Prenuptial agreements or "prenups", are very useful for financial planning when parties are entering into a marriage. This is particularly true when it is a second marriage, either party has children from a previous marriage, either party (or his/her family) has significant assets, either party has significant debts or either party is a business owner (or involved in a family business). Case law has established that prenuptial agreements are binding and enforceable in Michigan.
To understand the issue I am about to discuss, it is necessary to give a brief background on divorce and property law. Very simply speaking, the court will equally divide marital property but each party is typically awarded his or her own separate property. Most prenuptial agreements create or preserve separate property for one or both parties and dictate that the court must award each party his or her own separate property free and clear from any claim by the other party. However, in Michigan there are two statutes that allow the court to use its powers of equity to invade the separate property of one spouse and award it to the other spouse. The statutes do not mention prenuptial agreements.
In Allard v Allard, COA 308194, January 31, 2017 (For Publication), the State of Michigan Court of Appeals, addressed a prenuptial agreement where the parties agreed to waive these two statutes so that the court could not use its powers of equity to invade the separate property of either party regardless of how inequitable the court may find the result. The court ruled that the parties cannot, by an agreement, deprive a trial court of its equitable discretion. If the court finds that the result of following the prenuptial would be so inequitable that it shocks the conscience of the court, then it may award some of the separate property to the other spouse.
I do not think this is the correct decision nor does it follow the current trajectory of court decisions regarding prenuptial agreements. The court argues that it is similar to the parties inability to waive child support or handle custody in a prenuptial, but it ignores that the reason is because these rights belong to the child, a third party that was not privy to the contract or negotiations. This is simply not true with the division of property. While prenuptial agreements remain a very useful tool, careful drafting will be required so as not to run afoul of these "invasion powers" of the court. Please do not hesitate to contact me if you have any questions regarding prenuptial agreements or family law in Michigan.
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