International Prenuptial Agreements Part II
International Prenuptial Agreements Part II: Issues for Prenuptial Agreements in the United States
By Chaninat & Leeds
Part II: Issues for Prenuptial Agreements in the United States
Many American couples on the path to marital bliss consider getting a prenuptial agreement. A prenuptial agreement is a contract between two soon-to-be spouses which protects the couple’s assets in the event of a divorce. Few people are aware that the U.S. law on prenuptial agreements is highly complex. The United States is a federal system made up of fifty states each with their own legislatures. Since there is no federal law for prenuptial agreements, each state has made their own laws. This article summarizes the laws of several major jurisdictions in the United States and introduces the main legal principles affecting U.S. prenuptial agreements.
Legal Principles Affecting U.S. Prenuptial Agreements
There are three main areas of law that affect U.S. prenuptial agreements: the Uniform Premarital Agreement Act (U.P.A.A.), conflict of law, and choice of law. Each of these three areas of the law can invalidate a couple’s prenuptial agreement and render it unenforceable. Couples wishing to draft a prenuptial agreement that will be valid in a U.S. court, should seek legal counsel who has practical experience in each of these three areas of the law.
The Uniform Premarital Agreement Act was passed in 1983 in an effort to bring uniformity to the treatment of prenuptial agreements in the United States. While it has been adopted by over 25 states thus far (e.g. California, Florida, Texas etc), the Act has not achieved its goals. This is due to the fact that many of the states that adopted the U.P.A.A. modified it or added their own unique clauses. For example, Utah modified the act so that Utah courts can disregard a couple’s choice of law clause in the interest of fairness. Iowa also modified the Act. Due to the modification, Iowa courts can now apply Iowa’s laws for determining unconscionability. To make matters worse, the U.P.A.A. fails to clarify the conflict of law and choice of law problems discussed below. The U.P.A.A. at best did not solve the inconsistency problems it attempted to solve and at its worse, may have further complicated prenuptial agreements by creating another source of inconsistency. Couples considering a prenuptial agreement should seek legal counsel that is well versed in the U.P.A.A. and that particular state’s unique modifications.
Conflict of Law
A conflict of law occurs when one state’s (or nation’s) laws conflict with another state’s (or nation’s) laws in a given case. Prenuptial agreements in the United States often have conflicts of law. If a couple signs a prenuptial agreement in one state but tries to enforce it in another, there is a conflict of law. The conflict is between the laws of the state where the party signed the agreement and the laws of state that has the task of enforcing the agreement. U.S. courts have two general approaches to this conflict. Some courts use the lex loci approach in which the court applies the laws of the state where the parties signed the agreement. Other courts use the “most significant interest” approach. Under this approach, the court will apply the laws of the state that has the most significant interest in the prenuptial agreement. Each state court applies these approaches slightly differently from one another. This results in inconsistency and unpredictability. Couples who think there is a chance they will file for divorce in a different state (or country) than the state that they signed the prenuptial agreement, should seek competent legal counsel. Counsel should have experience in conflict of law issues and be familiar with the legal systems of the jurisdictions involved.
Choice of Law
Prenuptial agreements often include a choice of law provision. This is a clause which designates the particular state/nation’s law the couple wants to apply to their prenuptial agreement. Many couples expect that their choice of law provision will be enforced by a U.S. court. However, this is not always the case. In California, the courts will not apply the couple’s chosen law when deciding if the prenuptial agreement is valid. Whereas in Connecticut, the court will apply the couple’s chosen law to any question raised by the prenuptial agreement. This inconsistency among state courts has created problems for couple’s making prenuptial agreements. Couples should seek legal counsel who has expertise in choice of law provisions.
Specific State Approaches
Each state has its own approach to the three legal areas affecting prenuptial agreements. To appreciate the complexity and diversity of these approaches, it is helpful to look at a few examples.