Prenuptial Agreements in Michigan – The Five Steps and Predictability

In the recent case, Reed v Reed, the Michigan Court of Appeals made a decision that strengthened the applicability of prenuptial agreements, especially in long-term marriages.

Before Reed, there was five basic factors To determine if a prenuptial agreement is enforceable:

1. Was the settlement obtained through fraud, duress, or error?
2. Was the agreement unconscionable/unfair when it was signed?
3. Have the facts and circumstances changed since then to the point of making it unfair and unreasonable?
4. Did both parties sign the agreement voluntarily?
5. Did both parties disclose all assets and facts before signing the agreement?

In enforcing prenuptial agreements in long-term marriages, Michigan courts have found that the facts and circumstances have changed since the date of the agreement and refused to enforce them. This new decision limits the ability of trial courts to dismiss a prenuptial agreement that the trial court does not like and substitute their own decision instead of following the prenuptial agreement.

This has been generally true until the case of Reed v Reed. Mr. and Mrs. Reed married in 1975. When they married, Mr. Reed was in law school and Mrs. Reed was studying for her business degree. They had approximately $20,000 in assets. Mr. and Mrs. Reed were married for thirty years. During the marriage, they amassed several million dollars in assets. They shared some of their assets and bank accounts jointly and titled other assets and bank accounts in their own names.

The trial court decided not to enforce the agreement. The trial court found that it would be unfair to enforce the agreement at the time of divorce based on the length of the marriage and the accumulation of assets. The Court of Appeals disagreed with the trial court and ordered the trial court to enforce the agreement despite the length of the marriage and the accumulation of assets.

The Court of Appeals included an element of “foreseeability.” He indicated that at the time of the agreement, it was foreseeable that the parties could accumulate significant wealth and that a long-term marriage was just as foreseeable (and actually what most people expect) as a short-term marriage. The court stated that due to the “predictability” of the long-term marriage and the accumulation of assets, the enforceability was fair. He indicated that Mr. and Mrs. Reed could have foreseen the long marriage and the accumulation of assets when they signed the agreement.

The Court expressed a very strong preference for maintaining prenuptial agreements. He claimed that the parties to the prenuptial agreement had “agreed to be captains of their own financial ship and decide their own destiny.” Therefore, if a future event is foreseeable, it is not a change that would make the application unfair.

This decision has strengthened the enforceability of prenuptial agreements, especially in long-term marriages. If the parties to be married would like to keep their own assets and income separate in the future, it seems that prenuptial agreements are a very solid way to do so. When drafting a prenuptial agreement or making changes to it, both people must be represented by a lawyer due to the serious effects it will have on their rights. Prenuptial agreements are especially important for owners or partners in small or family businesses.