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PREMARITAL AGREEMENTS ARE ENFORCEABLE – IF DONE RIGHT!

Posted by: In: Newsletter Archive 03 Aug 2015 Comments: 0

BY: LORIE D. FOWLKE

(Please understand that the answers to these questions are general in nature and may not cover every individual situation.)

       Like most states, Utah has a law authorizing premarital agreements, sometimes called prenuptial agreements, or “prenups.” The statute in 30-8-6 Utah Code, states:

30-8-6. Enforcement.
(1) A premarital agreement is not enforceable if the party against whom enforcement is sought proves that:
(a) that party did not execute the agreement voluntarily; or
(b) the agreement was fraudulent when it was executed and, before execution of the agreement, that party:
(i) was not provided a reasonable disclosure of the property or financial obligations of the other party insofar as was possible;
(ii) did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
(iii) did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.

In layman’s language, this means you have to sign the prenup voluntarily or the agreement is not enforceable, i.e. not effective. It is also not enforceable if there was fraud and before it was signed, there was no disclosure of assets and debts or a specific waiver of the nondisclosure, or no actual knowledge of the assets and debts.

The Utah appellate court, which interprets statutes and issues rulings on specific fact situations brought to its attention, has generally held that premarital agreements are enforceable in the same manner as any other contract. However, the Utah Court of Appeals added some clarification to the requirements for enforceable premarital agreements, in the recent case of Keyes v. Keyes. In this case, the husband persuaded his fiancé to sign a premarital agreement when he did not disclose all his assets in his business by telling her that his business was bankrupt. The evidence at trial shows that numbers (b)(i), (ii), and (iii) above were met, but not necessarily number (b) itself, fraudulent execution. The trial court found there was fraud because numbers (b)(i) through (iii) were met.

The appellate court said that “fraudulent execution” was a separate fact that had to be met, independently, in order to find that the premarital agreement was unenforceable. To show fraudulent execution, the court repeated that:
“Fraud” is a “false representation of an existing material fact, made knowingly or recklessly for the purpose of inducing reliance thereon upon which the plaintiff reasonably relies to his detriment.” Atkinson v. IHC Hosps., Inc., 798 P.2d 733, 737 (Utah 1990) (citation and internal quotation marks omitted).

In the Keyes case the appellate court sent the case back to the trial court and instructed it to determine if there was fraud when husband persuaded wife to sign the premarital agreement. If the court finds there was fraud, then the premarital agreement cannot be enforced and the court will determine the terms of the divorce as if it did not exist. If the court determines there was no fraud, then the agreement is enforceable and everything in that contract will dictate the terms of the divorce. The lesson, to be learned, is to be sure you know what you are doing in drafting and signing a premarital agreement. [Just a hint: If someone is telling you to sign one but claiming his business is bankrupt, there seems to be no real reason to do it and I’d be asking a lot more questions.]

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