Probable problematic pitfalls in preparing prenuptial agreements.

• Author: Frumkes, Melvyn B.
• Position: Florida

As the use of prenuptial agreements (hereafter "PA") becomes more widespread, so does the deluge of cases interpreting, enforcing, and invalidating them. The practitioner preparing a PA for a Florida resident or a client who may someday reside in Florida (1) must be cognizant of the pitfalls that abound. Some pitfalls should be manifest while others less conspicuous. Ignoring the pitfalls is a recipe for a malpractice claim. (2)

The (Hopefully) Obvious Pitfalls

Consideration. Often, PAs recite the boilerplate "for good and other valuable consideration" or make no reference to consideration at all. The PA should recite that the marriage is the consideration for it. (3) By doing so, the practitioner will likely avoid a challenge, as occurred in Akileh v. Elchahal, 666 So. 2d 246 (Fla. 2d DCA 1996), (4) that there was lack of consideration for the PA.

Full Financial Disclosure. In representing the party seeking to enforce the PA, the practitioner must make sure the client is fully and frankly disclosing to the other party his or her net worth (all assets and liabilities and the values and amounts thereof) and income. (5) Too often just assets, and perhaps liabilities, are disclosed. Florida law requires disclosure of income as well. (6) Do not rely on income tax returns alone since they do not reflect any nontaxable income. The financial disclosure should be appended to the PA and initialed by the parties so as to prevent or minimize a later claim of nondisclosure.

While the disclosure must be full and frank, it need not necessarily be minutely detailed or exact as to values and amounts. Reasonable approximations "close to" the actual values and amounts may suffice. Even phrases such as "value unknown as of the date hereof," "exact value unknown," or "value unknown and undetermined" may be ample (7) although it would be wise to make sure the other party had an opportunity to have any assets with the values delineated "unknown" or "undetermined" appraised. (8) As the Fourth District recently concluded:

We do not read into Del Vecchio or Casto a requirement imposing a duty ... to hire an expert to determine a valuation of his interest in [an asset] before the parties could marry. To so hold would mandate that all parties entering into such agreements first obtain a professional appraisal of business or professional interests, even without proof that such appraisal could be accomplished within the time remaining prior to the marriage, and at reasonable cost, and with the data and information available. (9)

It is advisable when placing values to indicate what the value reflects, e.g., book value, present fair market value, cash value, tax basis, etc. All backup information relating to the assets, liabilities, and income should be made available for review by the other party and the PA should state they were made accessible. If no appraisals are being done, the other side should be given the opportunity to do so and the owning spouse should assert that his or her full cooperation will be given in that respect.

Financial disclosure is not required if the PA makes fair and reasonable provision for the other (usually less pecunious) party or if that party already has a general and approximate knowledge of the character and extent of the other's assets, liabilities and income. (10) A prudent practitioner, however, should not rely on the PA ultimately being interpreted as fair and reasonable or on the other party's supposed knowledge of the assets, liabilities, and income since such involves the unknown (i.e., how a court will interpret the PA) and problems of proof. Full financial disclosure obviates those potential problems.

Timing of Execution. The practitioner must ensure that the PA is not the product of "fraud, deceit, duress, coercion, misrepresentation, or overreaching." (11) As to duress, the PA should not be sprung on the other party "at the 11th hour." There is no bright line rule but it appears that one or two days before the wedding is insufficient time but two to three weeks will suffice.

For example, Hjortaas v. McCabe, 656 So. 2d 168 (Fla. 2d DCA 1995), when the husband proposed to the wife in early April 1987 to get married on May 1, 1987, he told her he wanted her to sign a PA. However, the agreement was not drafted until April 28, 1987, and was executed in identical form two days later, the day before the wedding. At that time, no financial disclosures were appended as exhibits and were not in fact created by the husband until a month later. In holding the PA invalid, the Second District observed:

Two days before the wedding [the wife] was presented with a document, the actual terms of which were previously unknown to her and which contained no information about [the husband's] finances. She had only one day to seek counsel from her own attorney, to make an independent evaluation of the contract, or to cancel her wedding. The only rational conclusion is that her signature was the product of unwarranted compulsion, and the document should have been set aside on that basis. (12)

In Waton v. Waton, 887 So. 2d 419 (Fla. 4th DCA 2004), the husband discussed with his wife his desire for a PA "long before the agreement was prepared," and the wife and her attorney received the PA (which the court termed "patently unfair and unreasonable") two weeks prior to the wedding day. The Fourth District held the PA was executed free of duress. Significantly, in comparing the circumstances in Waton to those in Hjortaas, the Fourth District noted:

We note that the court, in Hjortaas, indicated that if the wife in that case had known of the proposed terms three weeks earlier, when the couple met with the husband's attorney [and even though there was no financial disclosure], that fact would have made it less likely that she signed under duress.

If economically feasible, videotaping the execution of the PA can prove invaluable later if the PA is challenged. The videotape will evince that the challenging party was there with counsel showing no signs of duress, coercion, etc., an acknowledgement that all of his or her questions were answered with regard to the PA, and that he or she is...