Family Law Research Paper.docx

Project on Pre-Nuptial Agreements

Submitted to: Prof.

Ruchika Sharma

Submitted by: Sharanya Nair URN No. 2016-B-01061998 BA.L.L.B (SEMV)

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Table of Contents 1. Introduction 2. What is prenuptial agreements 3. Enforcement of prenuptial agreement 4. Basic provisions required for valid prenuptial agreement 5. Advantages and Disadvantages of prenuptial agreements 6. Status of prenuptial agreements in India 7. Conclusion

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INTRODUCTION In the era of modern family, every moment relationships make and break in fractions of seconds. Premarital Agreement, Prenuptial Agreement. Matrimonial Agreement, Ante nuptial Agreement. Whatever they choose to call it, every couple contemplating marriage should also contemplate a premarital agreement. Yet, scholars and lawyers have told us to be wary of premarital agreements—unfairly characterizing them as being coercive, unfair, sexist, unromantic, and even predictors of future divorce.1 Critics argue, and the law often presumes, that default marital property laws benefit women—an argument that is outdated, at best. Modifications of the default rules, they claim, must be viewed critically in order to prevent women—who are typically in an economically inferior position—from being harmed. In order to protect a woman from the harms of negotiating with her economically superior spouse, the common law grants courts expansive authority to review marriage contracts for procedural and substantive fairness. This approach— the approach taken by most major common law jurisdictions causes more harm than good. It is premised on several sexist and faulty presumptions and it is rarely supported by any actual data. In an effort to protect women from their own ignorance, weakness, and stupidity, the common law creates barriers to entering into premarital agreements that fail to achieve any meaningful protection. The legal profession—in viewing entry into a premarital agreement as an antagonistic process—has erected additional ethical barriers to hiring an attorney to prepare a premarital agreement. For those couples that do decide to pursue a marriage contract, the barriers put in place by the common law and by the legal profession inject unnecessary expense and adversarial decision-making to what could—and should—be a relatively inexpensive and collaborative process. Common law and the legal profession have, in a sense, created a self-fulfilling prophecy. By adopting a dual-representation, dissolution-focused model for entering into premarital agreements, we increase the chances that agreements will be coercive, stressful, and will fail to reflect the expectations of the spouses. These barriers are premised on sexist and outdated notions— notions that typically do more harm than good. Removing these barriers and empowering couples to decide how to arrange their financial affairs would have an overall positive effect on relationship stability and equality of money management within the

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relationship. The meaning of marriage in this era is not that if a social institution but a relationship between two individuals through an agreement, just like a contract1.

What is Prenuptial Agreements A prenuptial agreement also referred to as a premarital or ante nuptial agreement and commonly abbreviated to “prenuptial,” is simply a contract entered into by a couple prior to a marriage or civil union. The content of a prenuptial agreement can vary widely, but commonly includes provisions for the division of property—both physical property as well as financial assets and interests, treatment of future earnings, and spousal support in the event of divorce or dissolution of the marriage. Pre-nuptial agreement is such a contract as to validate the account of marriage2. This is done to ensure that after marriage all the assets of both the parties are fairly divided. But the notion of prenuptial stands in-between many concepts of family law, contract law, economics, feminism and public interest3. One intended benefit of a prenuptial agreement is to avoid (or partially avoid) the cost and emotional stress of a long dispute over dividing up property in the event of a divorce, and, perhaps more importantly, to create an explicit plan that reflects the intentions of the couple rather than a reliance on the community or separate property laws of the state in which they reside. Postnuptial agreements are similar to prenuptial agreements, except that they are entered into after a couple is married. There are clauses for certain civil right to property as well as spousal support in case of break-up of marriage. Hence, the concept of pre-nuptial can be stated to have re-emerged from feminist ideology, as it ascertains equal right to share of property and other requirements to marital life 4. Pre-nuptial is an agreement made between a couples that's about to get married that outlines the fate of finances and personal liabilities in case the marriage fails. In the case of the guys, it protects

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http://family.findlaw.com/marriage/pros-and-cons-premarital-agreements-prenuptialtialtials.html, Accessed, Oct 10, 2018 at 2300 hours. 2 Matthews v. Matthews, 162 S.E.2d 697, 698-99 (N.C. Ct. App. 1968) (refusing enforcement of an agreement entered during marriage due to lack of consideration). 3 Brian Bix, Bargaining in the Shadow of Love: The Enforcement of Premarital Agreements and How We Think About Marriage, 40 Wm. & Mary L. Rev. 145 (1998), Av Lawler, Michael G. (2000) "Christian Marriage and Family in the Postmodern World, “Sacred Heart University Review: Vol. 20: Iss. 1, Article 3. Available at:http://digitalcommons.sacredheart.edu/shureview/vol20/iss1/3avilable 4 Gail Frommer Brod, (1994),“Premarital Agreements and Gender Justice,” 9 Yale Journal of Law & Feminism, Pg. 229.

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them from exorbitant divorce settlements. In the case of individual earners, it makes sure that nothing, not even a joint account, can become a point of dispute in case of a divorce. These days, some couples are even pre-determining matters like custody of a child so that it eases the prolonged procedure when people recourse to court of law to settle dispute amicably. As this generation is about ambitious, educated and focused people who do not want a single mistake to pull them down in life. Arranged marriages once gave couples the security of families knowing each other well. In the age of instant marriages, its fine for couples to be practical about keeping their individual lives to themselves. Prenuptial are enforceable guidelines, contrary to popular perceptions

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Enforcement of prenuptial agreements 6 State laws govern enforcement of prenuptial agreements. Likewise, state law also governs whether the prenuptial agreement is even valid. If enforceability of a prenuptial agreement is called into question in the event of separation, divorce, or death, a trial may result. In a landmark ruling in October 2010, in the case of Radmacher v Granatino, the Supreme Court of England and Wales set out the circumstances in which a pre-nuptial agreement should be binding The purpose of the trial is to allow the judge to weigh evidence presented and credibility of witnesses to enable her to decide whether the prenuptial agreement is to be enforced. Prior to recent years, some states failed to recognize premarital contracts, claiming they were violations of public policy, and therefore null and void. For example, it was not until 1982 that Georgia even recognized prenuptial agreements as valid pre-marriage contracts. Today, most states and their courts recognize the right of competent and consenting adult parties to enter into premarital contracts.

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http://www.legalserviceindia.com/article/l284-Pre-nuptial-agreements.html http://www.attorneys.com/divorce/when-is-a-prenuptialtialtial-agreement-enforceable

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Basic Requirements 

Generally speaking, prenuptial agreements are enforced if they meet these basic requirements:

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The agreement addresses the rights and responsibilities of each party in property of either or both.

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The agreement is in writing and is signed by both parties prior to their marriage.

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The agreement is entered into voluntarily and is not considered unconscionable (defined as overly one-sided, oppressive, and unfair).

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The terms in the agreement addressing the parties' financial information are adequately disclosed, or the parties knowingly and willingly waived financial disclosure.

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The agreement's enforcement would not violate all of one party's marital rights.

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The agreement was signed well before the wedding ceremony to avoid any possible situation of coercion (preferably one to two months prior).

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The agreement is considered fair and does not render either party destitute.

BASIC PROVISIONS REQUIRED FOR A VALID PRE-NUPTIAL AGREEMENT Every prenuptial agreement is unique to the circumstances of the couple that develops it, but there are some typical provisions. Most agreements begin with a brief description of each party’s circumstances, such as age, occupation, any children, and perhaps intentions for future employment or education. Disclosure of each party’s finances—assets, liabilities, and incomes— is required and is usually included as an appendix.

Common provisions include: 1. A provision that each spouse’s separately owned property will remain that spouse’s sole and separate property during the marriage. Sometimes this refers to assets owned before the marriage but it can also include property acquired during the marriage through gifts and inheritances 2. A provision confirming how each person will deal with his or her own premarital debts. 6

3. A waiver of the surviving spouse’s legal right to claim a share of the other spouse’s separate property at death. 4. A provision for the ground rules for buying and owning property while the couple is married (particularly if the purchases will be made with the assistance of family assets from one spouse). 5. An agreement about how taxes will be filed and paid based on each spouse’s separate and commingled assets. 6. A provision that the agreement will terminate (sunset) on a future date, or that the terms will adjust as time passes. 7. An exchange of property for the waiver of property rights (for example, payment of a certain amount of money according to a specified timetable, life insurance coverage, or establishment of a trust for the spouse waiving their rights). 8. A provision defining the rights of each spouse when one spouse contributes to the continuing success and growth of his or her spouse’s business or professional practice. When these rights are not defined in an agreement, the contributing spouse may not be entitled to claim a share of the increase in value in the future which may, or may not, have been the intention. 9. A provision spelling out how joint property will be divided in the event of divorce. 10. A provision specifying how household expenses will be paid.

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Advantages and Disadvantages of Pre-nuptial Agreements Advantages 1. Partners who do not have any wealth can be protected by a prenuptial as well especially when the wealthy spouse has a lot of debt. 2. Reasons for prenuptial agreements are to fully disclose and assign assets in specific ways. 3. Pre nuptial can help to alleviate disputes over property when divorce becomes necessary. 4. Premarital agreements have the potential for many benefits not afforded by the default laws. 5. When a divorce does occur, a premarital agreement can prevent many of the stresses, costs, and time delays associated with a divorce. 6. Premarital agreements could even result in fairer outcomes at divorce because couples are usually able to bargain more cooperatively when they are contemplating their marriage rather than ending it. 7. Perhaps more importantly, premarital agreements may actually prevent divorce by prompting a couple to better define and communicate their expectations at the outset of the marriage. 8. Perhaps more importantly, premarital agreements may actually prevent divorce by prompting a couple to better define and communicate their expectation at the outset of the marriage 9. When both spouses participate fully in financial decisions their own wellbeing, and that of their children, is positively impacted. 10. Contrary to popular opinion, prenuptial agreements are not just to protect the assets of a partner with significantly more assets. Couples of more modest means often use prenuptial agreements to clarify their financial rights and responsibilities during the marriage, or to protect the interests of children from a previous marriage in the case of a subsequent marriage. 11. It is often said that the better you know someone before marriage, the greater the likelihood of marital satisfaction.

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12. Ideally, a prenuptial agreement reflects a couple’s roadmap for their financial future in addition to each partner’s individual desires7. 13. One of the most compelling reasons to consider a prenuptial agreement is the existence of a closely held family business or other legacy asset that has helped to define a family8. 14. The prenuptial agreement safeguards these bloodline assets from leaving the family due to divorce or death. Examples range from shares in a family business to family heirlooms. 15. To protect the financial interests of older persons with substantial wealth who may be entering into a second or subsequent marriage. 16. To protect the inheritance rights of children and grandchildren from a previous marriage. 17. To protect an inheritance or special asset from going outside the bloodline. 18. To protect a business or professional practice from division, this might require a sale upon divorce. 19. To protect one spouse from taking on debts of another spouse, as when one spouse has significantly more debt than the other (e.g., college loans or excessive credit card debt). 20. To protect one spouse in situations where that person will rely on the other spouse for income (e.g., when one spouse plans to give up a career after the marriage).

DISADVANTAGES OF PRENUPTIAL AGREEMENTS:

1. The process of developing the prenuptial agreement may inadvertently raise concerns regarding trust in the relationship or comfort with the broader family. 2. The agreement may require one spouse to give up the right to inherit from his or her spouse’s estate when the spouse dies. 3. A low- or non-wage-earning spouse may not be able to sustain the lifestyle to which he or she has become accustomed during the marriage if the agreement substantially limits the amount of spousal support to which the spouse is entitled after divorce. It’s fairly typical

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https://www.abbotdowning.com/insights/publications/white_papers/a_thoughtful_approach_to_prenuptial_a greements/ 8 Ibid

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that life circumstances change over time and they may not be adequately addressed by a prenuptial agreement. 4. It can be difficult to project into the future how potential issues should be handled (e.g., what may seem like an inconsequential compromise between the couple during the romantic premarital period may seem more burdensome or have greater financial consequences over time). 5. The most common criticism of premarital agreements is that they are one sided, unfair, and serve primarily to protect the economically superior spouse (typically the man) to the detriment of the economically inferior spouse (typically the woman), also as against the public policy9. 6. Many, if not most, criticisms of premarital agreements stem from an underlying assumption that women are categorically in a weaker bargaining position in both wanting to marry and in negotiating a premarital agreement. 7. Can be a trap. Prenuptial agreements can be a trap for some people. In certain cases they can be as a tool to control the partner that is coming into the relationship with less assets. 8. May be unnecessary. State laws sometimes cover a lot of the issues that are addressed in a prenuptial agreement. Most states also don’t allow certain issues to be resolved through a prenuptial agreement. For example, child support matters have to be resolved through court mechanisms. 9.

Can create burdens. Sometimes circumstances change and people cannot predict what will occur in their lives and marriage. It can be difficult to predict how potential issues should be handled in the future, and what may seem like a compromise at first can seem more burdensome later on10.

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It can be unbalanced. It’s easy to have tunnel vision when you are first in a relationship. Many parties sign a prenuptial agreement thinking “I’ll never get a divorce, so what does it matter?” It matters because if you sign a prenuptial that favors your spouse, you may walk away from the divorce with less than what you deserve. The key to making sure that

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Mcleod v. Mcleod (2008) UKPC 64 https://armourlawfirm.com/pros-cons-prenuptialtialtial-agreements/

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your prenuptial favors each of you equally is for both of the parties to hire independent attorneys to draft and review the document before the parties sign it11.

STATUS OF PRENUPTIAL AGREEMENTS IN INDIA Unlike most countries where a valid prenuptial is legal and binding when a couple separates, the Indian legal system does not recognize this pre-marital agreement. In fact, the concept has gained wide social acceptance over the past five years but till date, it is not a legally valid pact as per the laws of our country. Unlike popular belief, a prenuptial pact is not meant for the rich and the famous alone. Though divorce is quite common in India now, it is still not considered a possibility before the marriage and hence there is no thought of a pre-nuptial agreement. There is no talk of a pre-nuptial agreement at all as a way of a by-plan as far as the legislation is concerned. There may be a few people talking about the pre-nuptial agreement, but India is far from including it in its law and legislation plans. Even though we still have a long way to go before pre-nuptial agreements are implemented in India it is a way by which couples can protect their assets in case of a divorce A pre-nuptial agreement helps resolve and simplify a lot of financial and property issues. Since the division of assets are already done before the marriage, implementing what has been decided before the marriage makes life simpler .It just comes down to dividing the assets as mutually decided by the couple and will save nasty arguments later. But a person could get a pre-nuptial agreement drafted abroad, marry in India according to Indian tradition but the agreement will be valid in that particular country only. India has no law on prenuptial or post nuptial agreements. Such agreements are not common in India and are contrary to Indian customs and views about marriage. Nevertheless, the global publicity about celebrity prenuptial agreements is encouraging more affluent people to consider the idea in India. There appears to be no significant case law in India on the topic of prenuptials or postnups. Critically, the Supreme Court of India -- which is vested with extremely broad power to do justice between the parties and which has been quite active in matters concerning the grounds for divorce -- has taken no stand on the matter of prenuptial agreements. It is therefore essential to understand that while prenuptial agreements might be a valuable way for parties in India to 11

https://www.nolo.com/legal-encyclopedia/prenuptialtialtial-agreement-benefits-drawbacks-29909.html 11

express their intention concerning the nature of their financial relationship; it is not possible to assure or even to expect that such agreed terms will be upheld in an Indian court. International clients should also anticipate that prenuptial and post nuptial agreements entered into while they reside outside India will likely not be enforced if either of them should initiate a divorce case in an Indian court12.

CONCLUSION It is evident that today the definition of marriage has changed with the evolution of the society. Today the idea of marriage being a divine institution is lost somewhere. Prenuptial agreements are considered as a security for the future if things don’t work as expected. Previously prenuptial agreements were considered as against the public policy and unacceptable by the society. The concept of prenuptial agreements in society remains a taboo subject in many communities. Many people still feel guilty and uncomfortable even considering the idea and perhaps taking the view that such a contract is unromantic. Many people understandably become offended when their partner initiates prenuptial agreements as a topic of discussion prior to their marriage. But these days in order to be at a safer side it is a better option to opt for prenuptial agreements. Prenuptial agreements have its own pros and cons, In this aspect it can be concluded that as pre-nuptial is entered before marriage, the obligations under it are similar to that of a marital life, which leads to enforcement of marriage through indirect means, which is actually done in good faith as in this post modern period relationship rarely last for more than a month, and so does marriage.

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http://www.international-divorce.com/prenuptialtials_around_the_world.htm

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BIBILIOGRAPHY 1.

TABLE OF CASES REFERED a) Mcleod v. Mcleod (2008) UKPC 64 b) Radmacher v Granatino 2010 UK SC42

2.

ONLINE SOURCES a)

http://www.attorneys.com/divorce/when-is-a-prenuptialtialtial-agreement-enforceable

b)

http://www.legalserviceindia.com/article/l284-Pre-nuptial-agreements.html

c)

https://www.nolo.com/legal-encyclopedia/prenuptial-agreement-benefits-drawbacks-29909.html

d) https://blog.ipleaders.in/pre-nuptial-agreement-in-india-all-you-need-to-know/ e)

https://www.news18.com/news/india/is-a-pre-nuptial-agreement-valid-in-india-1474033.html

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