Prenuptial Agreements in Virginia: When Are They Enforceable and How Can We Separate or Join Properties?
Are Prenuptial Agreements valid and enforceable in Virginia?
The short answer is: Yes, upon marriage.
It is important to recognize the value of a Prenuptial Agreement. A Prenup is often perceived as an instrument that facilitates or encourages divorce. The true intention of a Prenuptial Agreement is to minimize conflict during the marriage and to avoid litigation and intrusion into their lives due to the unexpected event of divorce or death.
This contract between fiancés is treated no differently than other contracts. A Prenuptial Agreement is a contract between fiancés that may establish boundaries of separate and marital properties upon marriage and may incorporate property settlement and separation agreement terms that would take effect upon marital separation and/or divorce. Specifically, under the Virginia Premarital Agreement Act, the Prenuptial Agreement’s terms on the spousal support and the disposition of property upon separation, marital dissolution, and/or death become controlling, enforceable terms upon occurrence of such events.
One way a Prenuptial Agreement is most often utilized is to continue to keep each party’s pre-marital separate property as a separate property. Therefore, the property that would have otherwise become a marital property and subjected to equitable distribution by court would not be subjected to a split. Section (I) further defines separate property and how a Premarital Agreement may set clear direction on how a married couple can separate or join their properties. Section (II) discusses requirements of an enforceable Prenuptial Agreement under the Virginia Premarital Agreement Act.
I. Separate Property
In a divorce action, a court may classify property as marital, separate, or hybrid (part marital and part separate). Separate property belongs to the owning party and the other party is not entitled to such property. However, separate property is not limited to the properties acquired before the marriage. While property acquired during the marriage is presumed to be a marital property, there are ways for a spouse to build separate property during a marriage. For example, a property from bequest, devise, descent, survivorship, or gift from someone other than the other spouse can be considered separate property. Also, if a party sells separate property during their marriage, the sales proceeds will be considered separate property as long as the fund is maintained as separate property.
To this effect, a Prenuptial Agreement can specify how and which property will be kept separate and when a property will become a marital property. The Agreement can also specify how and when a marital property is jointly created. In a divorce action, the Prenup pre-designation terms could prevent high litigation costs of fighting over separate and marital properties.
II. Requirements to Make an Enforceable Prenuptial Agreement
There are legal requirements to make this beneficial Agreement enforceable under Virginia Code § 20-151.
First, a Prenuptial Agreement cannot be enforced if there is clear and convincing evidence that the agreement was not executed voluntarily. Second, the a Prenuptial Agreement is invalid if the agreement was unconscionable at the time of executing the Agreement, and the counter-party was not provided a fair and reasonable disclosure of the property and financial obligations of the other party when the counter-party did not agree in advance in writing to voluntarily and expressly waiving his or her right to be notified of the other party’s assets and debts.
A Prenuptial Agreement will not fail this test just because a party failed to list all assets and debts existing at the time of the contract. So, what is the extent of the assets and debts necessary to meet the “fair and reasonable disclosure” requirement? When is an agreement considered “unconscionable”?
A. Fair and Reasonable Disclosure of Assets and Debts
The courts will review the circumstances to assess whether there was a fair and reasonable disclosure. For example, in Chapin v. Chapin, the Virginia Court of Appeals held in 2017 that the husband did not make a fair and reasonable disclosure when he had disclosed about $1,800,000.00 in assets and concealed over $500,000.00 in liabilities. As a result, the husband’s debt ended up reducing his property and asset values by nearly a third, affecting the wife’s entitlement. So, the court refused to enforce the party’s Prenuptial Agreement terms in their divorce proceeding. In Chaplain v. Chaplain, the same court held that there was no fair and reasonable disclosure in the Agreement when a party failed to disclose his net worth of approximately $20 million dollars.
B. Agreement was Conscionable
Generally, deception, trickery, bad faith or oppressive behavior are factors that a court reviews to find whether an Agreement was conscionable or not. It is not a trickery just because a fiancé said to the other that “I will marry you only if you sign a premarital agreement.” In Galloway v. Galloway, the Court of Appeals of Virginia ruled that the Agreement was conscionable even when a party has received the Agreement a night before, because the other party informed her of her right to retain an attorney, and she voluntarily signed the Agreement without coercion.
If an agreement is conscionable and enforceable, the court will not modify the terms of the contract.
C. Agreement was NOT Conscionable
In juxtaposition, a court held in Odom v. Odom (Loudoun County, 2003) that a prenuptial agreement was unconscionable and thus not enforceable. In that case, the wife had recently come to the U.S. speaking little English, the husband’s Russian translator did not translate the agreement word for word for the wife, the wife did not know that the agreement contained the 10-year spousal support waiver, had no income or prospects for income, and had no assets.
A simple Prenuptial Agreement can save tremendous time, money, and energy of spouses during marriage, as well as during the unexpected event of marital dissolution. It is important to seek legal advice to craft an agreement that is unique to your needs and circumstances.
Ra Hee Jeon is a Pender & Coward attorney focusing her practice on family law and immigration matters.
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