of the time it was signed.
In some states, including Massachusetts, a premarital agreement that is considered to have been valid at the time it was agreed to does not end the story. Courts will take a “second look” at the contract at the time of the divorce to be sure its enforcement will not be unconscionable.
“Second Look” Standard
In the case of Dematteo v. Dematteo, the Massachusetts Supreme Court articulated the standard courts should use when determining if an agreement deemed valid at its execution is still valid at the time of the divorce. In taking a second look, the Court stated: “We follow the majority of courts and require that a judge may not relieve the parties from the provisions of a valid agreement unless, due to circumstances occurring during the course of the marriage, enforcement of the agreement would leave the contesting spouse ‘without sufficient property, maintenance, or appropriate employment’” to support either himself or herself.
The Court gave examples of what may be grounds to invalidate the agreement at the time of the divorce:
- The unanticipated deterioration of the contesting party’s mental or physical health.
- The “erosion by inflation” of the amount the couple intended the spouse to have as alimony to the degree as to “nullify the intentions of the parties.”
- Stripping one party of all the marital rights of maintenance and support.
After considering all these factors, family law courts may invalidate a prenup that is found to be unconscionable. This deviates only slightly from the previous standard of “fair and unreasonable.”
In the Dematteo case, after its second look, the Court found that enforcing the prenuptial agreement was not unconscionable even though the wife would no longer enjoy the same standard of living she had enjoyed during the marriage. What she received under the agreement was “modest” considering her husband’s substantial holdings, but she knew about those holdings at the time she entered into the agreement and was willing to accept the “less than modest arrangements.”
Second Look: Appeals Court Strikes Down Prenup as Unconscionable
In January 2015, the Massachusetts appeals court upheld the decision of the family law court to strike down a prenup as unconscionable after giving it a “second look” according to the standards articulated in Dematteo. In the case of Kelcourse v. Kelcourse although the agreement was deemed valid at the time of its execution, circumstances had changed such that to enforce it would be unconscionable.
Terms of the Kelcourse agreement. At the time the couple signed the premarital agreement in 1991, the husband was a successful business owner in his 40s and the wife was a young woman in her 20s and was pregnant with their second child. The agreement was signed just four days prior to their marriage. At the time, they were living in rental property the husband said was temporary.
The agreement stipulated that any home purchased during the marriage would go to the wife in the event of a divorce. The issue of alimony was “left open.” Approximately 20 years later, the couple divorced. The home the husband returned to his former home which he still owned as his separate property. It was valued at $1.7 million.
The home that belonged to the wife under the premarital agreement had decreased in value since its purchase and was in dire need of about $300,000 in repairs. This made the mortgage on the house greater than its value. Additional factors were that the couple now had three children and the wife earned only $300 a week.
On these facts, after giving the prenuptial agreement a “second look,” the family court determined it would be unconscionable to enforce the agreement. The appeals court agreed, finding: “The subsequent neglect” of the principal residence “constituted a change in circumstance beyond what the parties contemplated when they executed the agreement.” Additionally, enforcement of the agreement would have left the wife with insufficient property and income to support herself.
Division of assets after finding the agreement unconscionable and unenforceable, since the premarital agreement was unenforceable, the court divided the marital property in accordance with Massachusetts law. In awarding alimony, the court considered, among other things:
- The wife’s current employment and occupation.
- The earning capacity of both parties.
- Age of each party.
- Ages and needs of the children.
- The wife’s contributions as a homemaker.
The appeals court also upheld the alimony award.
If you need a prenup drafted, or are in the process of a divorce and concerned about a “second look” hearing, contact our prenup lawyers at Infinity Law Group for a free consultation.