Hollywood divorces are typically high asset divorces, and prenuptial agreements between married celebrities are frequently mentioned. What effect does a prenup have in a divorce with significant assets? Contrary to other jurisdictions, the courts in Michigan do not view a prenuptial agreement as being set in stone.
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The courts in Michigan have the authority to impose a decision that is fair to both parties and go beyond the prenuptial agreement’s letter. You must also be aware that in high asset divorces, there may be many assets but little money to divide. The final decision about a fair asset distribution during property split rests with the court.
Just recently we wrote about “What Is Considered A High Asset Divorce In Michigan?” in our Legal Blog here. We talk about what is a high asset divorce and the crazy things you shouldn’t do if you ever get into one. Part of the topic in that article was about prenuptial agreements or what we refer to here in Michigan as an antenuptial agreement.
The Practical Truths About Prenuptial Agreements
Prenuptial agreements are a term that most people are familiar with. The phrase is frequently used to refer to a written agreement made between two individuals before getting hitched. Theoretically, this agreement safeguards a person’s assets in the event of a divorce. This document is officially referred to as an antenuptial agreement in the State of Michigan.
An antenuptial agreement is a written contract between two people who are getting married that specifies how future earnings will be treated, who will govern each other’s property, and how assets might be divided if the marriage ends in divorce. In other words, even if the marriage doesn’t work out, the agreement offers each side a degree of certainty.
Antenuptial agreements, according to the State of Michigan, are legitimate as long as they are in writing and signed by the authorized party who will be held responsible for them. In essence, this means a court will not recognize an oral agreement.
Prenuptial agreements can be used to specify how assets will be handled in the event of divorce if you enter into the marriage with more assets than your prospective spouse, such as a home or a collection of investment accounts.
If you or your prospective spouse have a sizable amount of premarital debt, you might consider using a premarital agreement to allocate responsibility for that debt. If you make significantly more money than your intended spouse, you might think about utilizing a prenuptial agreement to set a cap on the amount of spousal support you may be required to pay in the event of a divorce.
A prenuptial or antenuptial agreement must be in writing to be valid.
These agreements are fairly typical if one or both of the parties have significant assets, children from a previous marriage, potential inheritances, high incomes, a family business to protect, a desire to avoid future litigation’s high cost, or if one spouse had a previous marriage that was perceived to have ended unfairly.
The most important item to safeguard in a prenup agreement is typically property.
The particular separate property that will be safeguarded by the agreement must be defined in the contract. The property owned prior to the marriage may be protected, as well as the value and income generated by the property during the marriage. Clients also want to safeguard gifts and potential inheritances.
The agreement may also address spousal support and establish the amount to be paid or state that one party is not eligible for spousal support. Making sure the agreement contains specific wording declaring spousal support cannot be changed is also crucial.
It’s crucial to remember that prenuptial agreements cannot include clauses restricting or specifying how much child support would be paid.
It is your obligation to fully disclose and account for all of your assets. These marital assets or resources, could be a or a combination of any, but not limited to the following:
[1] Assets listed along with their values
[2] Income source and amount
[3] Liabilities
[4] Previous responsibilities and rights related to child support
[5] Alimony or other duties to a former spouse financially
[6] Background in education of each party
[7] Status of each party’s employment
[8] Age and quality of each party’s health
The Sad Truths About High Asset Divorces
There’s a very common misconception about high asset divorces. People may think we are referring to a group of wealthy married couples.
A marriage may have so much assets but may not actually be liquid, meaning the marriage may actually be low in cash because of a large set of debts. They may have millions worth of properties but may not have cash to spend for maintenance or even repair.
Some people will go to any lengths to avoid discussing the value of their assets after divorce and will start looking for ways to hide them. For instance, people may provide money or property to family members or conceal it in more cunning ways.
Since these attempts to hide assets are commonly discovered, the judge will view you in a less favorable light. For instance, in Michigan, you could forfeit 100% of your assets if it becomes discovered during the divorce process that you have hidden assets from your spouse.
A couple can take specific steps to safeguard their wealth before a final decision is made, even though Michigan courts will carefully evaluate high asset divorce cases to guarantee a fair settlement.
In high asset divorces, there are some things that should never be done. For instance, making changes to an account’s beneficiary information or spending a lot of money hastily might not be a good idea. Maintain regular transaction levels to make the process much simpler to navigate.
Reaching a property settlement agreement can expedite the divorce process and give the spouses a say in how their assets and debts are shared, especially in high asset divorces. Even in cases of high net worth divorce, the spouses frequently own assets that are more valuable emotionally than they are financially.
In certain situations, a property settlement agreement could let the couple participate in determining what assets they would each keep after the divorce.
When Prenuptial Agreements Don’t Turn Out As Expected
Did you know that prenuptial agreements were not legal in Michigan before 1991?
It was believed these agreements encouraged divorce.
One extremely important fact about prenuptial agreements the general public needs to be aware of. In Michigan, prenuptial agreements aren’t really set in stone. In Michigan, the courts always make an effort to issue rulings consistent with what the parties want.
The court will always fairly apply its judgment when determining whether a prenuptial agreement is valid. In some circumstances, a judge may find an entirely lawful prenuptial agreement to be unfair. Consequently, it is permitted to enter the property covered by the prenuptial agreement.
The court may decide to reject the agreement if the circumstances have changed to the point that it would be unfair to enforce it. Just because the agreement gives one spouse a much bigger share of the marital estate does not make it unenforceable.
To prevent an unfair outcome, the courts have always had the authority to pierce prenuptial agreements. When creating a prenuptial agreement, how can we reasonably predict what will be deemed unfair by a judge (whom we cannot choose) a few years (and asset changes) down the road?
The answer to this question has never been certain, but cautious lawyers and parties will adopt measures to make prenuptial agreements seem more equitable.
One measure worth mentioning is having a prenuptial agreement signed well in advance of the wedding, both parties should have independent legal representation, and if the couples’ wealth is significantly different, the agreement may incorporate a progressive property settlement schedule based on the length of the marriage.
The establishment of irrevocable trusts, such as Michigan’s new Domestic Asset Protection Trust, which can be used by either party to provide greater asset protection for separate assets, is another measure to assure the protection of separate property before a marriage.
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