Part 2 Are Prenuptial Agreements enforceable in Georgia?

As usual, the best way to illustrate the current state of the law is to give an example by way of recent precedent.  One particularly illustrative case is Mallen v. Mallen, a case decided by the Georgia Supreme Court in 2005.  In Mallen, the Supreme Court upheld a prenuptial agreement after an in-depth examination of the facts on the record, which were fairly sympathetic and arguably in favor for the wife to set the agreement aside. 

 In Mallen, the Husband filed for divorce after eighteen (18) years of marriage and four children and requested the trial court to enforce the prenuptial agreement between the parties.  The facts showed that the Husband, who was a wealthy and educated businessman, and the Wife, who was a hostess at a restaurant and had a high school education, had lived together for about four years (unmarried) when the Wife got pregnant with their first child.   While the Wife was at a clinic to terminate the pregnancy, the Husband called her and asked her not to go through with it and to marry him instead.  The Wife agreed and left the clinic.

 A few days later, and ten (10) days before the planned wedding, the Husband asked the Wife to sign a prenuptial agreement prepared by his attorney telling her the agreement was “just a formality” and that he “would always take care of her.”  The Wife took the agreement to an attorney whom the Husband had allegedly paid to review the agreement but the attorney did not have time to give it his full attention before the wedding. 

 As a result, the Wife then met with the Husband and his attorney on her own (e.g., without legal representation) about the agreement on more than one occasion.  The Wife ultimately signed the agreement after a life insurance benefit was increased and alimony provisions were modified slightly.  At the time of the agreement, it was undisputed that the Wife had a net worth of approximately $10,000.00 and the Husband had a net worth of approximately $8,500,000.00.  In 2002, when the Husband filed for divorce, the Husband’s net worth had increased to $22,700,000.00.  Nevertheless, the agreement only provided alimony in the amount of $2,900.00 a month for four (4) years.  Further, the agreement provided that the Husband was entitled to all the assets with which he entered the marriage and all assets accumulated during the marriage.  Significantly, the agreement also contained a financial statement that set out the Husband’s assets and liabilities (but not his income). 

 The trial court upheld the agreement and the Supreme Court affirmed.  The Supreme Court found

 (1)        That there was no fraud (the Wife should not have relied on the Husband’s statements but on the plain meaning of the agreement she signed);

(2)        That there was no duress (the “threat” of not going through with the wedding was not enough);

(3)        That there was a sufficient disclosure of assets even though the Husband did not disclose his income because it was evident from the four years of living together and the Husband’s assets on his financial disclosure that he was a wealthy man of means;

 (4)        The agreement was not unconscionable just because of the great disparities in the financial status and business experience of the parties (or because the Wife did not have an attorney); and

 (5)        That the fact that the Husband’s net worth increased by 14 million dollars during the marriage was not a change of circumstances as to render the enforcement of the agreement unfair or unreasonable because the Wife could have easily anticipated that the Husband’s wealth would grow over the ensuing years (the continued disparity of their respective financial conditions was foreseeable). 

 In light of this case, it is apparent that yes, a Georgia court will indeed uphold a properly drafted prenuptial agreement, even one presented at the 11^th hour that allows for a party with significant assets to maintain essentially all of his/her wealth while providing a minimal amount of support for the other party.   

*Special thanks for Atlanta Family Law Attorney Jordan Hendrick for his contribution to this article.

Are Prenuptial Agreements enforceable in Georgia? (Part I of a II Part Series)

It seems that whenever a client calls to inquire about a prenuptial agreement (also known as an antenuptial agreement), that their initial concern is whether such an agreement will hold up under judicial scrutiny.  Recent case law answers this question with a resounding “yes”….as long as the agreement is drafted prudently by a knowledgeable attorney. 

 Until 1982, prenuptial agreements were rejected by Georgia courts as a matter of law because they were deemed to be contrary to public policy.  This changed with the landmark Georgia Supreme Court decision of Scherer v. Scherer, in which the Court held that due to certain undeniable changes in societal norms (i.e., the advent of “no fault divorce” and the increased percentage of marriages ending in divorce), the Court could no longer justify this strict rule invalidating all prenuptial agreements.  Instead, the Court determined that persons may establish their rights by contract prior to marriage as long as certain prerequisites are met. These prerequisites are referred to as the “Scherer factors” or the “Scherer test.” 

 The Scherer factors are:

 (1)        Was the prenuptial agreement obtained through fraud, duress or mistake, or through misrepresentation or nondisclosure of material facts?

 (2)        Is the agreement unconscionable?

 (3)        Have the facts and circumstances changed since the agreement was executed so as to make its enforcement unfair and unreasonable (and were any changes in circumstances foreseeable)? 

 While these factors may seem daunting upon initial review, case law has appeared to prove over time that courts will review the factors with an eye towards enforcing the agreement as long as a “full and fair” disclosure of the parties’ financial condition (including income) is made prior to execution of the agreement.  The Georgia Supreme Court has even suggested that a “fairly simple and effective method of proving disclosure is to attach a net worth schedule of assets, liabilities, and income to the agreement itself.” 

 In other words, it appears that the most important step in making sure the prenuptial agreement will be enforceable down the road is to make sure that before signing the agreement, you can prove that both parties had a “general idea of the character and extent of the financial assets and income of the other.”  If this is done properly, then it would be rather difficult for a party to later make a persuasive argument for fraud, duress, mistake, nondisclosure, misrepresentation, unconscionability, or unreasonableness. 

 In particular, it is worth pointing out here that the burden to show duress or unconscionability is especially high in our state.  For duress, the law is well-settled that the mere fact that one party insists on a prenuptial agreement as a condition of marriage does not constitute duress that would void an agreement.  Contrarily, to succeed on a claim of duress, a party would have to show threats of bodily or other harm, or other forms of coercion that would actually overcome the mind and will of the other person and induce him or her to sign the agreement contrary to his or her own free will. 

Further, in order to show that a contract is unconscionable, a party would have to show that the prenuptial agreement between the parties is one that “no sane person not acting under a delusion would make and that no honest person would take advantage of.”  In this regard, it has been specifically held that a prenuptial agreement will not be rendered unconscionable just because it perpetuates an already existing disparity in the financial condition of the parties prior to marriage.