Common pitfalls in prenuptial agreements

Posted Thursday, July 23rd, 2020 by Gregory Forman
Filed under Divorce and Marriage, Of Interest to General Public, South Carolina Specific

I hate drafting prenuptial agreements, considering them to be malpractice traps. However there are clear procedural and substantive issues that can increase the likelihood of a prenuptial agreement being enforceable.

As for the procedural concerns:

  • One needs to provide one’s affianced full financial disclosure prior to entering the agreement. In South Carolina one would fill out a financial declaration form. Ideally this executed form would be attached to the prenuptial agreement to show that one provided full financial disclosure. So long as this disclosure was relatively accurate and complete South Carolina will find full financial disclosure was provided, even if one did not provide any other financial disclosure.
  • Each party to the agreement must each have his or her own individual and independent attorney advise them on the prenuptial agreement. Ideally each attorney’s name would be listed as that party’s counsel in the body of the agreement and each attorney would be listed as a witness, and witness, that party’s signature. One party can pay for the other party’s attorney but the other party has to select his or her own attorney. To demonstrate the independence of each counsel, one should not use attorneys from the same firm.
  • The agreement needs to be “fundamentally fair.” This fairness is determined both at the time of execution and the time of enforcement. For example, it would be considered fair to have a prenuptial agreement in which both parties waive the rights to each other’s separate property or property each one accumulates during the marriage that is solely titled in that party’’s name—even if one party owns all the property and has all income and the other party has none. This would be considered fair because it would have been the same result if the parties had never married. However an agreement in which one party retains all of his or her own property but get rights to other’s property is likely not fundamentally fair. At the time one party tries to enforce a prenuptial agreement (typically as part of a marital dissolution case), the court will determine whether the agreement is still fundamentally fair. However if it was fair at the time of execution, they will likely find it fair at the time of enforcement. In one South Carolina case a wife waived alimony in the prenuptial agreement, became disabled during the marriage, sought alimony upon the separation, and was denied alimony due to the prenuptial agreement. The South Carolina Supreme Court held that the possibility of becoming disabled during the marriage was foreseeable and thus did not render the agreement fundamentally unfair. Hardee v. Hardee, 355 S.C. 382, 585 S.E.2d 501 (2003).
  • Don’t spring the draft prenuptial agreement on the other party shortly before the wedding. If wedding guests are already in town when the prenuptial agreement is first sent to the other party, there will be an argument that the agreement was coerced. Sending the draft a month before the wedding will greatly reduce claims of coercion (assuming it isn’t modified further in the issuing party’s favor before being executed). Ideally, to avoid claims of coercion, a prenuptial agreement should be executed at least 30 days before the wedding.

As for the substance of the prenuptial agreement, these are the typical issues one can and cannot address:

  • South Carolina will not enforce prenuptial agreement provisions that affect the rights of minor children.
  • South Carolina will enforce provisions in prenuptial agreements that waive alimony or that have a set amount of alimony. The length of the marriage will not affect the alimony obligations under the prenuptial agreement unless the agreement specifically ties those obligations to length of marriage.
  • South Carolina will enforce provisions in prenuptial agreements that address property and debt owned before the marriage and property and debt accumulated during the marriage. The length of the marriage will not affect these rights/obligations under the prenuptial agreement unless the agreement specifically ties those rights/obligations to length of marriage.
  • South Carolina will enforce provisions in prenuptial agreements that address entitlement to attorney’s fees in any marital dissolution litigation. The enforceability of such provisions will not apply to fees incurred for child-related issues, such as child custody/visitation or child support.
  • One can jointly title property during the marriage and still have it addressed by the prenuptial agreement if that issue is specifically addressed in the prenuptial agreement. For example, one can agree to jointly title property but have it remain one party’s separate property in the case of marital dissolution. However such provisions may become void if they do not meet the fundamental fairness test.
  • No prenuptial agreement is ironclad. What often happens in a marital dissolution case is the higher income/asset spouse demands the prenuptial agreement be enforced as written while the other spouse seeks all alimony and property division rights he or she would have had absent the prenuptial agreement. How close the ultimately resolution is to each party’s position depends upon two factors. The first is how clearly the prenuptial agreement was written and how closely it conformed to the procedural requirements above. The better the prenuptial agreement is on those issues, the more likely the resolution will be close to the prenuptial agreement. Where the above provisions were completely ignored, the prenuptial agreement will be worthless. The second way prenuptial agreements fail to meet the expectations of the high income/asset spouse is when that spouse fails to look to the prenuptial agreement when accumulating new assets or exchanges assets addressed in the prenuptial agreement for new assets. If one fails to comply with the requirements of the prenuptial agreement in accumulating new assets or exchanging old assets, such assets may fall outside the provisions of the prenuptial agreement and become marital property subject to equitable distribution.
  • Do not count on the prenuptial agreement being modifiable during the marriage. South Carolina law is unclear on the enforceability of agreements made during the marriage but not in contemplation of separation or divorce. Geddings v. Geddings, 319 S.C. 213, 460 S.E.2d 376 (1994) would suggest such agreements are not enforceable.

While I hate drafting prenuptial agreements, the above tips might help others draft better ones.

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