A Recent SJC Decision Clarifies Their Status Under Massachusetts LawPrior to the recent decision by the Mass. Supreme Judicial Court (SJC) in the matter of Kenneth S. Ansin vs. Cheryl A. Craven-Ansin, the status of ‘postnuptial’ or ‘marital’ agreements in Massachusetts was uncertain.
Massachusetts has long recognized (since 1981) the rights of parties to enter into premarital or antenuptial agreements before marriage and to enter into separation agreements (since 1976) when they are approaching divorce. Prior to Ansin, however, the issue of postnuptial or marital agreements, which are entered into after marriage and alter marital rights or distribute marital assets between parties not contemplating divorce, had not been decided in Massachusetts.
The use of postnuptial/marital agreements has been determined in other states with mixed results. Courts in Florida, Arizona, Wisconsin, and Tennessee, for example, have allowed such agreements under certain circumstances while Ohio, by statute, specifically prohibits them no matter when or where signed.
With the decision in the Ansin case, the SJC has now established criteria for the enforcement of what will be known as ‘marital’ agreements, which differ from the criteria for enforcement of prenuptial agreements or separation agreements. The SJC’s rationale for the difference in criteria rests on the leverage that a party has during the negotiation of the agreement. In the case of prenuptial agreements, if a party is not in agreement with the terms that have been proposed, then the party is free not to marry. When negotiating separation agreements, the parties have acknowledged that their marriage has failed, and each is negotiating for their own independent interests, and if they cannot agree, they are free to proceed to a determination of their rights by the courts. Once parties are already married, the scrutiny applied to the terms of a marital agreement should be more strenuous.
There are specific criteria set forth in the Ansin case that provide guidance as to factors by which future cases will be determined as follows: (1) each party must have had an opportunity to obtain separate legal counsel of his or her own choosing; (2) the marital agreement must have been signed freely and voluntarily without any fraud or coercion; (3) the marital agreement must contain a full disclosure of all assets with their approximate market value, a statement of each party’s approximate annual income, and, equally as important, disclosure of any significant future acquisitions or changes in income which are reasonably anticipated; (4) the marital agreement must also contain a clear and explicit waiver of the right to a judicial determination of marital rights and asset distribution in the event that a divorce does take place at some point in the future; and (5) the martial agreement must be evaluated to determine if the terms were fair and reasonable at the time of the execution of the agreement and are still fair and reasonable at the time of the divorce.
The SCJ has established that the spouse who seeks to enforce a marital agreement is the one who has the burden to prove that the other spouse’s consent was not obtained through coercion or fraud. In the Ansin case, Cheryl argued that Kenneth had committed fraud by misrepresenting his intention to remain in the marriage in his effort to convince her to execute the marital agreement. Kenneth presented evidence that he had made significant efforts to improve the marriage, that they had purchased and renovated at great expense a new home after the signing of the agreement, and that he did not file for divorce until Cheryl had asked him to leave the home and was involved with another man. It should be expected that, in any review of a marital agreement, a court will closely examine whether or not a spouse has been misled regarding the other party’s commitment to the marriage.
The decision in the Ansin case includes detail for the evaluation of whether or not there has been a valid waiver by a party of his or her right to have a judge determine his or her marital rights and asset distribution at the time of the divorce. The criteria for a valid waiver include whether or not a party has been represented by independent counsel, whether they had sufficient time to review the terms of the agreement, whether they understood the terms of the agreement and their impact, and whether or not they understood what their rights would have been absent the agreement.
The standard for evaluation of a marital agreement will differ from that of a prenuptial agreement because of the context in which the marital agreement takes place. There will be heightened scrutiny in the evaluation of marital agreements. Massachusetts has already described the contractual obligations between spouses in the matter of Krapf vs. Krapf in 2003 by stating that spouses “stand as fiduciaries to each other and will be held to the highest standards of good faith and fair dealing in the performance of their contractual obligations.”
When reviewing whether or not the marital agreement was fair and reasonable at the time of its execution, there are standards a judge ‘should’ consider and standards which a judge ‘may’ consider. The SJC has stated that a judge should consider the entire context in which the agreement arose, including a consideration of whether or not each party was represented by independent counsel. While the failure of independent representation will not be fatal to an agreement, it is likely to impact the scrutiny which is applied. A judge may consider: (1) the difference in the outcome under the marital agreement from the outcome under current law, (2) whether the purpose was to benefit the interests of third parties such as children from a prior relationship, (3) the impact of the agreement on the children of the parties, (4) the length of the marriage, (5) the motives of the parties, (6) the bargaining positions of the parties, (7) the circumstances which gave rise to the agreement, (8) the degree of pressure experienced by the spouse who is contesting enforcement of the marital agreement; and (9) other circumstances that the judge may want to consider.
When reviewing whether or not the marital agreement is fair and reasonable at the time of a divorce, the SJC requires that the same criteria be used that is utilized to evaluate a separation agreement. A judge may consider: (1) the nature and substance of the objecting party’s complaint, (2) the financial and property provisions of the agreement as a whole, (3) the context in which the negotiations took place, (4) the complexity of the issues involved, (5) the background and knowledge of the parties, (6) the experience and ability of counsel, (7) the need for and availability of experts to assist the parties and counsel, and (8) the mandatory and, if the judge deems it appropriate, discretionary factors set forth in G. L. c. 208 § 34.
Marital agreements will likely find a variety of uses as a method to protect third parties such as children from a prior marriage or to strengthen a relationship by providing assurances of asset distribution should there be a divorce in the future. Marital agreements also have significant estate planning consequences for married couples. Similar to those couples who enter into prenuptial agreements, a marital agreement will need to be reviewed by the attorney doing one or both parties’ estate plan.
Ideally, a marital agreement should be drafted in consultation with both parties’ estate-planning attorney(s). The document may set forth parameters within which the estate planning attorney must work to effectuate the individual or couple’s estate planning goals while ensuring that those goals will not interfere with the mandates of the new marital agreement.
Marital agreements, like pre-nuptial agreements, will often contain guidelines concerning gifts between the spouses as well as benefits to a surviving spouse upon the death of the other. All of these provisions, as well as others, can have a significant impact on a client’s overall estate plan. Further, marital agreements may well impact certain spousal rights and/or obligations with regard to Medicaid or MassHealth planning for either or both spouses.
In any contemplation of the use of marital agreements, it is clear that great care must be taken so that the intentions of the parties will not be undermined by the failure to follow the clear criteria that have been established.
This article is a general summary only and does not constitute legal advice.
Carla Newton is a partner at Robinson Donovan, P.C.; (413) 732-2301.