12 Model Title Controls Agreement with Provisions for Weaker Party

• Library: Premarital Agreements: Drafting and Negotiation (ABA) (2017 Ed.)

12 Model Title Controls Agreement with Provisions for Weaker Party

PREMARITAL [POSTMARITAL] AGREEMENT

This Agreement is made this day___of__________, 20___, by and between SPOUSE ONE, [prospective husband/wife], (hereafter referred to as "___"), and SPOUSE TWO, [prospective husband/wife], (hereafter referred to as "___").

Recitals: Comment

Recitals are not operative provisions of a contract unless the contract expressly incorporates them as such.¹ They do not create rights, expand rights, or withdraw rights.² Recitals deserve attention because they can create mischief when poorly drafted. References in the recitals to parties' intentions should conform to the operative terms of the agreement. For example, in Cameron v. Cameron,³ a recital stated the wife intended to waive her rights to property then owned or to be acquired by the husband. However, the operative provisions of the agreement only waived any rights she might have had to his premarital property. The court held she did not waive her right to make a claim at divorce to a share of property acquired after the date of marriage.

A recital can provide evidence of the parties' intent but is not dispositive.⁴ The language chosen to express the parties' rights and obligations should be words of promise or words of waiver, rather than merely statements of general intent. For example, in Uhrig v. Pulliam,⁵ the premarital agreement had a recital stating the husband contemplated making a will leaving some or all of his estate to the wife. However, the agreement also waived all claims the wife would have had as a surviving spouse. The court held the husband was not obligated to make a will or precluded from revoking one; there was no promise.⁶ Similarly, in Barrows v. Barrows,⁷ a recital said the parties intended the premarital agreement to apply at divorce or death. The text of the agreement did not include an express waiver of each party's rights as a surviving spouse. Rather, it stated all property of a party would remain his or her "personal estate and constitute non-marital property."⁸ The court refused to hold that the recitals established the parties' intent to waive the elective share as a matter of law, and it sent the case back to the trial court for an evidentiary hearing on intent. Of course, the deceased husband was unavailable to testify to his intent.

Every agreement should state clearly whether it is to apply only upon the death of a party, only upon divorce (or marital separation), or in either event. Some parties, or their lawyers, prefer to avoid using the word divorce because it seems unromantic, but the failure to make clear the parties' intentions has been the cause of much avoidable litigation, and, as with all litigation, outcomes are unpredictable.⁹ The better approach is to use explicit language referring to both divorce (or marital separation) and death.

The recitals should be factually accurate. For example, the recitals should not state that both parties are employed and capable of supporting themselves unless the statement is true.¹⁰ Similarly, the recitals should not say the parties made full disclosure or that each party consulted independent counsel unless true.¹¹

A premarital agreement typically recites that the parties intend to get married after execution of the agreement. The agreement may recite a planned wedding date. However, when a premarital agreement specifies a planned wedding date, a postponement of the wedding after execution, or a breakup followed by reconciliation and a new wedding date, can create a basis for litigation over whether the parties intended to abrogate the agreement.¹²

The recitals should support the law chosen to govern the agreement by showing a nexus between at least one party and the state of governing law.¹³

The recitals in the model include a statement in boldface that each party has read the agreement. This is intended to highlight the importance of reading the agreement before signing it.

Counsel in a second-look state should pay particular attention to statements in the recitals that can help to create a basis for a court to decide an agreement has become unfair at divorce as a result of changed circumstances.

Recitals: Model Text

recitals

1. The parties plan to marry after execution of this Agreement. [Alternative: The parties plan to marry on___ [DATE] and after execution of this Agreement.] [If parties are already married: The parties were married on___[DATE] and are now husband and wife/spouses. The parties have___children together:___.]
2. Each party currently owns separate property, all of which has been acquired independently of and without the assistance of the other.
3. SPOUSE ONE is employed with __________ as __________. [Optional: He/She is in good health to the best of his/her knowledge.] SPOUSE TWO is employed with __________ as __________. [Optional: He/She is in good health to the best of his/her knowledge.] The parties are residents of___. [Or: SPOUSE ONE is currently a resident of __________ and SPOUSE TWO is a resident of__________.]
4. SPOUSE ONE has [never] been married [previously] and has ___/[no] children. SPOUSE TWO has [never] been married [previously] and has ___/[no] children. [Add, if appropriate: ___has financial obligations for___his/her child/ren and for a previous spouse.]
5. Each party read this Agreement in its entirety before signing it.
6. [If a postmarital agreement, state reason for agreement, e.g.: The parties intended to enter into a premarital agreement, but did not have enough time to conclude the negotiations and drafting prior to the date of marriage.]
7. The parties intend, by this Agreement, to establish their rights in all property currently owned or hereafter acquired by each of them upon the death of a party or in the event of a marital separation or divorce. The parties intend that each of them shall have the right to retain his/her separate property and to share marital property as set forth in this Agreement.
8. [Include following text if agreement provides for waiver of spousal support: Each party further desires to waive any right or claim he or she has or may ever have to support from the other in the event of a marital separation or divorce [Add if agreement provides for contractual spousal support:], except as specifically provided herein]. [Optional: Each party is capable of providing for his or her own support through employment and through other means. Neither party intends to be dependent on the other for support in the future.]
9. The parties to this Agreement do not intend to facilitate or encourage a separation or divorce. Each party believes that the resolution of the issues covered by this Agreement in the manner set forth will promote their married life together, since the interests and values embodied in this Agreement are shared by and important to each party. The parties enter into this Agreement after thoughtful discussions between themselves, [Add, if appropriate: consultations with and advice from independent counsel,] and with love and respect for each other. Both parties intend for this Agreement to eliminate any issues between them or between one of them and the other's family upon the death of a spouse or in the event this marriage is unsuccessful.
10. The parties acknowledge that this Agreement is a premarital [postmarital] agreement as defined by law. Each party understands and intends that the provisions of this Agreement shall prevail over any statute or law of__________, or any other jurisdiction, including any foreign jurisdiction, which may be applicable in the absence of this premarital [postmarital] Agreement, and that this Agreement shall govern their rights and obligations upon death, separation, or divorce regardless of where they may be living at the time.
11. The parties acknowledge that a party may experience changed circumstances during the marriage [Alternative: after execution of this Agreement], such as a substantial increase or decrease in property values, or a decline in actual earnings, or earning potential, due to illness, disability, loss of employment, or market conditions, and that such changes may be unanticipated. The parties nevertheless agree that no change in circumstances shall affect the fairness and mutual consideration given at the time this Agreement is entered into nor shall it affect the validity of this Agreement or any provision thereof.
IN CONSIDERATION of the mutual promises and exchanges made by each party to this Agreement, the parties agree as follows:

Definitions, Property and Income: Comment

The definitions of property, retirement benefits, earnings, and income in the model paragraphs below describe comprehensively the forms of wealth on which the agreement operates.

The definition of property includes virtual currency, such as bitcoin, as well as animal companions.

The definition of earnings includes employee benefits. However, if the agreement includes a provision for spousal support as a percentage of earnings, the drafting attorney should either delete this text or provide that the value of noncash employee benefits is not included for purposes of calculation of support.

Retirement benefits include an individual retirement account, but only if derived from earnings, in order to distinguish such an account from an inherited IRA.

Among the reasons to include these definitions, they can serve to make clear to the other party, especially if unrepresented, the rights he or she is waiving by entering into the agreement.

There may be some situations where these definitions can be deleted. When the agreement will need to be translated for a weaker party who is not fluent in English, the cost of translation, time constraints, or a desire to reduce the length of the agreement may require eliminating all terms that are not absolutely essential. As long as the definitions of separate and marital property remain intact, the meaning of the agreement will not be damaged. When...