Friday, May 28, 2021

Divorce and the Marital Home: Prenuptial/Postnuptial Real Estate Planning (Article)

Editor’s Note:  The following is a handout associated with a webinar of the Association’s Estate Planning, Trusts and Estate Administration Section on June 4, 2021.

What is a Prenuptial Agreement and What is a Postnuptial Agreement?

In Massachusetts, a prenuptial or "antenuptial" agreement can be

used to spell out the rights, obligations, and protections of parties if they divorce or one party dies during the marriage. A prenuptial agreement must be signed before the parties marry. To be enforceable, the prenuptial discussions must include full financial disclosure by each party of the nature and extent of each one's assets, and any waiver of rights to the other party's assets must be made voluntarily, knowingly, and intelligently after full disclosure of assets owned by the other. A premarital agreement is only enforceable if its terms are fair and reasonable when the parties execute it and if it is not unconscionable when a party seeks to enforce it against a spouse in the context of divorce. This means, even if the court determines that a prenuptial agreement was fair and reasonable when the parties signed it, the court will still take a second look to determine if circumstances have changed making it unconscionable when it is offered up for the divorce judge to consider.

A postnuptial agreement is signed by parties after the marriage. It can be used to keep an otherwise rocky marriage together by removing worry about asset division and alimony down the line. It can add certainty and prevent fear that the other spouse will waste assets, give them away, gamble them away or otherwise dissipate funds to which the other spouse has a right. Postnuptial planning is often bolstered by trust planning, concurrently.

How do Prenuptial and Postnuptial Agreements Protect Assets (Particularly Real Estate) and Alter Rights Such as Alimony Rights?

These agreements enable parties to shelter premarital real estate or personal assets or family lines of wealth or expected inheritances from what becomes marital property subject to division in divorce, so that distribution of property in a divorce or at death will exclude the sheltered assets, reserving them for one of the spouses or that person's estate. In divorce, courts will more readily allow parties to leave a marriage with the prenuptial or postnuptial property division agreed to; whereas limitations or waivers on alimony are more closely scrutinized and will not always be approved by judges, since alimony turns on need and prevention of spousal impoverishment. Additionally, alimony is different than premarital property or postnuptially segregated marital property because it is a right that grows and accrues to the spouses through their combined efforts during their marriage. Alimony and its function to accommodate income need, is a future right impacted by future circumstances that cannot be anticipated or calculated when the parties sign the prenuptial before their wedding day or a postnuptial while married and living under then present circumstances.

Is there a Rule of Thumb for These Agreements and How do they Impact the Marital Home and Other Real Estate?

Divorces involving Prenuptial and Postnuptial Agreements are highly fact driven. While one judge may allow a husband to use a prenuptial agreement to exit his marriage with the $100 million that he brought with him when he entered the marriage ten years before, since the wife agreed in writing, another judge may decide that a prenuptial agreement that waived the wife's right to receive alimony was invalid even though the wife voluntarily and knowingly signed away her right to alimony. Other cases may wind up with the less wealthy spouse being forced to vacate the marital home; whereas in other matters, the wealthier spouse might be obligated to purchase a residence of commensurate value for the less wealthy ex-spouse, especially if there are children and custody parenting plan impacts that might lead to an unconscionable result. The cases seemingly flip-flop because they are decided on a case-by-case basis, and any fact in the case can become pivotally outcome-determinative. 

Lisa Cukier is a partner and firm executive committee member in the Boston-based law firm of Burns & Levinson LLP, with offices throughout New England, as well as in London and Denver.  She concentrates her practice on all aspects of estate and trust litigation, fiduciary litigation, probate law, child custody, parentage issues and divorce, planning and litigation for blended families, adoption, guardianship and conservatorship, and elder financial exploitation.  Lisa’s email address is lcukier@burnslev.com.

Co-chair of REBA’s Estate Planning, Trusts Estate Administration Section, Dave Raymon is a partner in the private client and trusts & estates group at Burns & Levinson LLP.. Dave is a JD/CPA, which has equipped him with a unique skill set that he uses to advise clients on tax and non-tax aspects of their estate planning, fiduciary duty actions, and other probate and trust-related controversies. Clients appreciate Dave's perspective on legal issues, which often include a very personal component, and his guidance in evaluating options. Dave can be contacted at draymon@burnslev.com


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