Premarital Agreements and Russian and Ukrainian Ladies

Are Premarital Agreements Valid?

The validity and enforceability of Premarital Agreements will governed by state law, and thus will vary from state to state. However, the vast majority of states either by statute or case law presently favor these agreements as a means of distributing property of spouses who separate or divorce. This progressive view continues to grow.

For example, currently eighteen states have expressly adopted Premarital Agreement statutes following the 1983 lead of the National Conference of Commissioners on Uniform State Laws which endorsed model legislation called the "Uniform Premarital Agreement Act":

Arizona, Arkansas, California, Hawaii, Illinois, Iowa, Maine, North Dakota, Rhode Island, Kansas, Montana, Nevada, New Jersey, North Carolina, Oregon, South Dakota, Texas, Virginia

Even in states which have not yet expressly adopted a Premarital Agreement statute, the Courts will generally enforce such an agreement under their common law. For example, the Washington Supreme Court enforced a Premarital Agreement in Matter of Estate of Crawford, 107 Wash. 2d 493, 498 (1986), and looked to the model legislation for guidance commenting: "the considerations set forth in Section 6 [of the model legislation] thereof express many of the same concerns that have been expressed in our cases".

In the absence of a Premarital Agreement, courts will usually require the partner in the marriage with the greater income and assets (typically the husband) to pay the other spouse two possible forms of money: 1. Alimony or Maintance or Spousal Support, and 2. Marital Property Distribution. will apply state law rules to divide property between contesting spouses in case of separation or divorce. The great majority of states follow the "equitable distribution" model of property settlement which awards property based on equitable principles and factors such as length of marriage, spouse's lifestyle, economic needs and requirements and the contributions each spouse brought into the marriage. All property is treated as jointly held by the spouses before distribution.

In a minority of states, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, known as "community property" states, the courts treat each spouse's property before the marriage as belonging to that spouse in case of marriage dissolution, provided that it is not "co-mingled" with the other spouse's ownership or control during marriage. Property acquired during the marriage, including appreciation of assets owned by each spouse before the marriage, is considered "community property", that is, up to one-half owned by each spouse.

Of course, a properly drafted Premarital Agreement can effectively change this distribution scheme.

What is the Legal Test for a Premarital Agreement?

There can be no guarantee that a Premarital Agreement will not be challenged. In fact, this is the case more often than not. However, there are legal tests for a Premarital Agreement's validity, and if they are satisfied, Courts will be constrained to enforce the contract. The accepted legal tests are:

Is the agreement in WRITING which evidences the intention of the parties?
Was there FULL DISCLOSURE of all assets and property of both parties in advance of the marriage? Courts will not enforce an agreement if one or both parties conceal the identity of assets and property. In fact, it is recommended that a detailed schedule of all assets and property be attached to the agreement together with a copy of the last federal income tax returns of each partner.
Did the parties FULLY UNDERSTAND the agreement beforehand? In the case of agreements with Russians and Ukrainians, the writing must be translated into her native language verbatim and include a certification from an official-approved translator. It is also strongly recommended that a native speaking Attorney be appointed to represent the prospective the bride separately so the agreement is fully explained. [Some states such as California REQUIRE that the bride be represented by "independent counsel" at the time of signing before any provision in a premarital agreement affecting for example spousal support are deemed "enforceable". See California Family Code, Section 1612 (c)].
Did the parties VOLUNTARILY AGREE to the contract without fraud, duress or coercion? For example, the agreement should be signed well in advance of the marriage which helps avoids the appearance of undue pressure. Further, a separate and independent lawyer for the Russian or Ukrainian Lady also helps to lessen any claim of fraud or duress such as "he said he would call off the wedding if I didn't sign, or he told me he would tear it up after our first anniversary, or he told me that it was a required part of the U.S. marriage or immigration process."
Are the terms and provisions of the agreement FAIR AND REASONABLE? Courts do not favor one-sided agreements where one party has an unequal bargaining position, or where one partner is left destitute. This does not mean that a husband, for example, cannot negotiate a cap on his financial exposure. Rather, he can in fact do so provided that it is not unreasonable, a legal concept called "unconscionability". See Uniform Premarital Agreement Act, Section 6(a).

Won't She Get Angry and Call Off the Marriage if I Raise the Topic of a Premarital Agreement with Her?

No, not in our experience for most people. First of all and needless to say, the topic and concept of a Premarital Agreement must be raised with the UTMOST DELICACY, and only AFTER a couple has developed an unquestionable BOND OF TRUST. Most easily and comfortably, it can be discussed in the context of other significant legal and financial matters such as the immigration and visa process and the affidavit of support. Besides, if the topic of Premarital Agreements is so distasteful and destructive to a potential spouse that she would "call off the wedding", then the gentlemen should probably re-consider the engagement himself.

Can I Get Away with Paying Her "Nothing" in a Premarital Agreement?

No, you can't. Some gentlemen wish to sign a Premarital Agreement whereby the lady receives an airline ticket home and perhaps an English lesson in exchange for keeping all their money safely tucked away in their chest of drawers in case of a terminated marriage. This won't work. This type of "Premarital Agreement" is the same as not having any, since it will be thrown out of court. In a similar vein, some gentlemen want to offer their spouse 50% of future property put into their joint names after the marriage, or 50% of the future appreciation in value of stocks and bonds or other assets. This too is amounts to actually no offer at all, as the courts view this type of offer as "illusory", since no property need ever be put into joint names after the marriage, nor is there any certainty that any appreciation in value of marital property would ever happen.

A Premarital Agreement can be thought of as a "quid pro quo" (something for something), and further as a "sliding scale". By "quid pro quo" we mean in this context that the gentleman must be willing to pay something to her which the Court will say is "fair" and which constitutes a minimum "floor", in exchange for the privilege of the gentleman protecting the remainder of his assets and income. By "sliding scale", we mean that the more the gentleman is willing to pay and can live with paying her, the more likely it is that the Premarital Agreement will survive a court challenge.

Are There Ways Other Than a Premarital Agreement to Protect Your Assets and Income?

Yes. The problem however is that most of these ways are either expensive or may mean that you will lose ownership and control of your property and income. For example, one way is to create an IRREVOKABLE TRUST, either living trust or other trust. You move all your assets and income out of your estate into the trust, which now owns and manages them forever. Another way is OFFSHORE TRUST AND FOUNDATIONS. Same problem here. Not only do you lose ownership and control to a trust owner, but this owner operates oversees and is not subject to US laws, some of which regulate owners and trustees in your best interest.

Creating OTHER LEGAL ENTITIES and transfering your assets and income to them is another way. Examples are S-Corporation, C- Corporations, Limited Liability Corporations or Charters. Management, accounting and administration of these can be expensive. Also, very important are the questions: how the entity is structured and who is the owner or shareholder of these entities? If a corporation is set up for the sole purpose of evading marital libilities, courts can "pierce the corporate veil", and collect the assets as part of a marital judgment. Also, if the gentleman himself who formed the corporation holds the shares of the coporation, then obviously those shares are part of his assets which can be collected as part of a marital judgment.

What about Pension and Retirement Plans, Including 401(k) Plans, and Other Qualified Plans, and Medical Disability and Related Payments?

Aside from a home or condominimum, the largest asset which most gentlemen possess is a pension or retirement plan, such as 401(k) plan or other qualified plan. Most gentlemen are concerned about losing their pension plan monies in case of divorce. The general rule is that the pension plan or 401(k) plan is in the name of the husband and brought into the marriage and thus would stay with the husband in case of divorce. However, appreciation in value in the retirement plan, in the absence of a Premarital Agreement, including a 401(k), is part of the "marital estate" subject to property division in case of divorce. A Premarital Agreement can change this subject to the limits of ERISA (Employment Retirement Income Security Act) by including provisions in it which say that the wife will agree to sign all future waivers and releases at a later date under the retirement plan provisions to allow the husband to keep his retirement plan in full, including appreciation in value.

One interesting area in regards to divorce and Premarital Agreements is how private insurance medical disabilities, military service-connected medical disbilities, workers compensation medical payments, and lawsuit personal injury payments operate. Many states, such as Minnesota, exempt disability pay plans from "alimony" or "maintenance" judgments. This does NOT mean that a court judgment cannot be entered against a gentleman for alimony or maintenance since he may be able to pay it from other sources, present or future. Also, this does NOT mean that a gentlemen is "off the hook" by not having to pay her anything. This gentleman's Premarital Agreement is still tested for validity by examining whether whatever he offers his lady is fair and reasonable to her. Furthermore, caution should also be used to determine if this gentleman's disability payments or personal injury award payment is truly for MEDICAL reasons, and not for psychological harm or stress or for legal discrimination or other legal violation. If so, there is NO exemption from alimony judgments.

What about the Premarital Agreement (State Law) and the Immigration Form I-864 Affidavit of Support (Federal Law)?

An interesting question which has arisen since the development in 1997 of the "new" Form I-864 Affidavit of Support is the inter-relationship between this federal affidavit and the state law Premarital Agreement. In the first reported case of its kind, a federal court has ruled on the enforceability of the I-864. In Olga STUMP v. Kenneth STUMP, No. 1:04-CV-253-TS (U.S. Dist. Ct. N.D. Indiana, Oct. 25, 2005), the Court ruled that the U.S. Citizen Affidavit-Signer owes a continuing duty to maintain the Beneficiary Immigrant at 125% of the federal income poverty guidelines and is directly liable to the Beneficiary Immigrant for a judgment in the appropriate amount for support, less any applicable set-off or mitigation. For more on the Stump case, see: Legal Enforceablity of the Affidavit of Support.

Certain rules appear to be well-settled and not subject to any real meaningful contest: 1. The I-864 Affidavit represents a separate contract between the sponsor and the federal government for reimbursement for public benefits paid to the immigrant spouse, in case she becomes a "public charge", enforceable by a judgment lien or even wage garnishment. 2. The sponsor's Affidavit obligations do not terminate in case of separation or divorce of the spouses. 3. The federal obligations of the Affidavit and the state law Premarital Agreement co-exist because each arises from different jurisdictions, and the Premarital Agreement cannot substitute for or eliminate the Affidavit obligations.

On a more comforting level, it seems equally clear however that a state law Premarital Agreement, under appropriate circumstances, can probably render the federal I-864 Affidavit obligations for minimum financial support both moot and superfluous. If, for example, the Premarital Agreement allows for sufficient support for the immigrant spouse and is otherwise "fair and reasonable", the federal Affidavit has no practical effect since the minimum needs of the immigrant spouse have been satisfied and no claim for public benefits nor reimbursement would ever be made. This is further buttressed by the Personal Responsibility and Work Opportunity Reconciliation Act (Welfare Act) of 1996 which effectively bars new immigrants in any case from claiming federal welfare or other federal means-tested benefits for a period of five (5) years of the immigrants' entry.

On a more cautionary note, apart from the reimbursement issue, it should be pointed out that a state court judge ruling on the enforceablity of a contested premarital agreement can and would probably look to the minimum required income amounts of the I-864 to determine the level of support deemed "fair and reasonable" for the immigrant to approximate her lifestyle during the marriage.

Thus, for example, a sum of one-half of the sponsor's required amount of support for the household size in question under the I-864 would not be an unreasonable general starting point (but not ending point) for analysis to determine the appropriate amount for support for the immigrant after marriage dissolution to approximate her lifestyle during marriage. See: State Department Income Guidelines for Immigrant Affidavit of Support.

With this kind of reasoned analysis, a properly drafted Premarital Agreement should not logically conflict with the federal Affidavit obligations.

How Can a Premarital Agreement be Transformed from a "Divorce Agreement" to a "Marriage Agreement"?

In the minds of many, a Premarital Agreement is usually synonymous with "lack of trust", and thus immediately potentially destructive to a relationship. Can this be changed? We believe yes.

We believe that a Premarital Agreement can be drafted not as a "divorce agreement" but as a "marriage agreement", thus smoothing the process of signing the document, and also transforming it into a tool to re-inforce the marriage partnership and foster mutual trust.

Some of the provisions we have included in Premarital Agreements to accomplish this for clients are for example: for example: a provision that the couple love and commit to each other and the values of a marriage, that both sides understand and accept the values of marriage such as a shared mutual commitment of time, effort and faithfulness, and a provision that both sides will seek professional counseling for up to six months before separation or divorce occurs.

While courts historically have not viewed such non-economic provisions of Premarital Agreements as enforceable, we believe that such "feel good" language greatly encourages the lady to sign the agreement, and actually strengthens the couple's bonds of mutual understanding and trust in the relationship.

A Premarital Agreement is a highly personal matter. It will require careful planning. With the high cost and emotional trauma of divorce, an effective Premarital Agreement, with the assistance of an experienced attorney, can provide at least some prospect of valuable asset and income protection. And at its best, a Premarital Agreement can be effectively transformed into a tool to enhance mutual trust in the marriage partnership.

PREMARITAL AGREEMENTS AND FIANCEES FROM RUSSIA AND UKRAINE

PREMARITAL AGREEMENTS
AND FIANCEES FROM RUSSIA
AND UKRAINE