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Court OK’s Prenup-Turned-Post-nup

On Behalf of | Jan 20, 2021 | Estate Planning |

Prenuptial agreements are a useful way for a soon-to-be-married couple to protect assets they are bringing into a marriage. Essentially, these are contracts that lay out exactly what each spouse is entitled to (and obligated to do) in the event of a divorce.

If you and your soon-to-be-spouse are considering such an agreement, be sure to work with an attorney who can make sure it’s properly executed. Otherwise it may not be enforced, as nearly happened in a recent Michigan case.

In that case, Carla Skaates and her husband Nathan Kayser lived together before getting married. Skaates had a dental practice purchased with her own assets. Kayser, who worked there as a business manager, also had a business of his own. The couple owned a third business together. When they decided to get married, they spent 16 months negotiating a prenup.

According to its terms, if they divorced the dental practice would go entirely to Skaates, Kayser’s business would be solely his and the third business would be divided equally, with Skaates having an option to buy out Kayser’s share. Everything else was separate property not subject to division.

The agreement also included a “cooling off” provision mandating that either party wait four months before filing for divorce while participating in at least three marital counseling sessions.

Even though the agreement was styled as a prenup, the couple executed it just over a month after they got married.

Less than four years later, Skaates filed for divorce with no cooling-off period. When a local judge enforced the agreement, Kayser appealed.

He argued that it did not qualify as a prenup and was unenforceable as a “post-nup” because it left Skaates better off financially. He also argued it was void because Skaates breached it and because, like many post-nups, it violated public policy by encouraging divorce.

The Michigan Court of Appeals agreed with Kayser’s overall points about the enforceability of post-nups but disagreed that they applied in this case.

The court also observed that the couple had attended marital counseling but it was unsuccessful. It then ruled the agreement was enforceable as a valid postnuptial agreement.

Some of the court’s language indicated that this decision easily could have gone the other way, however. So if you are negotiating a prenup, your best bet is to execute it before the marriage and to seek the advice of competent counsel.