Drafting Premarital Agreements in Massachusetts and Rhode Island
practitioners Should be aware of the subtle differences between each state's two-prong test
The practice of drafting a valid premarital agreement in Massachusetts or Rhode Island presents several discrete issues of law that can be easily blurred into error. Though the general policy concerns motivating the legal developments in this area are largely the same in Massachusetts and Rhode Island, the different lead cases in each jurisdiction have shaped subtle but significant differences into the law of the two jurisdictions. Even experienced attorneys could take for granted and mistakenly apply the more palpable, well known general policy considerations, thereby overlooking those fine points that will make the difference when advising clients about their estates. This is especially important for those attorneys practicing in both jurisdictions.
Each jurisdiction uses a two-prong approach. Rhode Island has adopted the Uniform Premarital Agreement Act (the "Act"), which covers a fair amount of ground, leaving only the basic tenets of statutory interpretation to the Rhode Island courts. However, some incomplete court interpretation has left a void in the Rhode Island scheme. A major difference between Massachusetts and Rhode Island is the ability to defeat an agreement. Massachusetts requires only one prong of the test to fail for avoidance while Rhode Island requires both prongs to be defeated.
Massachusetts has not adopted a uniform code, instead relying on a very broad statutory grant of a power of couples to enter into antenuptial agreements. The Massachusetts statutory scheme generally permits the enforcement of these contracts between married couples (there was a time when the enforceability of such contracts, or any contract between a husband and wife, for that matter, could successfully be questioned in the courts), and the Massachusetts courts have developed their rules through legal analyses spanning several prominent cases.
Rhode Island's Uniform Premarital Agreement Act is codified at Rhode Island General Laws Title 15, Chapter 17, §§1-11. Most of those sections are devoted to the basics, but one stands out in the analysis here, namely §§15-17-6, titled "Enforcement."
Subsections (a) and (b) are most relevant. Starting with subsection (b) first, the burden of proving a premarital agreement is unenforceable falls on the party seeking to have it declared invalid. This is rather straightforward.
Subsection (a) is split to invalidate an agreement, thus giving us the two pronged approach in Rhode Island. Both prongs must be proved. Again, it is the party against whom enforcement is sought that must prove these prongs. Under sub-subsection (1), that party must prove he or she did not execute the agreement voluntarily. Under sub-subsection (2), which is itself multifaceted, that party must also prove the agreement was unconscionable when it was executed and that before execution that party (i) did not receive fair disclosure of the financial situation of the other party, (ii) did not waive in writing fair disclosure, and (iii) did not have and could not have had adequate knowledge of that situation. Note that the sub-subsections provide guidance to the determination of unconscionability, thus imposing several requirements on a contesting party. Note also that this requirement is tested at the time of execution, with special attention given to the implied relationship of confidence and trust existing between the parties. Thus, the Rhode Island Supreme Court has held that an unconscionable agreement could also be evidenced by terms that denote "overreaching" or "sharp dealing." Penhallow v. Penhallow, 649 A.2d 1016, 1022 (R.I. 1994)
In Penhallow, the Rhode Island Supreme Court took an opportunity to interpret §15-17 for the first time. The Court held that proving a premarital agreement invalid under the Act requires proving both prongs, conjunctively. It therefore enforced a premarital agreement that was voluntarily entered into regardless of its unconscionability. "This issue is critical, because without clear and convincing evidence of involuntariness, the agreement cannot be rendered unenforceable." 649 A.2d 1021-22.
This is all rather straightforward, with the exception of the seemingly obligatory confusing footnote thrown in for good measure. Footnote one of that case states (admittedly fairly):
"We do not here address the issue of whether a party, having conclusively proven that he or she executed a premarital agreement involuntarily, for example coerced by threats of death or serious bodily harm, may under due-process considerations avoid enforcement on that basis alone, without requiring proof of unconscionability and/or inadequate disclosure."
This is troubling because it undercuts the very essence of the opinion, namely that both prongs must be proved by a party challenging the validity of a premarital agreement. The opinion stresses the conjunctive nature of §15-17-6(a)(1) and (2). But the footnote quite plainly states that there may be a time when due process requires invalidating an agreement on involuntariness grounds alone. This footnote combined with the opinion itself potentially makes voluntariness the only relevant inquiry, because if an agreement was unconscionable at execution it can still be enforced if entered into voluntary; but even if the agreement is conscionable at execution, it potentially cannot be enforced if not entered into voluntarily. The Rhode Island Supreme Court has yet to resolve this kink in its jurisprudence.
Massachusetts has enacted a general statutory provision that governs antenuptial agreements. The most relevant provision is codified at Massachusetts General Laws Chapter 209, Section 25, and it states that the parties may make a written contract providing that, after the marriage is solemnized...property...of which either party may be seized or possessed at the time of the marriage, shall remain or become the property of the husband or wife, according to the terms of the contract.
Interpretation of this broad provision has been left to the opinions of the Supreme Judicial Court (SJC), and lower courts have worked with those opinions in the secondary sense. The leading Massachusetts case on point is Rosenberg v. Lipnick, 377 Mass. 666 (1979).
In Rosenberg, the SJC applied the rule set forth in Wellingston v. Rugg, 243 Mass 30 (1922), to the facts immediately at issue, and then overruled that rule and set forth new rules to govern antenuptial agreements going forward. Rosenberg set forth what is now the first prong, as the rule, like in Rhode Island, now consists of two prongs due to further developments in case law.
The first prong is multifaceted, consisting of three interrelated parts, no one of which appears to be dispositive. The SJC pulled these guidelines from leading cases in other jurisdictions. The relevant factors (guided by even more language of what can be considered in analysis) are whether (1) it contains fair and reasonable provision as measured at the time of its execution for the party contesting the agreement; (2) the contesting party was fully informed of the other party's worth prior to the agreement's execution, or had, or should have had, independent knowledge of the other party's worth; and (3) a waiver by the contesting party is set forth. Rosenberg, 377 Mass. at 672 (emphasis added).
Predictably, the SJC recently had occasion to clarify how these factors applied to a particular set of facts in DeMatteo v. DeMatteo, 436 Mass. 18, 31 (2002).
It is only where the contesting party is essentially stripped of substantially all marital interests that a judge may determine that an antenuptial agreement is not fair and reasonable and therefore not valid. Where there is no evidence that either party engaged in fraud, failed to disclose assets fully and fairly, or in some other way took unfair advantage of the confidential and emotional relationship of the other when the agreement was executed, an agreement will be valid unless its terms essentially vitiate the very status of marriage. (Internal quotations and citations omitted).
Osborne v. Osborne, 384 Mass. 591 (1981), added the building blocks for the second prong of the test, and in DeMatteo the SJC struggled with competing policies behind the freedom to contract and the wisdom of not leaving the waiver of legal rights unrestricted in the even of divorce, thus ultimately compromising by fully sanctioning the second prong of the current analysis, or the "conscionability" consideration.
The conscionability consideration is sometimes referred to as the "second look" because it is only applied if the first "fair and reasonable" prong is met.
Conscionability, unlike the first prong's factors, is tested at the time the antenuptial agreement is sought to be enforced. The first prong and the second prong together cover the gamut by looking into the factual circumstances at play before, during, and after marriage. The failure of one prong defeats the agreement. In Osborne, the SJC described the "second look" as giving "the judge the authority to deviate from the terms of an antenuptial agreement in certain situations, for example, where it is determined that one spouse is or will become a public charge . . . ." 384 Mass. at 599 (internal quotations and citations omitted). This "second look" is to protect the less advantaged party and the state from a relationship of dependence. Every party to an antenuptial agreement must get something that at its minimum prevents a party from becoming a public charge, and an antenuptial agreement will not be enforced, even if "fair and reasonable" at the time of execution, if circumstances have changed so much so that there is a risk that one party would become a public charge if the agreement were enforced. Such a change in circumstances could be the onset of an illness or the effects of inflation. See Austin v. Austin, SJC-09492, December 21, 2005.
Of course, in Austin, the dissent made of how these rules were applied. The crux of the oral argument on that case focused on how the "second look" interacts with the "fair and reasonable" requirement which is measured at the time of execution. In that case, the facts presented a problematic situation because at the time of the execution the agreement provided very little to the wife, and under one circumstance perhaps nothing at all, but at the time of the enforcement the agreement provided for a multi-million dollar award. This presented a problem for the SJC because, it may have been required to prevent the enforcement of an agreement that at its initiation was unfair but at its enforcement was more than fair.
The SJC ruled that the agreement was enforceable because it did not essentially strip the wife of substantially all marital interests, and the dissent cautioned that this may have made the first prong a nullity under the facts presented. If the dissent is right, and if there is any circumstance under an agreement that at the time of execution could leave a spouse with nothing, then the opinion does in fact permit a "second look" even if the first prong is not met. Because this case was so recently decided, it remains to be seen how the lower courts will deal with this question as more particularized factual conundrums come through their doors.
The Primary Difference
Though both jurisdictions' laws present troubling holes of their own, the estate planner or family lawyer working on the border of both states must know more than just that. How the subtle differences between Rhode Island's and Massachusetts' laws show themselves is an important aspect of the equation that a practitioner working in both states should have in mind.
The superficial differences shown above are apparent, as each jurisdiction has its own scheme for testing the validity of an agreement. The primary difference, however, is not so much in the schemes as they stack up against each other as it is in Massachusetts' development of its case law. The addition of the "second look" requirement can actually make the Massachusetts test look like it has three prongs, namely the Rhode Island prongs plus the "conscionability" or after-the-fact prong. Rhode Island does not require a "second look" so preparing an agreement in advance requires walking through the statutory steps with full disclosure. Massachusetts, however, makes drafting an antenuptial agreement tricky in advance because the agreement must reflect the possibility of a marital breakdown from day one through the end of a parties life. The most effective way to confront this problem is to draft agreements that automatically adjust for inflation or automatically get keyed to the necessities of life and major life changes such that the Massachusetts conscionability test has no chance of being offended anywhere down the line.
Rhode Island and Massachusetts have established legal schemes for the enforcement of premarital agreements, the former primarily statutory and the latter primarily by way of case law. The differences between the two are extremely subtle, but the primary difference is the most significant, and that Massachusetts requires a "second look" cannot be overlooked by practitioners working in both jurisdictions because even though a party who is well protected in advance will be protected down the line should something come up to make the agreement less sufficient, a party who is not protected at the time of an execution but who is well protected down the line may end up under statutory alimony protection alone due to the fact that the agreement must pass muster under the first prong before the "second look" is given.
Practitioners working in both jurisdictions would do well to thoroughly review the subtle and bold differences between the laws of Rhode Island and Massachusetts on this topic, as each takes on a life of its own.