What is a premarital agreement?

A premarital agreement (also known as an antenuptial or prenuptial agreement) is a contract between intended spouses made in contemplation of marriage. The premarital agreement dates back to sixteenth century England. Although Oklahoma statutes recognize in general the validity of premarital agreements, case law has changed over time as to the allowable subject matter of such agreements.

What purposes does a premarital agreement serve?

The reasons a prospective married couple might want a premarital agreement are as varied as human perception can allow. Some examples are:

• To preserve rights of inheritance for others, such as children from a prior marriage;
• To establish property and alimony rights of parties in the event of marital dissolution;
• To define, to the extent valid, the respective domestic responsibilities of the new marital partners;
• To outline anticipated arrangements that justify an agreed variance from constitutional and statutory rights;
• To put in writing the disclosure and discussion by the parties about their respective estates, and expectations as to how those separate estates will be managed during the marriage.
• To identify ownership of separate property for the purpose of protecting title;
• To prevent undue surprise between spouses, including the economic aspects of new relationships both during marriage, and upon termination by dissolution or divorce.

Prospective spouses should discuss in detail exactly how they think a premarital agreement might affect their future relationship. This can foster positive discussion between prospective domestic partners, and strengthen the ultimate authority of the agreement.

What rights may be affected by a premarital agreement?

Certainly the traditional use of premarital agreements is to set out the property rights of the surviving spouse on the death of the other. More recently, Oklahoma has led the way in recognizing the rights of prospective mates to alter their statutory rights on divorce. Public ordering of matters of lifestyle or taste may serve more to express the intent of the parties than to create private rights of action.

Rights On Death Of Spouse - This can be a particularly important aspect of private ordering where a party has acquired a substantial estate, and also has children from a previous marriage to whom the party would like to pass the estate. The parties can waive or alter their rights to receive any portion of the other's estate upon the death of the other spouse. Spouses can waive rights to claim the marital residence as homestead property under either the statutes or Constitution of the State of Oklahoma. Spouses can waive the right to collect an allowance during administration of the estate of the other upon death, called the "widow's allowance."

Rights On Dissolution Of Marriage - Oklahoma was the first state in the United States to enforce a premarital agreement which allocated the property and alimony to be awarded between the parties in the event of a divorce. This happened in the 1960 Oklahoma Supreme Court case of Hudson v. Hudson.

Other Marital Rights - There are no Oklahoma cases dealing with the respective rights of prospective spouses as to matters of personal taste, lifestyle, conduct, or purporting to dictate the upbringing of children. Certain aspects of the marital relationship are not subject to private arrangement. This would include obligations of mutual respect, fidelity and support, the duty of each spouse to support the other, and the right of either spouse not to be excluded from the other's home.

How does the law limit what can be negotiated in a premarital agreement?

Tax Considerations - A premarital agreement can create significant gift, income and estate tax burdens for the unwary drafter. Direct payments to a spouse may or may not qualify as alimony under the Internal Revenue Code. This determines whether the payments are deductible by the payor spouse and qualify as income to the payee spouse. Direct transfers of property may qualify as income, a gift, a credit against your lifetime exemption for estate tax purposes, or a tax free exchange. If there is any question or doubt about the possible impact of any provision of a premarital agreement, obtain the advice of a tax professional. A poorly drafted document can have disastrous unintended results.

Pensions And Retirement - the Employee Retirement Income Security Act may prevent re-directing your pension plan from anyone other than your spouse in a premarital agreement. A spouse must consent in writing to the designation of a third party's right to receive certain retirement benefits only after the wedding, not before. Otherwise, the benefits must be paid to the surviving spouse.

How does a court determine whether a premarital agreement is valid?

In addition to general principles applied to determine the validity of contracts, courts have developed a 3-part test to determine the validity of premarital agreements:

1. Is fair and reasonable provision made for the [party opposing the contract];
2. If not, was a full, fair and frank disclosure of the [other spouse's] worth made before execution of the contract;
3. If neither of the above, did the [party challenging the contract] in fact have a generally accurate knowledge of [the other's] worth?

Fairness - A growing number of states determine the fairness of a premarital agreements based on the circumstances of the parties at the time of enforcement. In Oklahoma, the fairness of the agreement is presently assessed as of the time the contract was made. Later changes in the value of the estate of either party (either up or down) are not considered in determining the fairness of the agreement. If the agreement is determined by the Court to be fair to the party opposing its enforcement, the agreement will be enforced.

Duty To Disclose - Even if the agreement is deemed unfair in its terms to the spouse challenging it, the agreement will be enforced against a spouse who consented to the agreement after a full disclosure of the extent and value of the other's estate. The question of whether the disclosure is sufficient must be decided on the merits of each case. The disclosure need not be in exact amounts, but the opposing spouse should have a clear idea as to the other spouse's property and resources. The most common way to establish full and fair disclosure of assets is to attach a list of assets and their value as an exhibit to the agreement. The burden is on the spouse seeking enforcement to demonstrate that a fair disclosure of the "amount, character and value" of the property was made.

Actual Knowledge Exception - Even if the agreement is unfair to the challenging spouse, and even if there was no disclosure, the agreement may still be upheld if the challenging spouse had actual knowledge of the amount, character and value of the other's estate. The assertion of actual knowledge may be recited in the agreement. However, merely reciting the fact of disclosure in the agreement without attaching a list of assets risks a challenge of the agreement. The conduct of a spouse after marriage may ratify an otherwise invalid premarital agreement.

Do I need a lawyer to have a valid premarital agreement?

No, but not having an attorney presents risks. The assistance of qualified legal counsel for both parties greatly increases the chance that the agreement will be assessed either as fair, or based on full disclosure. A monied spouse interested in preserving a substantial separate estate should not hesitate to fund legal fees for the other party.

Does a premarital agreement have to be in writing?

Generally, yes. The parties must agree to the terms of their premarital agreement before the wedding. An oral agreement reached before marriage and reduced to writing after the wedding has been held valid by an Oklahoma court, but this practice carries risks.