Legislation Would Make Certain Prenuptial Agreements Unenforceable

by: Matt Newburg

02/13/2018 08:24 AM EST
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A legislative proposal to make Michigan prenuptial agreements unenforceable in certain circumstances has passed the state House of Representative and now awaits a vote in the Senate.

Under current Michigan law, a contract relating to property that is made between two individuals in contemplation of marriage – otherwise known as a prenuptial agreement – is enforceable after the marriage takes place. However, House Bill 4751 would make prenuptial agreements in Michigan unenforceable if certain factors are proven, including duress, fraud or unconscionable terms.

Prenuptial Agreements In Michigan: House Bill 4751

House Bill 4751 says that a Michigan prenuptial agreement would be unenforceable if a party against whom enforcement is sought proved either of the following:

  • the party’s consent to the contract was the result of fraud, duress or mistake.
  • before signing the contract, the party did not receive adequate financial disclosure, including disclosure of assets in a domestic asset protection trust.

Adequate financial disclosure would occur when the party: 1) receives a reasonably accurate description and good-faith estimate of value of the property, liabilities and income of the other party; 2) expressly waives the right to financial disclosure beyond the disclosure provided; or 3) has reasonable knowledge of the estimated value of the property, liabilities and income of the other party.

House Bill 4751 would also let a court refuse to enforce a term of a prenuptial agreement or the entire contract if, when the contract is viewed in its entirety, either of the following applied:

  • the term was unconscionable at the time the contract was signed.
  • enforcing the term would be unconscionable for a party because of a “material change in circumstances” that arose after the contract was signed which was not “reasonably foreseeable” at the time the contract was signed.

According to the proposal, a court would be required to decide the question of unconscionability as a matter of law. The legislation would apply to Michigan prenuptial agreements entered into before and after its effective date.

‘Allard’ Decision And Michigan Prenuptial Agreements

According to the measure’s sponsor, Rep. Klint Kesto, House Bill 4751 is needed in light of the Michigan Court of Appeals January 2017 decision in Allard v Allard.

In Allard, the Court of Appeals held that a court retains the authority to award a party’s separate property to the other party in a divorce proceeding, despite a valid prenuptial agreement protecting the assets.

The Allard court wrote: “[P]arties have no discernible rights to waive under MCL 552.23(1) and MCL 552.401. Moreover, to the extent that parties attempt, by contract, to bind the equitable authority granted to a circuit court under MCL 552.23(1) and MCL 552.401, any such agreement is necessarily void as against both statute and the public policy codified by our Legislature. Put differently, the parties to a divorce cannot, through antenuptial agreement, compel a court of equity to order a property settlement that is inequitable. Although parties have a fundamental right to contract as they see fit, they have no right to do so in direct contravention of this state’s laws and public policy. Parties cannot, by mutual agreement, strip a circuit court of its authority under MCL 552.23(1) to order relief that the court, in its sound discretion, deems necessary to adequately support and maintain the parties’ minor children.”

While various individuals and organizations have testified in favor of House Bill 4751, claiming it is “good public policy,” the State Bar of Michigan Family Law Section has not overwhelmingly supported the proposal. The section has asserted the bill could undermine the Allard decision completely and that Michigan prenuptial agreements are useful, especially in second marriages.

The House has already passed the legislation by a 63-43 vote. The bill currently sits in the Senate Committee on Families, Seniors and Human Services, where it awaits further discussion before it is sent to the full Senate for a vote. The most recent legislative action occurred on January 30, 2018, when the bill was placed on a third reading with a substitute version, S-1.

The Newburg Law Family Law Division is closely following the Michigan prenuptial agreement legislation. Stay tuned to the Newburg Law Blog for further updates.

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