Premarital and Marital Agreements in Hawaii Divorces

• Publication year: 2020

Premarital and Marital Agreements in Hawaii Divorces

by Thomas E. Crowley III Stephanie A. Rezents

When two married persons divorce in Hawaii, the family court¹ must complete up to four discrete parts of the divorce action: (1) dissolution of the marriage; (2) child custody, visitation, and support; (3) spousal support; and (4) division and distribution of property and debts.² The court has two basic ways of doing so: either apply the criteria and procedures established by Hawaii statutes³ and case law, or, in the event the parties' have an agreement resolving some or all of the issues in the divorce action, approve their agreement, if it's valid and enforceable.⁴

There are three kinds of spousal agreements which may affect, among other things, marital property rights upon divorce: premarital, postmarital, and settlement agreements.⁵ Premarital or prenuptial agreements are entered into before marriage.⁶ Postmarital or postnuptial agreements are entered into after marriage.⁷ Settlement or separation agreements, also referred to as "Agreements Incident to Divorce" or "divorce agreements," are entered into after separation due to the marital breakdown or in anticipation of immediate separation.⁸

This article focuses on spousal agreements that resolve some or all of the marital property rights a court must consider in a divorce action.⁹ Postnuptial and settlement agreements are referred to herein as "marital agreements." This article is intended to assist family law attorneys and their clients apply the criteria for premarital and marital agreements to property division and spousal support in Hawaii divorces. It compares Hawaii's property division statute for divorce actions (Haw. Rev. Stat. § 580-47) with Hawaii's Uniform Premarital Agreement Act (Haw. Rev. Stat. Chapter 572D) and Hawaii's marital agreement statute (Haw. Rev. Stat. § 572-22), and summarizes the requirements for valid and enforceable premarital and marital agreements in Hawaii divorces.

Hawaii's property division statute and the Marital Partnership Model

If there's no valid and enforceable spousal agreement resolving a divorcing couple's marital property rights, the family court applies Haw. Rev. Stat. § 580-47, Hawaii's property division statute, to determine property division and spousal support in the divorce action. HRS §§ 580-47(a)(3) and (4) provide that, upon granting a divorce, the family court may finally divide the real and personal property of the estate of the parties, as shall appear "just and equitable."¹⁰

HRS § 580-47(a) also provides six broadly-stated equitable factors the family court is required to consider in dividing the marital estate:

In making these further orders, the court shall take into consideration: the respective merits of the parties, the relative abilities of the parties, the condition in which each party will be left by the divorce, the burdens imposed upon either party for the benefit of the children of the parties, the concealment of or failure to disclose income or an asset, or violation of a restraining order issued under section 580-10(a) or (b), if any, by either party, and all other circumstances of the case.

To provide further guidance for the family court in dividing marital property, Hawaii case law has created a framework based on partnership principles.¹¹ These partnership principles have been customized by Hawaii case law to create the "Marital Partnership Model" for dividing property consistent with "a well-accepted ideal of marriage" for fairly dividing property without undue emphasis on who made or contributed the money for the marital estate.¹² Under the Marital Partnership Model, "marriage is a partnership to which both parties bring their financial resources as well as their individual energies and efforts."¹³ The application of § 580-47(a)'s equitable factors to the Marital Partnership Model requires the family court to focus on the present and the future, not the past.¹⁴ An important equitable factor justifying departure from an equal distribution of partnership property is "the condition in which each party will be left by the divorce,"¹⁵ such as where the proposed property division would result in a significant financial disparity between the spouses.¹⁶

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Under general partnership law, "each partner is entitled to be repaid his contributions to the partnership property, whether made by way of capital or advances."¹⁷ Absent a partnership agreement to the contrary, "partners share equally in the profits of their partnership, even though they may have contributed unequally to capital or services."¹⁸ Under partnership principles, if the spouses have not agreed otherwise, marital property is equally divided "where the only facts proved are the marriage and the existence of jointly owned property."¹⁹

The Marital Partnership Model recognizes three general classifications of marital property: (1) premarital separate property, (2) marital separate property, and (3) marital partnership property.²⁰ "Premarital Separate Property" is property owned by each spouse immediately prior to their marriage or cohabitation that was concluded by their marriage. Upon marriage, this property became either Marital Separate Property or Marital Partnership Property. "Marital Separate Property" or "MSP" is a narrow category of separate property owned by one or both of the spouses at the time of the divorce that has been excluded from the marital partnership and thus not subject to division. "Marital Partnership Property" or "MPP" is all property that is not Marital Separate Property. The assets and debts of most marital estates fall into the MPP classification of marital property. With respect to MPP, the Marital Partnership Model established five categories of net market values that the family court may use as guidance in dividing MPP.²¹

Marital Separate Property is not subject to division in divorce

Marital Separate Property remains with the owner of that property, and is not subject to division in divorce.²² While MSP cannot be used by the family court to offset the award of Marital Partnership Property to the other spouse, it can be used by the family court to alter the ultimate distribution of Marital Partnership Property based on the respective separate conditions of the spouses.²³

Spouses may, through a valid and enforceable agreement, exclude certain assets from the marital partnership entirely, segregating those assets as MSP:

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[S]pouses may expressly contract for a different division of marital partnership property, and the family court must enforce all valid and enforceable agreements with regard to marital property division. See HRS § 572-22 (2006) ("All contracts made between spouses. . . not otherwise invalid because of any other law, shall be valid."); ... In addition, spouses may exclude certain assets from the marital partnership entirely, thereby segregating those assets as marital separate property.²⁴

There are three methods of segregating property as Marital Separate Property: (1) a premarital agreement pursuant to HRS Chapter 572D; (2) a valid "marital agreement" pursuant to HRS § 572-22; and (3) gifts and inheritances acquired during the marriage that were "expressly classified" as separate property, maintained by itself or sources other than one or both of the spouses, and "funded by sources other than marital partnership income or property."²⁵

Premarital and marital agreements, if valid and enforceable, may govern property division upon divorce, instead of HRS § 580-47's equitable factors and the Marital Partnership Model's criteria for MPP. In Epp v. Epp, 80 Haw. 79, 85, 905 P2d 54, 60 (Haw. App. 1995), the Hawaii Intermediate Court of Appeals held that when a premarital or marital agreement setting forth support and property division in the event of divorce is not unconscionable and has been voluntarily entered into by the parties with knowledge of the financial situation of the other prospective or current spouse, enforcement of the agreement does not violate the principle of a "just and equitable" award under HRS § 580-47. The Hawaii Supreme Court put it this way in Magoon v. Magoon, 70 Haw. 605, 608, 780 P.2d 80, 81 (Haw. 1989): "[T]he agreement rather than the court's view of what is just and equitable in the circumstances may govern the division of property."

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Hawaii's Uniform Premarital Agreement Act and the requirements for a valid premarital agreement

Hawaii's Uniform Premarital Agreement Act (Haw. Rev. Stat. Chapter 5 7 2D) provides the requirements for a valid and enforceable premarital agreement.

The requirements for a valid premarital agreement regarding property division and spousal support include:

• The premarital agreement is in writing, and signed by both parties.²⁶

• Each spouse has the capacity to contract in order to enter into a binding premarital agreement.²⁷

• A premarital agreement is enforceable without consideration.²⁸

• With respect to property division and spousal support, the permitted contents of a premarital agreement²⁹ include:

(1) The rights and obligations of each spouse in any of the property of either or both of them whenever and wherever acquired or located.

(2) The disposition of property upon marital dissolution or death.

(3) The modification or elimination of spousal support.

(4) Any other matter, including the spouses' personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.

• The right of a child to support may not be adversely affected by a premarital agreement.³⁰

• A premarital agreement becomes effective upon the marriage of the parties.³¹

• After the marriage, the premarital agreement was never amended or revoked or abandoned.³²

Hawaii's marital agreement statute and the requirements for a valid marital agreement

Haw. Rev. Stat. § 572-22, entitled "Contracts," provides that all contracts made between spouses which are not otherwise invalid because of any other law...