Common Pitfalls in Prenuptial Agreements (or the Myth of the Massey Prenup) (February 2022)

Material for South Carolina Bar lecture, February 2022

In the Coen Brother’s comedy of remarriage, Intolerable Cruelty, George Clooney plays Miles Massey, an (overly) aggressive divorce attorney and the inventor of the “Massey pre-nup“, a heretofore impenetrable prenuptial agreement so allegedly ironclad that a semester-long class on it is taught at Harvard Law School. 

Like the movie upon which is based, the Massey pre-nup is a work of fiction.  This does not prevent high-income/high-assets spouses from assuming the prenuptial agreement they subsequently provide their marital dissolution attorneys is impenetrable. They are often disappointed to learn it is not.

Because most attorneys are human, [1] they cannot conceive every potential outcome. Unlike separation agreements (and most other domestic agreements), prenuptial agreements are written to address some hypothetical future event–either one spouse’s death or a marital dissolution. Other domestic agreements only need to address circumstances at the time of the agreement. Prenuptial agreements need to address an unlimited number of potential future pathways.

For example, a prenuptial agreement may intend to allow one spouse to keep a particular asset outside of the marital estate and have it not subject to equitable distribution.  It’s very easy to draft a prenup to accomplish this. It’s easy to consider the possibility that this property may be sold, and the proceeds used to purchase some future property. It’s less easy, but still quite possible, to draft that prenuptial agreement. What if this premarital property is subsequently mortgaged and the proceeds used for part, but not all, of the purchase of a new piece of property? That’s harder to anticipate. What about a daisy chain of accumulated property? Unless all parts of that potential chain of property are rendered premarital under the prenuptial agreement, the final property is potentially marital. Attorneys simply cannot anticipate every potential eventuality.

And even if they could, clients might well bungle it. A number of prenuptial agreements I’ve encountered have been partially vitiated because the more powerful spouse had better things to do during the marriage than continually reference the prenuptial agreement. A prenup may provide methods for keeping property separate, but if the spouse doesn’t follow those methods property can become marital. I once encountered a prenuptial agreement that allowed one spouse to fund certain retirement accounts from marital earnings with those accounts remaining non marital. During the marriage that spouse–one of most savvy clients I’ve ever represented–opened a new retirement account and funded it heavily. He was shocked to learn that account was marital and ended up having to provide his spouse a substantial portion of the proceeds from that account.

It is best to think of a prenuptial agreement as executing some type of gravity on the family court’s discretion on equitable distribution and alimony.  If an ironclad prenuptial agreement existed, the gravity of the agreement would decide these issues and statutory factors would be meaningless.  If the prenuptial agreement is clearly invalid, the gravity of statutory factors would decide these issues and the prenuptial agreement would be meaningless.

In practice for most properly executed prenuptial agreements both the statutory factors and the agreement exert some gravity.  The goal of any prenuptial agreement should be to maximize the amount of gravity it will ultimately have on the resolution of alimony and equitable distribution issues. There are clear procedural and substantive issues that can increase the likelihood of a prenuptial agreement being enforceable, thereby exerting gravity on the resolution of these issues. Among the procedural concerns:

• S.C. Code § 20-3-630(A)(4) notes that “antenuptial agreement of the parties … must be considered presumptively fair and equitable so long as it was voluntarily executed with both parties separately represented by counsel and pursuant to the full financial disclosure to each other that is mandated by the rules of the family court as to income, debts, and assets.” While the exchange of executed financial declarations and the use and advice of independent counsel may not be absolute requirements for a valid prenuptial agreement, it is legal malpractice to do such agreements without them.
• One should provide the other party full financial disclosure prior to entering the agreement. In South Carolina parties fill out a financial declaration form. Ideally this executed form would be attached to the prenuptial agreement to show that one provided full financial disclosure. So long as this disclosure was relatively accurate and complete South Carolina will find full financial disclosure was provided, even if one did not provide any other financial disclosure.
• “Whether a party obtained independent legal advice is a significant consideration in evaluating whether an antenuptial agreement was voluntarily and understandingly made.” Holler v. Holler, 364 S.C. 256, 612 S.E.2d 469(Ct.App.2005).
• The agreement needs to be “fundamentally fair.” This fairness is determined both at the time of execution and the time of enforcement. For example, it would be considered fair to have a prenuptial agreement in which both parties waive the rights to each other’s separate property or property each one accumulates during the marriage that is solely titled in that party’s name—even if one party owns all the property and has all income and the other party has none. This would be considered fair because it would have been the same result if the parties had never married. However an agreement in which one party retains all of his or her own property but get rights to other’s property is likely not fundamentally fair. At the time one party tries to enforce a prenuptial agreement (typically as part of a marital dissolution case), the court will determine whether the agreement is still fundamentally fair. However if it was fair at the time of execution, they will likely find it fair at the time of enforcement. In one South Carolina case a wife waived alimony in the prenuptial agreement, became disabled during the marriage, sought alimony upon the separation, and was denied alimony due to the prenuptial agreement. The South Carolina Supreme Court held that the possibility of becoming disabled during the marriage was foreseeable and thus did not render the agreement fundamentally unfair. Hardee v. Hardee, 355 S.C. 382, 585 S.E.2d 501 (2003).
• Don’t spring the draft prenuptial agreement on the other party shortly before the wedding. If wedding guests are already in town when the prenuptial agreement is first sent to the other party, there will be an argument that the agreement was coerced. Sending the draft a month before the wedding will greatly reduce claims of coercion (assuming it isn’t modified further in the issuing party’s favor before being executed). Ideally, to avoid claims of coercion, a prenuptial agreement should be executed at least 30 days before the wedding.  In Holler, supra, the Court of Appeals refused to enforce a prenuptial agreement, finding Wife entered into it under duress. She was pregnant when she executed the premarital agreement, her visa was about to expire (thus requiring her to leave the United States unless she married), she could not understand the agreement, and she had no money of her own to retain or consult with an attorney or a translator.
• Do not count on the prenuptial agreement being modifiable during the marriage. South Carolina law is unclear on the enforceability of agreements made during the marriage but not in contemplation of separation or divorce. Geddings v. Geddings, 319 S.C. 213, 460 S.E.2d 376 (1994) would suggest such agreements are not enforceable.

As for the substance of the prenuptial agreement, these are the typical issues one can and cannot address:

• South Carolina will not enforce prenuptial agreement provisions that affect the rights of minor children. Singh v. Singh, 434 S.C. 223, 863 S.E.2d 330 (2021) (parties cannot divest the family court of jurisdiction to resolve issues regarding minor children).
• South Carolina will enforce provisions in prenuptial agreements that waive alimony or that have a set amount of alimony. The length of the marriage will not affect the alimony obligations under the prenuptial agreement unless the agreement specifically ties those obligations to length of marriage.
• South Carolina will enforce provisions in prenuptial agreements that address property and debt owned before the marriage and property and debt accumulated during the marriage. The length of the marriage will not affect these rights/obligations under the prenuptial agreement unless the agreement specifically ties those rights/obligations to length of marriage.
• South Carolina will enforce provisions in prenuptial agreements that address entitlement to attorney’s fees in any marital dissolution litigation. The enforceability of such provisions will not apply to fees incurred for child-related issues, such as child custody/visitation or child support.
• One can jointly title property during the marriage and still have it addressed by the prenuptial agreement if that issue is specifically addressed in the prenuptial agreement. For example, one can agree to jointly title property but have it remain one party’s separate property in the case of marital dissolution. However such provisions may become void if they do not meet the fundamental fairness test.

No prenuptial agreement is ironclad. What typically happens in a marital dissolution case is the higher income/high asset spouse demands the prenuptial agreement be enforced as written while the other spouse seeks all alimony and property division rights he or she would have had had there been no the prenuptial agreement. How close the ultimate resolution is to each party’s position usually depends upon two factors. The first is how clearly the prenuptial agreement was written and how closely it conformed to the procedural requirements above. The better the prenuptial agreement is on those issues, the more likely the resolution will be close to the prenuptial agreement. Where the above provisions were completely ignored, the prenuptial agreement will be worthless.

The second way prenuptial agreements often fail to meet the expectations of the high asset spouse is when that spouse failed to look to the prenuptial agreement when accumulating new assets or exchanges assets addressed in the prenuptial agreement for new assets. Such assets may then fall outside of the safe-harbor provisions of the prenuptial agreement and become marital property subject to equitable distribution.

Prenuptial agreements are malpractice traps.  I charge a premium for representing either party to such agreements, understanding I run a substantial risk of a malpractice claim or being named as a witness to marital dissolution litigation long after I retire.  Family law attorneys unwilling to develop an expertise in drafting such agreements should not draft them.

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[1] This is a joke.