Episode 113 - Prenuptial Agreements - When Are They Enforceable?
Leh Meriwether: Welcome everyone. I'm Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you're listening to Meriwether & Tharp Radio on The New Talk 106.7. Here, you'll learn about divorce, family law, tips on how to save your marriage if it's in the middle of a crisis, and even from time to time, tips on how to take your marriage to the next level.
Leh Meriwether: If you want to read more about us, you can always check us out online, atlantadivorceteam.com. Todd?
Todd Orston: We're going to have to pick up the excitement level here. That was-
Leh Meriwether: That was just a-
Todd Orston: Yeah. Yeah, we're going to have to pick it up a little bit.
Leh Meriwether: Okay.
Todd Orston: How excited are you about this show?
Leh Meriwether: I'm very excited.
Todd Orston: Yeah, that's still not very much high.
Leh Meriwether: It's going to be a great show.
Todd Orston: There you go. All right. All right, so I'm pretty excited too.
Leh Meriwether: What's interesting is that we've never talked about this before in the show and we've done it over two years.
Todd Orston: Yeah, I know. I know, and what's amazing is that what we're going to be talking about, we're being very cryptic here. What we're going to be talking about is a common place and it's becoming even more so. Meaning, it is something that is commonly. It's a tool commonly used in family law and it's something that really, a lot of people should be considering especially if they … I'm going to give away a little bit.
Todd Orston: If they want to try and avoid the unnecessary litigation that sometimes comes with a divorce, so since I've given a little bit away, what are we talking about today?
Leh Meriwether: We're talking about antenuptial agreements.
Todd Orston: Also known as prenupts.
Leh Meriwether: Prenupts?
Todd Orston: That's right.
Leh Meriwether: Today, we're going to talk about what are prenupts. We're going to give a little history of prenupts because I think it's interesting, how the law has evolved in that area.
Todd Orston: Man, they started with caveman. Yes, I read that song when … That might not be right. All right, never mind. Just keep going.
Leh Meriwether: Who might, what won, what does the court consider when enforcing a prenupt? Best practices when it comes to preparing one and making it enforceable and what clauses can or cannot be included. In order to go through that, we figured, we will pull some celebrity prenupts that we have read about over the years and analyze them and some of our … We're not sure if they're real.
Leh Meriwether: We're not sure if it's just some tabloid trying to claim something but anyways, we're going to take those examples and analyze them as to whether it would be a legitimate clause in a prenupt.
Todd Orston: Good idea. I'm in. I mean, count me in.
Leh Meriwether: I'm glad you like it. All right, so Todd, what is a prenupt?
Todd Orston: Very basically, a prenuptial agreement is an agreement that you can reach before you get married and the whole purpose of that document is you are entering into an agreement or contract that will establish rights and obligations in the event of a divorce. Really, what you're trying to do and the reason I'm saying it, that it's an important tool especially if you want to avoid litigation.
Todd Orston: You can deal with a myriad of topics and issues that typically and routinely come up in divorces. There are some that you can't. We'll go into those but issues of alimony or spousal support, issues of division of property. You can protect assets that you have or you can … If you have no assets at the time, you can still, meaning it's a new marriage, you haven't accumulated anything.
Todd Orston: You can deal with who's going to get a house, who's going to get bank accounts, who's going to get different assets that you accumulate and the reason that that's a powerful tool is because as we, as attorneys know, anybody who has watched Law & Order and not Law & Order but I guess L.A. Law and other divorce shows.
Todd Orston: I just dated myself with L.A. Law but it can get ugly, right? It can get nasty even though we like to say, "Divorce hurts. It doesn't have to be nasty. It can get nasty." By entering into a prenupt, it can avoid some of that fight, if not, all of that fight because at that point, there's no fight. We've already dealt with how alimony will look.
Todd Orston: We'll already dealt with division of property, division of debts and at that point, hopefully, it's an easy transition.
Leh Meriwether: Yeah, unless there's trouble.
Todd Orston: Of course, right. That goes to things that you can't handle. Things like child support, child custody. Those things cannot be handled in the context of a prenupt.
Leh Meriwether: We're strictly talking from a legal perspective, not in the other perspective side of the advantages of prenupts. From a strictly legal perspective, from more of a philosophical question of whether it's a good idea or not. That could be debated.
Todd Orston: It's a difficult conversation to have. I'm not going to downplay the difficulty that you are starting a relationship, starting a life with someone and it's like hey, honey. I love you. I can't wait for us to get married. Can you sign here, here, initial these pages and by the way, you'll get nothing from me when we … No.
Leh Meriwether: Right. It creates this. Are you really all in on this marriage if you're holding back but I don't want to get into that. That's not what we're going to talk about today.
Todd Orston: No, that's not what we're going to talk about but my comment was simply to show. We do recognize. It can be a difficult conversation because you're having it at a time when things are fantastic between you and your soon-to-be spouse but you have to talk in terms of a contemplation of potentially, this relationship won't work and we may end up in a divorce.
Todd Orston: When you count it in terms of, but if that happens, I don't want to fight. Let's try and avoid the fight and that's where, it just comes out to negotiating, making sure that both parties are being treated fairly.
Leh Meriwether: Yeah, and I've seen … The times where I've seen it seem to work really well is like second marriages where people are … They're coming from different places. They're all in and I don't want to jump ahead but I've seen situations where they enter an agreement. They're like, "Look, we think we love each other. We're pointing ourselves into each other but if we get in a divorce the next 10 years, then this is how we're going to split thing.
Leh Meriwether: "But, if we go past 10 years, this agreement is null and void." I've seen people that say, "Hey-"
Todd Orston: Absolutely.
Leh Meriwether: Where they were all in.
Todd Orston: Yeah, and usually, in those second marriages, they've either already accumulated assets that they want to protect. They've also been through a divorce so they know that as good and healthy as they believe their relationship is. Sometimes, relationships end and they've been down that road before and they don't want to, once again, getting caught up in an ugly divorce proceeding.
Leh Meriwether: The description you gave of prenupts is really what people think about today but years ago, those prenupts actually were not … They were against public policy so the only prenupts you could enter into years ago, so this is before the 1970s and this was apparently across the entire United States where agreements, there were anticipation of marriage.
Leh Meriwether: You could talk about, how you're going to combine things and how you were going to organize your finances. I even heard of agreements that had dates nights built into them that was part of it but as soon as it reaches at the point of a divorce, here's how we're splitting everything up. It made the agreement null and void-
Todd Orston: Because it was in contemplation of divorce rather than contemplation of the upcoming marriage.
Leh Meriwether: Exactly, so that made it invalid until 1982, at least here in Georgia.
Todd Orston: Basically, between the disco and this case law, you're going to talk about crazy times.
Leh Meriwether: Crazy times, so 1982, a case came out, Scherer, and am I pronouncing that right? Scherer? It's the Scherer Test so-
Todd Orston: Scherer. Sure. Sorry. That was terrible.
Leh Meriwether: That was terrible.
Todd Orston: I must formally apologize to everyone listening.
Leh Meriwether: That was terrible but it's spelled S-C-H-E-R-E-R and it is still called the Scherer Test. It's the test that's applied to prenuptial agreements to determine whether the court's going to enforce them.
Todd Orston: It's a Georgia case?
Leh Meriwether: It's a Georgia case, yes, but what was interesting is when this case came up that I'm actually going to read from a portion of it because I think it's very interesting. "There could be no doubt that the institution of marriage is the foundation of the familiar and social familial and social structure of our nation and as such, continues to be a vital interest to the state, but we cannot blind ourselves to the fact that the concept or the sanctity of a marriage as being practically indissolvable once you enter into.
Leh Meriwether: "Held by our ancestors only a few generations ago, has been greatly eroded in the last several decades." This is what the Supreme Court is writing and-
Todd Orston: You had me at hello.
Leh Meriwether: That was one long sentence too. My gosh, that was a long sentence. This court can take judicial notice. The fact that the ratio of marriage to divorces has reached a disturbing rate in many states so the … Next time, I'm going to try to summarize this.
Todd Orston: Yeah, I think it's a good idea.
Leh Meriwether: It made sense when I was reading it but when I read it aloud, like this is one long sentence. They were actually looking at the state of our country and in the case, they did some analysis going up until this point, almost all the states or all the states said, "We're not going to enforce these. They are against public policy." They said that "With the advent of no-fault divorce, we need to change our policy."
Todd Orston: Yeah, because they were probably getting bombarded with litigation and things are resulting in long trials. Why wouldn't they then say, "You know what? Maybe it's a good idea to let people contract at the beginning of a relationship in a way that it may limit or prevent, prolong litigation at the end."
Leh Meriwether: There's some times when doing that, I think, can be advantageous because we've seen cases where they never really talked about having kids, and then when they got married, all of a sudden, one party didn't want kids and it caused the divorce so having a conversation about all kinds of aspects of your future together is really important and up next, we're going to talk about some other things that are really important like who might want a prenuptial agreement.
Leh Meriwether: What does the court look at when determining whether it's enforceable? What is that Scherer Test? Welcome everyone. I'm Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp and you're listening to Meriwether & Tharp Radio on The New Talk 106.7. If you want to read more about us, you can always check us out online, atlantadivorceteam.com.
Leh Meriwether: Today, we're talking about something we actually have never talked about in the radio show before, even though we've done it for over two years. That's prenuptial agreement. It is something that's becoming more and more common place today. In the last segment, we talked about how years ago, back in the early, the late '60s, early '70s, it actually was not enforceable.
Leh Meriwether: Somebody could enter a prenupt in the anticipation of divorce, a caveat and it was not enforceable back then as against public policy but the Georgia Supreme Court here in Georgia and across the whole country, decided, took a reevaluation of it and decided that it was no longer against public policy and came up with a test as to whether a prenuptial agreement in anticipation of divorce was enforceable.
Todd Orston: That would be the Scherer Test and that's based on Scher v. Scher. When we say a test, basically, the court came up with three elements if you will that need to be looked at and considered by a court in the event … Parties present the court with a prenuptial agreement and also, let me say. I just want people who are listening to understand.
Todd Orston: At least here in Georgia, we keep saying prenupt but I want to do at least very quickly at the beginning, mention that there is also such a thing called a postnup, okay? A prenupt is you haven't married yet but you enter into an agreement but parties can, after the date of marriage, enter into a similar kind of an agreement and that's called a postnuptial agreement, all right?
Todd Orston: We're going to be saying prenupt, prenupt, prenupt but I, at least, wanted to clarify that so now, getting back to the Scherer Test based on this case law. The court basically came up with these three elements. You want to tell everyone what the elements are?
Leh Meriwether: Sure, so the first element is what's the agreement obtained through fraud, duress or mistake or through misrepresentation or non-disclosure of material facts. The second one is the agreement unconscionable. Number three was have the facts and circumstances changed since the agreement was executed so as to make the enforcement unfair or unreasonable?
Todd Orston: Right, so why don't we … There's a lot to unpack.
Leh Meriwether: Right.
Todd Orston: Let's just go through very quickly, one, two and three and just highlight what the court's really looking for or looking at when applying a Scherer Test. Go ahead. I'm sorry?
Leh Meriwether: Important and if you're listening in another state, there is … A lot of states have their own test and it's based on the case that went up to that particular Supreme Court and I can't, for the life of me, I can't remember what floor this similar case was. The Scherer Test is only in Georgia so if you're in another state, it is important to … The reason I bring this up because in Scherer, the parties actually … It said that it was going to be interpreted and according to Michigan law.
Leh Meriwether: The Supreme Court said that … They said a few other things. I think the parties may have said, "I want Georgia to interpret it." The court said, "Even if they wanted it to be Michigan, we could refuse to use it, enforce it under Michigan law because it's a public policy issue here in Georgia," so just that caveat, you could actually have some case that's really good. Then, when you go to the Supreme Court, all of a sudden, they could change things saying, "We think that the public policy has now changed and we're not going to force these things in."
Todd Orston: Right.
Leh Meriwether: I didn't mean to go off in that-
Todd Orston: No, no.
Leh Meriwether: I just wanted to make sure we hammered that. Thank you. All right, so let's get back to the agreement obtained through fraud, duress, mistake or through misrepresentation or non-disclosure. When you do a prenupt and I … I want to say it's in every state but I know for a fact, at least in Georgia, both parties have to sign a statement basically of their net worth, their assets, their liabilities-
Todd Orston: The financial statement.
Leh Meriwether: The financial statement so there's full disclosure and the concept being somebody says, "Hey, can you sign this and I'm really not worth anything and okay, yeah, I'll sign this." It turns out, they're worth $100 million and the person says, "I was, they tricked me into signing this," or something along those lines so that's that whole fraud mistake.
Todd Orston: Disclosure of material facts.
Leh Meriwether: Yes.
Todd Orston: Right, so yeah. Going back to fraud, duress, mistake. Fraud, obviously, we're talking lies. Information that one party provided was misleading, false. It was a lie. Duress, what people need to understand is duress, in the eyes of the court, is not, if you don't sign this, we're not getting married. That's not duress. Duress is if you don't sign this, I'm going to hit you repeatedly with this rake.
Leh Meriwether: Yeah, or holding a gun to your head or-
Todd Orston: Yeah. Physical violence, jokes aside, something where there are legitimate threats to your physical safety or life-
Leh Meriwether: Or a family member.
Todd Orston: Or a family, correct, that you are then under duress. You feel like you have no choice but to sign. That would constitute duress.
Leh Meriwether: Apart from that extreme circumstance, I've never heard of a prenupt being overturned because-
Todd Orston: I haven't either.
Leh Meriwether: Somebody saying, "He gave it to me. Literally, an hour before we got married." That's still not duress.
Todd Orston: Yeah, because usually, when people say, "I was under duress." They either don't have an attorney, okay? They believe that something constitutes duress that didn't, like in other words, I'm pregnant and we're going to have this child and I'm being told, if I don't sign, that we're not getting married and I just, I need to be married for my unborn child.
Todd Orston: I felt pressured. Pressure does not equate to duress. Duress is a physical threat and if you don't do this, these bad things are going to happen to you. Then, there's mistake. A mistake of fact. Basically, you were relying on some piece of information and you genuinely mistake … It was a mistake. You entered into it. You thought one thing.
Todd Orston: It turns out, it was something else. That also is very difficult because there is … You have a burden when you enter into an agreement to do your due diligence, to basically investigate and make sure that you're educated and fully and completely and correctly understand the terms that you are entering into but nonetheless-
Leh Meriwether: But if someone leaves off an item like … I'm not sure there's an affirmative duty to say, "You know what? I'm going to do a background check on you to make sure you disclose all your real estate."
Todd Orston: Right.
Leh Meriwether: If you look at something that's only … Book's kind of off. Maybe you're supposed to investigate that and there's actually some dispute. It seems like you read one case and the court says, "No." That person should've investigated a little more in the next case. That person doesn't have a responsibility to investigate so each case is very factually dependent.
Todd Orston: Yeah, and there's a big gray area when it comes to enforcement of pre and postnuptial agreements, at least here in Georgia, meaning like let's get to the next one because there's a big gray area. It was narrowed some by another case after Scherer that we'll talk about but there's a gray area still about unconscionability.
Leh Meriwether: I want to be clear like most of the time we see prenupts enforced so when we say gray area, I don't want people to think, what? They're not enforceable?
Todd Orston: There's room for argument. What I mean by gray area is that it's not a black or white thing that you have a signed agreement, then it will be enforced. This whole test is because of that gray area or maybe you can even argue, it creates that gray area because these are all ways to avoid the enforcement of an agreement.
Todd Orston: If you entered into an agreement before you got married, in your mind, you're like, all right, I'm locked in. Right? It's a contract. I signed. He or she signed. We're done so if we do get a divorce, we're bound. No. You have the Scherer Test and what that Scherer Test is, is to determine whether or not that agreement should be enforced at the date of a divorce so unconsionability. What's unconscionability?
Leh Meriwether: I'm not sure if I have an example of one because every case that I've ever seen someone argue that they have failed. There may be one out there that I'm not aware of, that I just missed but they don't hold up. That argument doesn't hold up because-
Todd Orston: We are on the radio so you may want to come up with something.
Leh Meriwether: Unconscionable, using people to say, "When I got married, I was only worth $10,000, and now we're getting a divorce, I'm still only worth $10,000 but he has gone from four million to 25 million." That's unconscionable.
Todd Orston: If I had to come up with my own definition, I would call it or refer to it as gross unfairness that basically, I entered into this agreement. Facts have changed so dramatically that it would be patently unfair-
Leh Meriwether: No, that's number three.
Todd Orston: Yeah?
Leh Meriwether: We're focusing number two.
Todd Orston: Yeah. Okay. I'm blending. Okay?
Leh Meriwether: I would've given a different example if I know you were blending.
Todd Orston: There's a little bit of blending. I'm a blender. I'm a blender but that right now that the terms on their face are just unfair for them to be applied and enforced right now. It would be unfair and that, of course, leads us to number three.
Leh Meriwether: Yet the facts and circumstances have changed since the agreement was executed so as to make its enforcement unfair and unreasonable. Let's actually break down that a little bit more. Break down a little bit more of just number two, the agreement being unconscionable so we'll get some clarity there and avoid some blending so I don't get confused too. We'll be right back.
Leh Meriwether: Welcome everyone. I'm Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp and you're listening to Meriwether & Tharp Radio on The New Talk 106.7. If you want to read more about us, you can always check us out online, atlantadivorceteam.com. We've been talking today about prenupts and we started off, going over the history of them.
Leh Meriwether: How originally, a prenupt that was drafted in anticipation of a divorce was unenforceable some 40 years ago or so and today … It might be 50 years. Today, it is enforceable. We're talking about what the court's do, the analysis that the courts here in Georgia in particular go through when deciding whether a prenupt is enforceable. From the cases I've read in other states, the process, the thought process is very similar from many of the states that I have read.
Leh Meriwether: I'm not going to talk about them because I don't have them memorized or anything. I'm going to focus on Georgia but-
Todd Orston: If you're in another state, obviously, listen to our show and then disregard most of everything that we've said. Go talk to an attorney in that state and find out what the law is there.
Leh Meriwether: Well at least you'll get a general idea.
Todd Orston: Absolutely, absolutely.
Leh Meriwether: Don't stop listening.
Todd Orston: No, I said, "Listen to our show."
Leh Meriwether: Then, disregard it. I got you. Don't rely on.
Todd Orston: That's right, then go find a local attorney and understand what the law in your state is.
Leh Meriwether: Don't actually rely completely on our show. We don't know the facts of your case if you have an agreement or case. You'd need to talk to a lawyer.
Todd Orston: All right. Maybe we should move on. The next thing you're going to be saying is "Actually, just stop listening." No. All right.
Leh Meriwether: No, I'm not saying that.
Todd Orston: Okay, so we were talking about unconscionable. The last one was that facts and circumstances have changed since the agreement was executed so as to make its enforcement unfair and unreasonable.
Leh Meriwether: Really, the only scenario that comes to mind with that. I've never seen this scenario but I can imagine this scenario qualifying in number three so they enter a prenupt, and then during the course of their marriage, let's say the wife has a stroke and now-
Todd Orston: A medical emergency, yeah.
Leh Meriwether: She is now disabled. She cannot work.
Todd Orston: She's been taking expensive medications. She's going to lose her insurance in the event of a divorce. She contracted a way, the majority of the assets. The husband has the money, has been providing for, medically speaking and just basic human needs but the prenupt would basically put her out in the cold and not give her access to the medical treatment that she needs.
Todd Orston: That might be a change of circumstances that would warrant, basically, no enforcement or refusal to enforce the agreement so again, unconscionability is was it fair at the time that you entered it? When you look at the facts, is it just grossly unfair? Change of circumstances, deals with an unconscionability type argument at the time that you were trying to enforce it.
Todd Orston: Have things changed so dramatically that it would be wrong on many levels to enforce this agreement?
Leh Meriwether: I would imagine that a judge might like subconsciously go, "Okay. If I enforce this, now, this person's basically going to become a ward of the state and create an expensive burden on the taxpayers of the state," and so …This person over here is worth five million dollars. I could easily not enforce it. Shift a million dollars over this person to have them taken care of.
Todd Orston: Yeah, and on top of that, I think the argument comes in that there's no way that the parties could have, would have or did contemplate a medical, severe medical issue like a stroke, like something else that would put one of the parties who entered into this contract that would put them into such a bad financial situation and maybe even affect their health and welfare.
Todd Orston: That could not have and was not contemplated all the way back then. At that point, the court potentially can say, "Okay, I'm not going to enforce this because right now, enforcement would do such harm to this one party. Considering, there's no way they contemplated this, I'm not going to enforce it."
Leh Meriwether: Yeah, so I still haven't seen one. The only thing I've-
Todd Orston: It's hard. Yeah. Look at the extreme that we're talking about.
Leh Meriwether: Yes, and the ones that we've seen and it may have happened. It just never got appealed and so you usually don't hear about them until they've been appealed in a public court.
Todd Orston: Yeah, and so we've been talking about Scherer. There was another case that came out. This was in 2005, Mallen vs. Mallen. In that case, there were some of these arguments. In that case, the husband, at the time of the marriage … I'm just going to very quickly sum it up. Made about and I'm averaging or I'm summing it up and summarizing. Made about half a million dollars, a little north of … Half a million dollars a year in income.
Todd Orston: Had, I want to say, somewhere between four and four and a half million dollars in assets. Got married to the person who became his wife who was pregnant with their child. From that point forward, his income was at the very least, that amount. More likely, it went up, but what did go up was the size of his estate and it went up to like … I think it was about $11 to $12 million dollars.
Todd Orston: The wife, there was a prenupt. The wife basically said, made all these arguments that there was a non-disclosure of information, that he was unconscionable because she was a waitress at the time that they got married and had nothing, and so he had so much. It was unfair and unreasonable and unconscionable to enforce that agreement.
Todd Orston: There was a change of circumstance because clearly, his estate tripled in size and therefore, I should get something at the very least. I think what she ended up saying was, "Forget about the assets. I can deal with the assets but I need some alimony." The bottom line is that the court looked at all these things and ended up enforcing the agreement.
Todd Orston: Basically, denied her request on the appellate level but I'm just saying, denied her positon that it should not be enforced.
Leh Meriwether: Yeah, and there was actually dissent in that case so it was a close decision because several of the justices thought, it shouldn't have been enforced but it was.
Todd Orston: That was really based on the non-disclosure of information-
Leh Meriwether: Of income. It wasn't just-
Todd Orston: It was on income so-
Leh Meriwether: He supposedly disclosed all his assets.
Todd Orston: He disclosed assets and because … I think my recollection was that because the issue that was being raised by the wife was I need alimony to survive. Income is a pivotal and important issue related to determination of alimony.
Leh Meriwether: Then Mallen, weren't they married? They would've been together for several years.
Todd Orston: They were together for about four years prior to getting married so basically, the minority who were dissenting basically said, "He didn't give information related to his income. Therefore, there was a non-disclosure of material fact and pursuing to the Scherer Test, therefore, that agreement should not have been enforced."
Todd Orston: The majority said, "No. They were together. She understood what his income was at the time of the marriage and she had an obligation to look into these things. If she chose not to pursue that information, that was on her."
Leh Meriwether: What's interesting is so in Blige vs. Blige which is three years later. It's B-L-I-G-E, that there was a discussion where it said, "In the absence of full and fair disclosure, the other spouse does not have a general duty to investigate the assets of the other party." If you look at … Hyper focus on the facts of these two cases.
Leh Meriwether: They look like they're different but if you pull back and try to go, "Okay, what am I to take out of these cases?" There seems to be a conflict. Not exactly but-
Todd Orston: There are nuances.
Leh Meriwether: There are nuances so when you have these cases, you have to find a case that closely fits. I'm talking about the appellate case or the Supreme Court case that closely fits your facts and circumstances when arguing whether something should be … One of these prenupts should be enforced.
Todd Orston: Yeah, and let me also say this. As we've done shows on representing yourself, I'll be honest with you. We will oftentimes say that "Yeah, you can represent yourself in a divorce, depending on the facts and the issues and all of that." These arguments are very, very technical and so my recommendation to anyone listening who is dealing with an enforcement issue in an upcoming divorce.
Todd Orston: Get yourself legal counsel because like I said, it's a very technical argument that your attorney is going to have to look at different case law and then apply that case law to your specific facts. The court is going to want to err on the side of enforcement because it's a contract. What you're doing is you're looking at a judge saying, "Yeah, yeah, yeah." I know I entered into this agreement and I know I formally contracted certain rights away but I want you to throw that away. Away.
Todd Orston: Let's just pretend like that never happened. Courts don't want to do that. That's not equilibrium for a judge. A judge doesn't want to throw out a binding contract but the Scherer Test is saying, "Okay. Typically, you're not going to do that but here's the test. Apply these things, these different prongs of the test because maybe, you have to get rid of this contract because it was unfair. There was misrepresentation." Something like that.
Leh Meriwether: I've had these cases where … I had one years ago where, and it had to go to trial and everything. It was interesting. The wife was the one who had all the assets and she insisted, our client sign it but when it came the time to enforcing it, she didn't want to enforce which was-
Todd Orston: I've seen that before. Usually, it's interesting. The facts have to be interesting or to say that because usually, that person in that situation want it enforced.
Leh Meriwether: Yeah, so hey, up next, we're going to actually talk about some best practices, so if this is something you're considering. What should you do to make sure you enter into a enforceable prenupt? Todd, while we're on a break, let's take a moment to speak just with our podcast listeners.
Todd Orston: Great idea, Leh. First, thank you for listening. If you're a client of ours, thank you for taking the time to educate yourself. It really helps us help you.
Leh Meriwether: I wanted to thank those that recently took a moment to review our podcast. We really appreciate it. If you feel like you're getting a value from the show, please take a moment to post your review. The reviews help others find the show which allows us to help even more people.
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Leh Meriwether: Welcome everyone. I'm Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp and you're listening to Meriwether & Tharp Radio on The New Talk 106.7. If you want to read more about us, you can always check us out online, atlantadivorceteam.com. All right. Today, we've been talking about prenupts and we've been … We started off with a history of them.
Leh Meriwether: The last two segments, we got deep into the analysis that the courts have done. We've talked about how they're very fact specific and sometimes, you might look at two cases, appellate cases. That means that at the trial court level, a decision was made and somebody appealed it so either the Court of Appeals or Supreme Court. Now, depending on the type of case and at least, that used to be the role.
Leh Meriwether: They're very fact dependent so sometimes, you might look at two cases that seem like, wait a minute, those conflict with each other but not necessarily. All right. Let's talk about best practices. What should you do? Let's talk about practical stuff. What should you do to make sure your prenupt is enforced?
Todd Orston: Let's start with where … If you're in Georgia and you are drafting this in Georgia, of course, you're going to apply Georgia law. You have to understand Georgia law. What I will say is going to what you said earlier, the laws of each state might be and are oftentimes different, so you have to understand that if you're both here and you're entering into the agreement here and Georgia law will apply, great.
Todd Orston: We've had people who are contemplating a marriage and they are talking about, then they come to us and they say, "Hey, we want a prenupt. By the way, as soon as we get married, we're moving to Kentucky."
Leh Meriwether: Right.
Todd Orston: Okay. If you're not planning on living here and you already have an idea of where you're going to go, I will tell you. You should probably contact an attorney in that state to make sure that the way Georgia handles things in terms of a prenupt and applies the law in relation to the enforcement of a prenupt is similar to the law in Kentucky let's say.
Todd Orston: If Kentucky requires something different or something additional, then you can talk to your Georgia attorney who is preparing it and you can add that language to make sure that in the event of a divorce, when you're both five years, 10 years, 20 years in Kentucky and Kentucky law will apply to the divorce, that the laws of that state have been complied with.
Leh Meriwether: Now, you can also include a choice of law clause so you could say, "Look, no matter where we move to, this is going to be interpreted under the laws of the state of Georgia." Now, it doesn't mean you don't run into problems in other states because like I said, when this case, the Scherer case first came out, it was, the choice of law was Michigan but there was a public policy against enforcing them so Georgia at the time could've said, "We're not enforcing."
Todd Orston: Correct and building on that example is why you just need to understand and know that you can elect and oftentimes, we do that Georgia law will apply but you may want to at least familiarize yourself with the laws of the state that you're going to be moving to, just in case there's something that could affect the enforcement.
Leh Meriwether: All right, the second thing is don't wait till the last minute to do it. There's several reasons for that but the first reason is you don't want to give that argument whether it fails or not. You don't want to give the argument that someone had the argument, I was under duress because people still make it even though the law is pretty clear on it. In my opinion at least.
Leh Meriwether: I still see people make it. Do it several months. If you can do it six months before your wedding, great. Have a discussion, not just about your finances, about all things but do it six months in advance before.
Todd Orston: Sometimes, that's not possible. We understand that. We have clients come to us all the time and they're like, "Hey, my wedding is three weeks from now or two weeks from now. Can we do this?" The answer is yes, we can. Just because you're doing it at the last minute doesn't mean it can't be done and where that it's not going to be enforceable.
Todd Orston: What we're saying is that it builds certain arguments in that somebody might wrongly, but somebody might still make an enforcement argument regarding, let's say duress or lack of … Failure to disclose if you're doing it in a rush and things aren't disclosed properly, so you don't want to wait till the last minute. Best practice, as much time as possible.
Todd Orston: I'm not trying to dissuade people from entering into a prenupt even if their marriage is around the corner.
Leh Meriwether: Right. You make an excellent point so that the reason not to-
Todd Orston: I appreciate that.
Leh Meriwether: You do it every once in a while. The reason you want do it in advance is number one, to avoid the argument of duress but number two, avoid the possibility of not properly filling out your financial statement, and so the next thing is do your financial statement well in advance. Double, trickle …. Trickle?
Todd Orston: Trickle, trickle-check it.
Leh Meriwether: Trickle-check it. Triple-check it, quadruple-check it because that is where I see most … I see every one I've ever read was where the court found that there was not a full disclosure of assets and liabilities-
Todd Orston: Or that it wasn't accurate. You prepared one, and then you started digging in and you see that there were dramatic differences between what the actual value of the counts were and what was put onto the financial statement. Make sure it's accurate and make sure it's comprehensive. Make sure, if you-
Leh Meriwether: Have someone else double-check it for you.
Todd Orston: Absolutely.
Leh Meriwether: Like if you have an accountant that knows a lot about your … Or a financial planner that you work with. Have them double-check it for you. That's a huge one.
Todd Orston: Next, I would also say, "Each party should have their own independent attorney." All right? For a couple of reasons. First of all, you need someone that you can speak to that is protecting you, all right? Because this is a contract, these terms can affect you for years and years and years to come and materially affect you.
Todd Orston: You may be giving up alimony rights. You may be giving up property rights. It can carry with you for years to come and affect your life, so make sure you have somebody who is dedicated to you, that represents you. One attorney can't represent two parties and give both of them the strong advice and counsel that they need. It's a conflict.
Leh Meriwether: That, and if you really want to enforce, you don't want the other person to say, "I thought this person was representing me, and now I found out they weren't so that's a fraud."
Todd Orston: That's right.
Leh Meriwether: It's worth the extra money to pay for two lawyers to be involved because it helps to eliminate the defenses that you may run into later on in court.
Todd Orston: If you hire the right attorney, it doesn't mean it has to be a fight.
Leh Meriwether: Right.
Todd Orston: That's where we've done shows on you have to interview the attorney. Make sure that they understand. I want good counsel. I want you to tell me right from wrong, but at the end of the day, I'm not looking to have this break down and me not get married. If this is horrible, tell me.
Todd Orston: I'll make some good decisions for myself but you don't want somebody who's going to try and fan some flames and turn it into something it doesn't need to be.
Leh Meriwether: Another practical tip is when you're preparing your financial statement, go ahead and print up statements so like if you're listing out, my 401(k) has $500,000 in it. Print a current statement and attach it to your financial statement because that goes to say, "Look, I was. There was full disclosure." It helps you avoid mistakes and here's the other thing that helps too.
Leh Meriwether: Let's say, there was a huge upswing and you put it in there and you just got busy with your wedding. By the time you got married, that $500,000 was now worth $650,000 because one of the stocks in your portfolio went through the roof. They can't say you mislead them because you had the statement attached.
Todd Orston: Yeah, we're going to talk, Leh, and we're going to talk in the next show we do on prenupts about a celebrity case that is similar to this but if you write on the back of a napkin. Hey, this is our prenupt and you both sign it. As opposed to, you have a full comprehensive agreement with attached exhibits in all of that. One is going to be very enforceable. The other one, not so much.
Leh Meriwether: Not so much. All right, I'm glad you said that the formality matters so in Georgia, they recently changed the law last year. They changed it, 2018, depending on when you're listening to the show. Now, it must be notarized and there must be another witness so you've got to make sure you follow those formalities because that is the other thing that I have seen some agreements thrown out on for failure to follow the formality.
Leh Meriwether: If you just, the two of you sign it in Georgia, you could do everything else we talked about but if it is not notarized and witnessed, it is unenforceable.
Todd Orston: This goes to the courts, what I was saying before about courts want to enforce these contracts but what they're doing is they … That the courts have been putting these rules in place to say, "Okay, I want to enforce this but you have to do a few things. You have to follow these formalities. You need to make sure that it will pass the Scherer Test. All of these things but as long as you do these things, it's going to be enforced."
Leh Meriwether: Shoot, you know what? We have run out of time.
Todd Orston: I blame you.
Leh Meriwether: All right. Hey, we didn't get a chance to get to a few things including what can and can't be in prenupts so-
Todd Orston: I think you mentioned it. I think we actually did mention it at one point.
Leh Meriwether: Tune in next week. Yeah, we're going to get into those. We're going to take some celebrity cases. Break them down and we're going to get into some of those. What you can and can't do next time. I'm glad we set that aside. There's actually some other best practices, tips. You can find them on our website if you go to atlantadivorceteam.com or mtlawoffice.com.
Leh Meriwether: Go there. Look up under our mega menu on the top, prenupts, and you're going to see some best practices there. If you're at that point, go check out our website. We've just scratched the surface in the show and tune in next week to hear some more details with some fun facts from some of these cases. We'll break those down and have a good time.
Todd Orston: I look forward too.
Leh Meriwether: Good.
Todd Orston: I'll be here.
Leh Meriwether: Thank goodness. Thanks so much for listening.
Speaker 3: This audio program does not establish an attorney-client relationship with Meriwether & Tharp.