DIVORCE, CUSTODY & FAMILY LAW

Unfortunately, many couples fail to recognize the gravity of a prenup. A properly drafted & executed prenup can last for the entire length of the marriage, which can be 5, 10, or 15 years. Many things change over the course of that time, and holding a spouse to a prenup they signed over a decade ago can sometimes be profoundly unfair.

Given the state’s role in the regulation of marriage, most states have statutes which govern the specific rules of prenups. These rules might cover the proper manner in which prenups are to be executed, and the scope of what may be “bargained” away in a prenup. These statutes give couples a common reference point when they decide to negotiate a prenup, and they serve as a check on what can be “given away.” After all, a marital relationship is not like a contractual relationship. It is not a voidable market transaction. We aren’t just dealing with buying and selling — we are dealing with spousal duties and responsibilities which we as a society hold sacred. When individuals marry, they agree to support each other “in sickness and in health, for richer or poorer.” Letting couples contract out of these basic duties can devalue marriage itself.

In any event, South Carolina is one of just three states without a statute which expressly governs prenuptial agreements. Instead, couples must rely on the professional judgment of their attorneys, who must in turn rely upon a variety of judicial opinions (“the common law”), which can sometimes be inconsistent, contradictory or incomplete. The absence of statutory guidelines can create a good deal of uncertainty, especially when an attorney is faced with a set of facts which are “on the line.” Nonetheless, a number of cases have provided substantial guidance to attorneys seeking to properly draft and enforce (or, alternatively, seeking to challenge and invalidate) a prenup.

I – Scope of Prenuptial Agreements

What can be bargained away in a prenuptial agreement? South Carolina courts have not set any standards which clearly “limit” what the parties may negotiate away prior to the marriage. Like all states, the citizens of South Carolina may agree to waive the right to collect alimony via a properly executed prenup. Similarly, the citizens of South Carolina can not agree to waive or limit the right to collect child support (one rationale being that the support obligation is owed to the child and not the spouse). Apart from the question of child support, there are few clear limits on what may not be bargained away.

In Stork v. First Nat’l Bank of South Carolina, 281 S.C. 515, 516, 316 S.E.2d 400, 401 (SC 1984), the South Carolina Supreme Court held that antenuptial agreements “will be enforced if made voluntarily and in good faith and if fair and equitable. . . . Such contracts are not opposed to public policy but are highly beneficial to serving the best interest of the marriage relationship.”

Unlike the vast majority of states, South Carolina appears to have expressly held that parties to a properly executed prenup may waive the right to seek support and maintenance during the marriage. In Gilley v. Gilley, 488 S.E. 3d 310 (SC 1997), the South Carolina Supreme Court held that a valid prenup “precluded any claim for equitable apportionment or separate maintenance.” The Gilley opinion also went on to spawn a number of extremely confusing cases relating to family court jurisdiction. These cases hold that where a valid prenuptial agreement precludes certain potential avenues of recovery (such as alimony, or separate support and maintenance) that the family court is without jurisdiction to hear the matter:

The family court dismissed husband’s action finding it did not belong in family court since the prenuptial agreement provides that neither party can claim alimony or separate maintenance. Further, the family court dismissed the action because the prenuptial agreement provided that property acquired by the parties during the marriage or owned at the time of the marriage would not be the subject of any claims for equitable apportionment. The family court ruled that any claims arising from property or investments must be asserted in circuit court. We agree.

The implications of this holding are profoundly confusing. They suggest that the husband in Gilley should bring some sort of cause of action in circuit court, rather than the family court. What would that action be? A breach of contract? Remember that equitable division is within the exclusive jurisdiction of the family court. Subsequent decisions have made this position even more confusing. The lesson to be learned from these cases is that the parties may bargain about the scope of the family court’s jurisdiction over their assets. I leave it to creative attorneys to think of the practical implications of this power.

In any event, the question of separate support and maintenance was unequivocally answered (again) in Hardee v. Hardee, 585 SE 2d 501 (SC 2003). There, the Supreme Court fully enforced a prenup to (among other things) prevent a claim for support and maintenance. In footnote 3, the Court explained its reasoning:

Wife cites Towles v. Towles, 256 S.C. 307, 182 S.E.2d 53 (1971) for the proposition that a contractual waiver of spousal support or alimony is against public policy and void. […] we take this opportunity to overrule Towles in light of its outdated views concerning women. There, we invalidated a reconciliation agreement finding it “tantamount to a release of the husband of his duty to perform his essential marital obligations and … therefore, void as against public policy.” Id. at 311, 182 S.E.2d at 54. We went on to state, “Among the essential incidents to marriage is the duty of the husband to support his wife. 41 Am.Jur. 2d, Husband and Wife, Sections 329 and 330; State v. Bagwell, 125 S.C. 401, 118 S.E. 767.

We find Towles represents an outdated and unwarranted generalization of the sexes which is no longer warranted in today’s society. See e.g. United States v. Virginia, 518 U.S. 515, 116 S.Ct. 2264, 135 L.Ed.2d 735 (1996)[…] As we have done in other cases, we find the distinction between men and women is based upon “old notions” that females should be afforded special protection. Accord In the Interest of Joseph T, 312 S.C. 15, 430 S.E.2d 523 (1993); Richland Mem’l Hosp. v. Burton, 282 S.C. 159, 318 S.E.2d 12 (1984). Accordingly, we overrule Towles to the extent it relies upon outdated notions which are violative of equal protection.

As you can see, the Supreme Court couched its ruling in terms of equal protection, arguing that a “man’s obligation to support his wife” was outmoded, and relied upon “old notions.”

But what about a reciprocal obligation between spouses to care for one another? What happens if one of the two spouses stays at home, and the money earning spouse (irrespective of gender) leaves? Is there no obligation to provide for your spouse prior to divorce? This is an essential element of marriage, and South Carolina has clearly held that the parties may contract this element away. “[P]arties are free to contractually alter the obligations which would otherwise attach to marriage.” Hardee v. Hardee, 355 S.C. 382, 387, 585 S.E.2d 501, 503 (2003).

Apart from the limitations on child support, the only apparent limits on the substance of prenuptial agreements are “unconscionability” and “changed circumstances.” These are generally raised as challenges to the entirety of the agreement, rather than limits on what the agreement can contain (although courts have held that one or two particular provisions of a prenup are unconscionable and therefore unenforceable). Thus, while there are few clear limits on scope, there are fact specific limits on substance which a thoughtful lawyer must raise immediately and aggressively. These substantive attacks on validity will be addressed in a subsequent article.

II – Proper Execution of Prenuptial Agreements

In order for a prenuptial agreement to be enforceable, it must be properly executed. Given the inherent ‘duress’ (i.e., emotion and irrationality) associated with marriage, there are a number of requirements regarding the manner in which the prenuptial agreement is executed. These requirements tend to have their roots in contract law, but they extend well beyond those roots for reasons of public policy.

A. Written and Signed Agreement

While this may be obvious, the first critical requirement to a prenup is that it be in writing and signed by the parties. As previously noted, there is no statute which comprehensively regulates prenups in South Carolina. However, S.C. Code Ann. § 20-3-630(A)(4) (discussed more below) provides some guidance, by directing family courts to enforce prenups which are “properly executed by written contract.” As discussed below, this rule imposes additional critical requirements as well.

B. Full Financial Disclosures

Any valid prenup which is signed and in writing must include full financial disclosures of both parties. These disclosures should be attached to the written instrument, and they should be accurate (in order to avoid claims of material misrepresentation, or fraud in the inducement, which would serve to void the contract). The rationale behind the financial disclosure requirement is simple: how can you know what financial benefits you are signing away if you don’t have a complete picture of the finances?

Again, S.C. Code Ann. § 20-3-630(A)(4) provides critical guidance (this time cited in its entirety):

(4) property excluded by written contract of the parties. “Written contract” includes any antenuptial agreement of the parties which must be considered presumptively fair and equitable so long as it was voluntarily executed with both parties separately represented by counsel and pursuant to the full financial disclosure to each other that is mandated by the rules of the family court as to income, debts, and assets;

The final clause of this section is critical. In order for a prenup to be viewed as valid, it must contain a full financial disclosure “that is mandated by the rules of family court.” In other words, it must contain the financial information sheet that parties are required to execute when they are preparing to divorce. Failure to attach such a disclosure should render the prenup void and unenforceable.

Note that additional statutory authority supports this position. S.C. Code Ann. § 20-5-50 (“Requisites of marriage contracts, deeds, and settlements.”) provides:

All marriage contracts, deeds and settlements shall therein describe, specify and particularize the real and personal estate thereby intended to be included, comprehended, conveyed and passed or shall have a schedule thereto annexed containing a description and the particulars and articles of the real and personal estate intended to be conveyed and passed by such marriage contracts, deeds and settlements. Any such schedule shall be annexed to the contract, deed or other settlement paper, signed, executed and delivered by the parties therein interested at the time of the signing, executing and delivering the marriage contract, deed or settlement, be subscribed by the same witness who subscribed the marriage contract, deed or settlement and be recorded therewith; otherwise, and in default of such schedule and recording thereof as aforesaid, the marriage contract, deed or settlement shall be deemed and declared to be fraudulent, null and void with respect to and against creditors and bona fide purchasers or mortgagees.

Further, in Wilson v. Dallas, 743 SE 2d 746 (SC 2013), the South Carolina Supreme Court noted that the standards governing a prenup are analogous to the standards governing waiver of spousal inheritance rights, suggesting the agreements are subject to the same requirements:

S.C. Code Ann. § 62-2-204. (“Voluntary waiver of surviving spouse’s right to elective share, homestead allowance, and exempt property; property settlement in anticipation of divorce.”)

(A) The rights of a surviving spouse to an elective share, homestead allowance, and exempt property, or any of them, may be waived, wholly or partially, before or after marriage, by a written contract, agreement, or waiver voluntarily signed by the waiving party after fair and reasonable disclosures to the waiving party of the other party’s property and financial obligations have been given in writing.

Apart from the aforementioned statutory support, numerous South Carolina courts have recognized that “Full Financial Disclosure” is a key element in determining whether a prenuptial agreement is valid. See e.g., Hardee v. Hardee, 585 SE 2d 501 (SC 2003)(finding prenuptial agreement enforceable and noting that “[i]t is patent that the agreement here was not obtained through fraud, duress, misrepresentation or nondisclosure. Wife was separately represented by her own counsel, by whom she was employed, was fully aware of the extent of husband’s assets, and was advised by her attorney not to sign the agreement.”); Hudson v. Hudson, 757 SE 2d 727 (SC Ct. App 2014) (noting that omission of flea market from “financial declaration attached to the Agreement” was not a material omission that would render the agreement unconscionable).

In short, South Carolina Rules, Statutes, and Case Law all clearly establish that a valid prenuptial agreement should include (i.e., should attach) a comprehensive written disclosure of property and assets. Failure to make this disclosure will likely be fatal to enforcement.

C. Separate Counsel & Understanding Agreement

While standard contract law generally holds parties to contracts (even if they have no read the contents of same), the law governing prenups is more liberal, and looks to whether the parties to the agreement read, understood, and were advised as to the substance of the agreement.

S.C. Code Ann. § 20-3-630(A)(4) specifically requires that the parties to a prenup be “separately represented by counsel.” Representation and understanding are emphasized in the cases considering whether prenups are valid. Hardee v. Hardee, 585 SE 2d 501 (SC 2003)(finding prenuptial agreement enforceable and noting that “[w]ife was separately represented by her own counsel, by whom she was employed, was fully aware of the extent of husband’s assets, and was advised by her attorney not to sign the agreement.”); Holler v. Holler, 612 SE 2d 469 (SC Ct. App 2005) (holding that prenuptial agreement was unenforceable and noting that “Wife professed the agreement ‘had specific language which [she did not] understand even in Russian [wife’s native language].’ Wife never retained counsel because she had no money to pay someone to review the agreement.”)

Accordingly, in order for a prenuptial agreement to be valid, the parties should be separately represented by counsel. This may not be fatal in all cases, but leaves the agreement open to question and greatly increases the risk that an agreement will be invalidated.

D. Time Between Execution & Marriage (“Duress”)

In order to freely bargain for a contract, a party must not be under duress when executing an agreement. Family courts are particularly sensitive to this factor, and will are far more likely to find duress than a civil court enforcing a traditional contract. While this is a fact intensive analysis, courts have considered the amount of time between the execution of the agreement and the scheduled marriage. They have likewise looked to external pressures which might prevent a spouse from freely bargaining. See e.g., Holler v. Holler, 612 SE 2d 469 (SC Ct. App 2005) (holding that prenuptial agreement was unenforceable and noting that “Wife signed the agreement on November 25, 1997. The parties were married on December 1, 1997, merely three days before Wife’s visa was set to expire.”); Hudson v. Hudson, 757 SE 2d 727 (SC Ct. App 2014) (holding that agreement was enforceable and noting that “The parties entered into the Agreement on February 4, 2000, and were married on February 19, 2000.”)

Thus, in order to ensure an prenuptial agreement is valid, the parties should ensure that the agreement has been executed well before the wedding date. If there are any extrinsic pressures (such as the threat of deportation in Holler) they may call the agreement into question due to duress.

III – Defenses to Enforcement of Prenuptial Agreements

There are several fact-specific defenses to prenuptial agreements which will be discussed at length in a subsequent article.