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Michigan Family Law Blog

Tuesday, November 20, 2012

Comingling Assets Can Defeat Prenuptial Agreements in Michigan

I am a family law attorney, also known a a divorce lawyer, in the Auburn Hills area of Oakland County, Michigan.  I read every case decided by our Supreme Court and Court of Appeals in my area of the law.  On September 11, 2012, the Court of Appeals issued an interesting opinion with regards to how comingling of assets can defeat the intention of an otherwise valid prenuptial agreement.

In that case the parties signed a prenuptial agreement two days before they married.  The agreement expressed their intent to retain control of their own separate earnings, to maintain separate bank accounts and to separately maintain certain assets listed in the contract.  The list included the husband’s premarital home and both parties’ retirement accounts.   They also agreed that any property acquired by the parties expressly held as joint property was not subject to the agreement.  The parties moved into the husband’s home on Burlington Drive after the marriage.  They then jointly refinanced that home and withdrew equity from the home to fund the husband’s education.  However, he did not use the money for that purpose, he deposited the money into a joint retirement account.  The parties then sold the Burlington property and deposited the proceeds from the sale into a joint account along with some other funds.  They eventually used money from the joint account for the down payment on a home that they built together on Angie Way and both parties were named on the deed and mortgage to the Angie Way home.  After the marriage, the parties never maintained separate accounts, they deposited their incomes into a joint account, paid bills out of the joint account and funded retirement accounts from the joint account.

The divorce trial court determined that the parties’ prenuptial agreement did not control the disposition of their assets and the Court of Appeals agreed.  Prenuptial agreements are enforceable in Michigan.  However, the court may void the agreement where (1) it was obtained through fraud, duress, mistake, or misrepresentation or nondisclosure of material fact or  (2) if it was unconscionable when executed or (3) when the facts and circumstances are so changed since the agreement that its enforcement would be unfair and unreasonable.  To determine whether there are changed circumstances so as to void the agreement, the first step is to focus on whether the changed circumstances were foreseeable when the agreement was made. 

Here the the trial court determined that the circumstances had changed since the date of the agreement such that enforcement of the contract would be unfair and unreasonable.  Specifically, the parties agreed to keep their assets separate and to maintain separate bank accounts and given the parties’ actions the agreement was really unenforceable because they had completely comingled their assets.  This appears to be a reasonable resolution in this matter, the parties agreed to maintain the separation of their assets, when they failed to do that, it became impossible to enforce the remainder of the prenuptial agreement.  That is why, when I prepare such an agreement for people here in the Rochester area of Oakland County I advise them that they have to maintain the separate accounts and keep the assets separate otherwise the agreement will not be enforceable.


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