We have been asked occasionally to draft a prenuptial, or antenuptial, agreement for a client who is planning to get married.  Such agreements are contracts between the soon-to-be spouses as to what rights they will each have to their respective incomes and assets in the event of death or divorce.  A 2014 Mississippi Supreme Court opinion laid out the requirements for a valid prenuptial agreement in the context of a later divorce.
After dating for two years, Tanya Sanderson and Hobson Sanderson married on July 23, 1994, in Decatur, Alabama. Hobson was a sixty-two-year-old businessman. He owned Sanderson Construction and Sanderson Ready-Mix. The value of his assets at the time of marriage was approximately $3,580,000. Tanya was twenty-eight years old, and she had attended one year at a four year college studying music and one semester at a community college. She also had about five years of clerical experience as a deputy clerk at the Lee County Chancery Clerk’s office. The value of her assets at the time of marriage was about $135,000, and she had a young daughter.
The parties decided to marry only a few weeks before the wedding ceremony. The ceremony was a small and casual event, and no formal invitations were sent. Two weeks prior to the ceremony, Hobson approached Tanya regarding the execution of a prenuptial agreement. Hobson’s attorney prepared the agreement and told Hobson to encourage Tanya to seek outside legal counsel. The agreement contained a signature line for Tanya’s attorney. Hobson’s brother and CPA for Hobson’s construction company, Tom Sanderson, prepared Hobson’s financial statement to be attached to the agreement. Tanya prepared her financial statement, and she gave it to Tom on July 18 or 19. The final agreement for the parties to sign, that was supposed to have the financial statements attached to it, arrived the morning of July 22 – the day before the wedding.  The agreement eliminated all rights to spousal support, and it deemed all property owned before marriage and all property acquired during the marriage to remain separate property if traceable.
Further, the agreement stated that neither party was entitled to alimony or any part of the other party’s “investments, earnings, gifts, or inheritance.” The agreement also covered what each party would receive upon the death of the other party. Tanya would receive $100,000 from Hobson’s estate, and Hobson would receive $20,000 from Tanya’s estate.
On July 22, the day before the wedding, Hobson gave the agreement to Tanya and requested she have an attorney sign it. Tanya testified that the first time she saw the agreement was on July 22, and she took the agreement to the law office of her cousin, Jimmy Doug Shelton. Tanya discussed the agreement with Shelton for about ten minutes before she convinced him to sign it. Shelton testified that Tanya’s number one concern was Shelton’s signature and that she did not seem to want legal advice about the agreement. Tanya appeared eager to drive to Decatur to finish planning the wedding. Shelton told Tanya that the agreement was one-sided, and he needed more time to review it. Tanya stated that she and Hobson would not divorce; Shelton signed the agreement.
At the divorce trial, Tanya testified she signed the agreement after the wedding at Hobson’s request. Hobson testified that Tanya signed it before the wedding. Hobson further testified that the financial disclosures were attached to the agreement at the time Shelton signed it. However, Tom also testified that the financial disclosures had not been initialed on each page like the agreement. Tom stated that he had tried to contact Tanya to have her come to his office, but she was already in Decatur, Alabama. Tanya initialed each page about a week after the wedding, and she testified that she had not seen the financial disclosures until she initialed them after the wedding.
Tanya testified that she did not understand the extent of her rights that she was forfeiting by signing the agreement, and if she had understood, she would have postponed the wedding. She further testified that Hobson did not want her to work after their marriage and that he promised to take care of her for the rest of her life. Tanya stated that she was generally aware of Hobson’s wealth, but he was secretive about it. About a year or two after they married, Tanya and Hobson opened a joint banking account, and Tanya deposited Hobson’s salary checks into the account each month. They filed joint tax returns.
The trial court judge valued Tanya’s separate property at approximately $424,597.01, and it valued Hobson’s separate property at $3,544,806.00 (including awarding him the joint checking account).
On appeal by Tanya, the Supreme Court found that Mississippi law concerning prenuptial agreements is not well settled.   Prenuptial agreements are enforceable like other contracts, but also have the heightened requirement of being “fair in the execution.” Fair in the execution means that the agreement must be entered into voluntarily, and each party must disclose his or her financial assets. Fair disclosure can be found either by the parties providing financial disclosure statements or by their independent knowledge of each other’s financial state.
Tanya also had the advice of independent counsel that the agreement was one-sided, and she chose to proceed.  Independent counsel is not necessarily required in order for a prenuptial agreement to be procedurally conscionable. However, whether parties had a reasonable opportunity to consult with independent counsel if they so desired is an important consideration in evaluating the overall procedural conscionability of the contract.  Although the agreement was signed in close proximity to the wedding, the informal nature and scope of the wedding, combined with the presence of independent counsel and the attachment of the financial disclosures, indicated that the agreement was not unconscionable to Tanya.
While holding that a prenuptial agreement must be procedurally conscionable (“fair in the execution”), the Court noted that confusion has arisen in Mississippi as to whether courts should also consider whether the agreement is “substantively unconscionable” (or fundamentally unfair due to the great difference between the parties).  In a prior contract case, the Court defined an unconscionable contract as “one such as no man in his senses and not under a delusion would make on the one hand, and as no honest and fair man would accept on the other.”
The trial judge stated in his Final Decree of Divorce that “some states look at both substantive and procedural unconscionability, Mississippi courts do not.  The Supreme Court held that this is not the case, stating:  “We hold that, given the contract law on unconscionability, substantive unconscionability for premarital agreements must be considered by trial courts. . . We hold that substantive unconscionability feasibly could be measured at the time the prenuptial agreement is made; measuring it at the time the agreement is made would maintain consistency in the law.”
Finally, the Court addressed when separate assets can become marital assets subject to division in a divorce.  Mississippi’s jurisprudence clearly establishes that property is presumed to be marital property unless it can be shown to have been exchanged for a separate, and not a familial, asset or function.  In the Sanderson case, the chancellor treated the joint account as separate because the monies deposited could be traced solely to Hobson and because Tanya made no contributions. However, the chancellor erred by failing to address the familial use of the funds and Tanya’s contribution in helping to disburse the funds for the familial purposes. Under Mississippi law, her contributions and the familial use to which the money in the joint account was put changed the legal nature of the money in the account from separate property subject to tracing to marital property.  Absent a contractual provision that indicates the parties intended familial use monies to be separate and subject to tracing, the Court was bound to hold the parties intended for the law regarding familial use to apply.  The Court found that Tanya and Hobson could have drafted the prenuptial agreement to address funds commingled for familial use, but they did not. Therefore, the law regarding commingled, familial use money applies.
Sanderson v. Sanderson, 170 So.3d 430 (Miss. 2014).
In summary, a valid prenuptial agreement is one that is not fundamentally unfair to either party and is entered into with full financial disclosure by both parties and with independent legal review on behalf of both parties.
If we can assist you and your loved ones, please contact one of the experienced attorneys at Courtney Elder Law Associates. We will be happy to answer your questions and help you through the process.