Pre- and Post-Nuptial Agreements Must Be “Just” and “Equitable” to be Valid

Both pre- and post-nuptial agreements have increasingly come into favor among many couples, particularly those who are waiting longer to marry (or are marrying later in life) or may have issues to resolve during the course of the union.
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These are formal agreements that will be recognized by Indiana civil courts in the event of marriage dissolution – barring certain findings of impropriety at the time the agreements were signed.

For example, Indiana Code 31-11-3 addresses the enforceability of pre-nuptial agreements, stating the agreement isn’t enforceable if one party did not execute the agreement voluntarily, it was unconscionable when executed, provisions modify or eliminate spousal maintenance or cause one party to suffer extreme hardship under circumstances not reasonably foreseeable at the time of the agreement.

Post-nuptial agreements are a slightly newer concept, and one the legislature hasn’t specifically addressed. However, Indiana case law – specifically Augle v. Augle, decided by the Indiana Court of Appeals in 2007, requires courts to recognize and refrain from modifying post-nuptial agreements in divorces unless there is a finding of “fraud, duress or other imperfections of consent or manifest inequities.”

Our Gary divorce lawyers know sometimes post-nuptial agreements are drafted specifically in anticipation of separation and divorce, and can clarify each person’s obligations.

The bottom line is these documents are pretty airtight – but they have to be drafted in a way the court will deem to be fair. The recent case of In re marriage of Traster reveals how courts have struggled with the issue.

In Traster, the Kansas Supreme Court issued a ruling that partially affirmed and partially reversed an appellate court’s finding of a post-nuptial agreement as void for lack of being just and reasonable. The court determined the appellate court could not base its decision on the rationale that the agreement encouraged divorce because such common-law analysis was tossed with the legislature rewrote the state law several years earlier.

The determination of what is “just” and “equitable” may be open for interpretation by the courts, as it is well-established that “equitable” does not necessarily mean “equal.”

According to court records, the couple in question married in 1976 and had no children. While husband had practiced law since 1981, wife graduated law school but never took the state bar exam. She maintained limited employment through much of the marriage, and said she is incapable of gainful employment due to a brain injury that has had a resulting impact on her mental health.

The couple entered two agreements regarding division of assets in the event of divorce, both drafted by husband. The first was written in the 1980s and was not introduced in court. The second, drafted in 2004, became the central issue of appeal.

The agreement acknowledges the couple’s assets were largely an accumulation of loans, gifts and payments from wife’s parents. The document stated neither had plans to divorce, but noted the marriage had suffered significant problems over the years, and the agreement was for the protection of both parties.

The document acknowledged there would be an unequal division of assets, and indicated why that was: Because most if not all accumulated assets came from wife’s parents. Thus, she was to be the primary benefactor of all assets. Additionally, because wife had not worked, she expected to receive no Social Security benefits and, at her age, would have limited ability to obtain gainful employment.

Wife would receive virtually all assets and accounts, except for husband’s business and individual retirement account.

Husband filed for divorce three years later, citing incompatibility. Wife later filed a motion for partial summary judgment ruling finding the agreement valid, enforceable and controlling. Husband opposed.

The trial court held the agreement was invalid or void because the unequal division of property promoted divorce, giving husband incentive to end the marriage as soon as possible so he could accumulate his own wealth and assets. The court also found the agreement to be not fair or equitable, as it would give the wife 98.87 percent of marital assets.

Wife appealed, and the appellate court reversed, finding the agreement should be upheld and its provisions totally enforced.

Husband appealed to the Kansas Supreme Court. Justices ruled the agreement is not void against public policy, but found there should be further review by the lower court regarding whether the agreement is just and equitable.

Indiana Family Law Attorney Burton A. Padove handles divorce and child custody matters throughout northern Indiana, including Gary and Hammond. Call Toll Free 877-446-5294.

Additional Resources:
In re marriage of Traster, December 2014, Kansas Supreme Court
More Blog Entries:
Balogh v. Balogh – Post-Nuptial Agreements Can Protect Property, Sept. 3, 2014, Gary Divorce Lawyer Blog