Prenuptial Agreements

In today’s society, divorce can be emotionally, financially and psychologically distressing. The divorce rates are continuously rising, and newlyweds face more pressure than ever to protect themselves and their marriage before entering into a lifelong commitment.

Particularly for individuals with a high net worth or substantial assets, the prenuptial agreement is a necessity. A prenuptial agreement is also important for an owner of a business or closely-held corporation. Even parties with young and grown children should consider a prenuptial agreement to protect their family.

If you are thinking about getting married and want to protect your existing assets against the possibility of divorce, a prenuptial agreement may be the right solution. Experienced Baltimore prenuptial agreement attorneys can draft and review documents that detail how your property will be divided in the event of divorce.

When you contact the attorneys at James E. Crawford, Jr. & Associates, you will find a firm that is committed to protecting your best interests now and throughout your marriage. Although it may seem unromantic to make plans for divorce before your wedding bells have rung, it can help ease unnecessary stress down the road. In the best case scenario, you and your loved one will stay happily married and there will be no need for the agreements.

Because money is one of the most common causes of disputes in marriages, clearly delineating what will happen to certain property can help stop that fight before it begins. If your marriage does not go as planned, prenuptial agreements can provide a clear and concise avenue to property division, and you may be able to avoid costly litigation. The term “prenuptial agreement” is often used as a synonym of an “antenuptial agreement.” The prenuptial agreement is “far more common.”

Attorneys for Prenuptial Agreements in Baltimore, Maryland

The attorneys at James E. Crawford, Jr. & Associates are experienced in drafting the prenuptial agreement or advising a spouse on a prenuptial agreement drafted by the other spouse. Before the marriage, the future husband and wife should each have their own legal representation. Terms in the agreement can be changed before it is signed. Also, the parties might seek additional information from each other about the assets owned by each side or the value of the assets. Ideally, the prenuptial agreement should be signed weeks or months before the marriage so that neither side can argue that they were pressured into signing.

The attorneys at James E. Crawford, Jr. & Associates also represent parties in a divorce action involving a prenuptial agreement. Call us at 443-709-9999 to discuss your case. Let us put our experience to work for you.

Considering Whether the Prenuptial Agreement is Valid

In many divorce cases, one spouse will claim the prenuptial agreement signed before the marriage is invalid. In Ortel v. Gettig, 207 Md. 594, 116 A.2d 145 (1955), in which the Court of Appeals in Maryland declined to uphold a prenuptial agreement because there was inadequate disclosure of the value of the husband’s assets. The court reasoned that the wife’s “knowledge of the fact that the husband had an electrical business” and owned various real properties (but not their “actual value”) was so “indefinite” that she could not be deemed to have “actual knowledge of his worth.” Id. at 612, 116 A.2d 145.

Because a prenuptial agreement is a contract, the courts in Maryland will review it “under the objective law of contract interpretation.” Cannon v. Cannon, 384 Md. 537, 553, 865 A.2d 563 (2005). The courts are mindful that, unlike the normal run of contracts, prenuptial agreements invariably involve a confidential relationship that is “presumed to exist as a matter of law” between the parties entering into that kind of an agreement. Id. at 572, 865 A.2d 563.

To establish the validity of such a contract, the agreement’s proponent must show that there was no “overreaching,” id. at 568, 865 A.2d 563, that is, that “in the atmosphere and environment of the confidential relationship,” there was neither “unfairness” nor “inequity” in “the result of the agreement or in its procurement.” Hartz v. Hartz, 248 Md. 47, 57, 234 A.2d 865 (1967).

A valid prenuptial agreement can be achieved in several ways. One of which is to show that the agreement “documents a full, frank, and truthful disclosure,” Cannon, 384 Md. at 573, 865 A.2d 563, of the “worth of the property, real and personal, as to which there is a waiver of rights in whole or in part, so that he or she who waives can know what it is he or she is waiving.” Hartz, 248 Md. at 56–57, 234 A.2d 865. Indeed, if this standard is met, the agreement may well be rendered resistant to attack. Id.

Full Disclosure Before the Prenuptial Agreement

In the absence of such a disclosure, “adequate knowledge” of what that disclosure would have revealed can serve as a substitute for such disclosure to confirm that there was no overreaching. Id. at 57, 234 A.2d 865. The courts in the State of Maryland have used the terms “adequate knowledge” and “actual knowledge” interchangeably, in discussing substitutes for full, frank, and truthful disclosure in the context of prenuptial agreements. See Cannon v. Cannon, 384 Md. 537, 568, 865 A.2d 563 (2005); Hartz v. Hartz, 248 Md. 47, 57–58, 234 A.2d 865 (1967).

“Proof of knowledge, unlike full, frank, and truthful disclosure, does not require that the enforcing party demonstrates that the attacking party had knowledge of the discrete value of each asset. Instead, knowledge means that the attacking party must be shown to have adequate knowledge—knowledge of the existence of the assets subject to the waiver and knowledge of what those assets are worth in sum so that the attacking party may be found to know what it is he or she is waiving.” Cannon, 384 Md. at 573–74 n. 21, 865 A.2d 563.

The purpose behind a requirement of disclosure or knowledge is so that the spouse who waives can know what it is he or she is waiving. If either disclosure or knowledge “is proven by the enforcing party and insufficiently rebutted by the attacking party, there can be no overreaching.” Id.

If, however, there is neither full, frank, and truthful disclosure by the party seeking to enforce the agreement, nor “actual knowledge” by the party attacking the agreement, and if “the allowance made to the one who waives is unfairly disproportionate to the worth of the property involved at the time the agreement is made,” then the validity of the agreement “must be tested by other standards.” Hartz, 248 Md. at 57–58, 234 A.2d 865.

Avoid Overreaching in Getting the Other Spouse to Sign the Agreement

Since the “real test” in determining the validity of a prenuptial agreement is whether there was “overreaching,” the Court of Appeals has set forth a two-pronged test, derived from the definition of “overreaching” itself. The test requires the court to ask, first, “was the benefit to [the party attacking the agreement] commensurate with that which she relinquished so that the agreement was fair and equitable under the circumstances,” and, second, “did the subsequent would-be repudiator of the contract enter into the agreement freely and understandingly.” Id.

The court will consider both the substantive and procedural prongs of the “overreaching” test to determine whether there was overreaching in procuring the other parties assent to the prenuptial agreement before determining that is was valid and enforceable. As the first prong of this “overreaching” test addresses the substantive fairness of the prenuptial agreement, while the second prong addresses the manner in which the repudiating party’s assent to that agreement was obtained, we shall refer to the first of the two prongs as the “substantive prong” and the second as the “procedural prong.”

Even if the court finds that one spouse did not receive anything that came close to full disclosure of the other spouses assets or have adequate knowledge of their existence or value and turn to the two-pronged “overreaching” test, that is whether, even if there was neither full, frank, and truthful disclosure of the parties’ assets nor a substitute for such disclosure, the prenuptial agreement might still be valid and enforceable because the benefit to the party attacking it was “commensurate with that which she relinquished so that the agreement was fair and equitable under the circumstances” and because “the subsequent would-be repudiator of the contract” entered into the agreement “freely and understandingly.” Hartz, 248 Md. at 58, 234 A.2d 865.

“Overreaching” Test—Substantive Prong

The substantive prong of the “overreaching” test concerns whether the benefit to the waiving party is “commensurate with that which she relinquished so that the agreement was fair and equitable under the circumstances.” Hartz, 248 Md. at 58, 234 A.2d 865. The court will also consider whether the agreement required one spouse to waive alimony or the right to a monetary award, to which she might be entitled under Family Law Article § 8–205.

In some cases, one side will complain that there no consideration for the agreement other than the marriage to support the prenuptial agreement. Consummation of the marriage is itself sufficient consideration to support a prenuptial agreement. Also, the courts will consider whether the marriage also confers a potential economic benefits of a substantial nature to assets not waive under the prenuptial agreement. That benefit can include the right to receive alimony and a monetary award upon the dissolution of that marriage.

“Overreaching” Test—Procedural Prong

Under the procedural prong of the “overreaching” test, the court will consider whether “the subsequent would-be repudiator of the contract” entered into the agreement “freely and understandingly.” Hartz, 248 Md. at 58, 234 A.2d 865. To answer this question, the court will begin with a brief summary of the circumstances surrounding the formation of the agreement at issue.

The court will consider whether the spouse had a chance to seek out the services of an attorney or willingly declined to seek any professional advice. The court will also consider whether the spouse was discouraged from seeking such advice under Md. Rule 8–131(c).

In many of these cases, the spouse will claim that he or she was prejudiced by the allegedly brief period of time she was given to consider the agreement. See Brett R. Turner & Laura W. Morgan, Attacking and Defending Marital Agreements, § 10.02, at 394 (2d ed.2012) (noting that “if the shortness of time did not affect the attacking party’s willingness to sign,” prenuptial agreement “may still be enforceable”).

The application of the two-pronged “overreaching” test presupposes “inadequate disclosure.” Cannon, 384 Md. at 560, 865 A.2d 563. Therefore, it follows that when there was a full disclosure of the specific assets owned by the other spouse but inadequate disclosure of their value, the agreement may nonetheless be valid and enforceable.

Is the Prenuptial Agreement Otherwise Unconscionable?

An “unconscionable bargain or contract has been defined as one characterized by ‘extreme unfairness,’ which is made evident by”

  • one party’s lack of meaningful choice; and
  • contractual terms that unreasonably favor the other party.

Walther v. Sovereign Bank, 386 Md. 412, 426, 872 A.2d 735 (2005) (quoting Black’s Law Dictionary 1560 (8th ed.2004)).

The first of these two components, known as “procedural unconscionability,” concerns the “process of making a contract” and includes such devices as the use of “fine print and convoluted or unclear language,” as well as “deficiencies in the contract formation process, such as deception or a refusal to bargain over contract terms.” Walther, 386 Md. at 426–27, 872 A.2d 735 (citations and quotations omitted).

The second component, “substantive unconscionability,” refers to contractual terms that are “unreasonably” or “grossly” favorable to the more powerful party and includes terms “that attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law,” provisions “that seek to negate the reasonable expectations of the nondrafting party,” and terms “ unreasonably and unexpectedly harsh … having nothing to do with … central aspects of the transaction.” Id. (citations and quotations omitted).

“The prevailing view is that both procedural and substantive unconscionability must be present in order for a court to invalidate a contractual term as unconscionable.” Freedman v. Comcast Corp., 190 Md.App. 179, 207–08, 988 A.2d 68 (2010). The burden of establishing the presence of both is on the party challenging the prenuptial agreement. Cannon, 384 Md. at 554, 865 A.2d 563. Moreover, unconscionability of a prenuptial agreement is determined as of “the time the contract was entered.” Id.

Was the Prenuptial Agreement Unconscionable?

The courts will often look to the case of Martin v. Farber, 68 Md.App. 137, 510 A.2d 608 (1986), the leading Maryland case explaining the the doctrine of unconscionability to the subject of prenuptial agreements. In that case, the courts considered whether an “otherwise valid” prenuptial agreement could be set aside on the ground that its enforcement would be unconscionable, and concluded that it could not. Id. at 143–45, 510 A.2d 608.

The husband, Morris W. Farber, although “steadily employed as an electrician, had no accumulated wealth at the time of his marriage to Mrs. Farber.” Id. at 139, 510 A.2d 608. The wife, the former Nettie Sue Goldberg (and soon-to-be Mrs. Farber), had previously been married to a Dr. Chester Goldberg and had inherited substantial assets upon his death. Id. To retain ownership and control over those assets, no matter what the future held, the future Mrs. Farber asked her intended to sign a prenuptial agreement, three days before their marriage, which provided, “in essence, that Mrs. Farber would retain sole control of the property she acquired either prior to or during the marriage” and that “Mr. Farber relinquished all rights in the property and estate of Mrs. Farber.” Id.

During their ensuing forty-four year marriage, Mr. Farber remained employed until his retirement, in 1967, and, during that employment, regularly “turned his paychecks over to his wife….” His wife “managed the couple’s household and financial affairs.” Id. Mrs. Farber gave Mr. Farber “repeated assurances” that she “would take care of him.” Id. at 146, 510 A.2d 608. Unfortunately, according to the court, she “abused” the couple’s confidential relationship by using Mr. Farber’s “earnings to acquire assets which she titled or placed solely in her own name.” Id.

In 1983, Mrs. Farber died intestate. By the time of her death, “she had accumulated in her own name assets valued at approximately $275,000.” Id. at 140, 510 A.2d 608. Mr. Farber was thereafter appointed, by the orphans’ court, as the personal representative of Mrs. Farber’s estate. Unhappy with that appointment, Mrs. Farber’s grandchildren filed a petition seeking his removal from that position on the ground that, under the prenuptial agreement, he had “renounced any claim to Mrs. Farber’s estate.” Id. Mr. Farber responded to that petition by filing a declaratory judgment action in the circuit court, in which he contended that the prenuptial agreement was invalid and that he was entitled to a spousal share of Mrs. Farber’s estate, under Estates and Trusts Article, § 3–102.10.

At the end of a bench trial, the circuit court found that although Mr. Farber had “released any claim that he might have [had]” to his deceased wife’s estate, “after some forty-four years of a seemingly happy marriage, in which [Mr. Farber] [had] turned everything he earned over to [Mrs. Farber] without question, and also upon her assurances that she would take care of [him], it would not only be unjust, but unconscionable for the court to enforce” the agreement. 68 Md.App. at 140, 510 A.2d 608. The court imposed a constructive trust upon Mrs. Farber’s estate, “for the benefit of Mr. Farber during his life; the remainder to be distributed equally to Mrs. Farber’s heirs.” Id.

Affirming in part and reversing in part that decision, this Court held that the circuit court had “erred in ruling that the agreement was unconscionable” because it had “palpably relied on circumstances arising after the execution of the agreement” and not “as of the time [the agreement] was made.” Id. at 144, 510 A.2d 608. The court noted that “[n]othing in the Farbers’ antenuptial agreement or in the circumstances surrounding its execution render [ed] it unconscionable or otherwise legally objectionable” and that, “[n]o matter how disturbing” Mrs. Farber’s behavior during the marriage was, it did not afford “an adequate basis” for ruling that the agreement at issue was unconscionable. Id. at 144–45, 510 A.2d 608. The court did, however, uphold the imposition of a constructive trust upon Mrs. Farber’s estate, though we limited it “to the extent Mr. Farber [was] able to trace his funds into his late wife’s estate.” Id. at 147, 510 A.2d 608.

When, as in Farber, the prenuptial agreement,  was executed just a few days before the marriage, it might still be upheld as valid. The courts will determine whether the agreement provided that the party seeking to enforce the agreement “would retain sole control of the property” he or she acquired “either prior to or during the marriage” and that the non-enforcing party “relinquished all rights in the property and estate of” the party seeking enforcement. Id. at 139, 510 A.2d 608. The courts will also look to see whether the party seeking enforcement entered into the marriage with substantial assets, while the party opposed to that enforcement did not. Id. In light of Farber, the court can conclude that the terms of the prenuptial agreement were neither unconscionable nor “otherwise legally objectionable.” Id. at 144, 510 A.2d 608.

Breach of a Prenuptial Agreement in Maryland

Breach of a covenant in a prenuptial or separation agreement does not, ipso facto, excuse performance of another covenant by the other party. In Schnepfe v. Schnepfe, 124 Md. 330, 92 A. 891 (1914), the court found that the wife’s breach of prenuptial agreement, by deserting husband, does not relieve husband’s estate of liability under husband’s promise to bequeath a specific sum of money to wife. As a general matter, if one person breaches a provision in a marital settlement agreement which is not dependent upon other provisions, enforcement of the other provisions is unaffected.

Finding an Attorney for the Prenuptial Agreement in Baltimore, MD

We can help you establishing a prenuptial agreement before the marriage. If you are thinking about creating a prenuptial agreement and want to make sure your rights are protected, we can help. We also represent clients in a divorce case involving a prenuptial agreement signed before the marriage.

Contact us online or call 443-709-9999 to schedule your free initial consultation with an experienced lawyer.