We granted direct appellate review in this divorce proceeding to determine whether so-called “postnup-tial” or “marital” agreements are contrary to public policy and,
A judge in the Probate and Family Court upheld the agreement, finding that it was negotiated by independent counsel for each party, was not the product of fraud or duress, and was based on full financial disclosures by the husband, and that the terms of the agreement were fair and reasonable at the time of execution and at the time of divorce. Judgment entered enforcing the marital agreement. The wife appealed, and we granted both parties’ applications for direct appellate review.
1. Facts. We recite the facts as found by the judge, all of which are supported by the record.
a. The marital assets. At the time of the execution of the marital agreement in 2004, the value of the combined assets of the husband and wife was approximately $19 million. One of the assets, now at issue, is the husband’s interest in certain trusts and business entities established by his grandfather, currently managed by his uncle. The assets of these various entities are substantial real estate holdings in Florida.
During the course of their marriage the couple retained RINET Company EEC (RINET) to provide financial advice to them and to prepare their joint tax returns. The parties’ primary financial planner from RINET met with the couple on a quarterly basis, and RINET prepared “periodic summary reports” to permit the couple to monitor their financial affairs. Because the husband’s interest in the Florida real estate was “fractional” and “non-controlling,” and because “speculation” is “inherent in any attempt to assign any values to such interests,” there was no attempt by RINET to assign concrete values to these assets. Rather, on the reports prepared by RINET, the husband’s interest in the Florida real estate was given a “placeholder” value of $4 million to $5 million (the amount varied from time to time), of which the wife was well aware. The wife understood that the husband’s principal objective in executing a marital agreement was to protect his interest in the Florida real estate in the event of a divorce.
b. The marital agreement. The parties were married in July, 1985. The execution of their marital agreement nineteen years later was precipitated by marital problems that began toward the end of 2003. At the time the couple sought the assistance of a marriage counsellor. In early 2004, the husband informed his wife that he “needed” her to sign an agreement if their marriage was to continue. He testified that his “uncertainty” about the wife’s commitment to their relationship was the reason for this request. It caused the wife a “great deal of stress”; she told her husband that she would not sign any such agreement, and that discussion of the issue made her “physically ill.” The parties separated, as it turned out for some six weeks. While the parties were separated, the husband promised his wife that he would recommit to the marriage if she would sign a marital agreement. She agreed to do so, she said, in an attempt to preserve the marriage and the family. The parties resumed living together, and went on a “second honeymoon.”
We briefly summarize key provisions of the marital agreement. The agreement sets forth the parties’ intent that, in the event of a divorce, the terms of the agreement are to be “valid and enforceable” against them, and “limit the rights” that “otherwise arise by reason of their marriage.”
As for the distribution of property in the event of a divorce, the agreement states that the wife “disclaims any and all interest she now has or ever may have” in the husband’s interest in the Florida real estate and other marital assets. The husband agreed to pay the wife $5 million, and thirty per cent of the
c. Events following execution of marital agreement. On execution of the marital agreement, the relationship between the husband and wife took on, in the judge’s words, a “light and optimistic tone” and both were “looking forward to strengthening their marriage.” The two engaged in numerous activities together, including training for a marathon and traveling. However, in August, 2004, the parties had a discussion that “led the [wjife to believe that their marriage was over.” The husband had not decided to divorce his wife, and the judge credited his testimony that he was “unwilling” to abandon the marriage at that time.
In response to their marital difficulties, the parties again considered separating, but decided not to do so at least until their younger son graduated from high school. They remained living together from August, 2004, until June, 2005, engaged in an intimate relationship, and “attempted to preserve the appearance of their marriage.” During this time, they purchased a new home for $790,000, and paid $500,000 for its renovations.
Meanwhile, the husband applied for and was accepted to Harvard University’s Kennedy School of Government; his decision to enroll as a student there was not supported by his wife. The wife began to increase her consumption of alcohol, leading to more arguments with her husband. In June, 2005, at the wife’s request, the husband moved out of the house. He did not file for divorce at that time, believing that while things looked “grim,” filing for divorce would have been the “ultimate declaration” that his marriage was over. After separating from her husband, the wife maintained contact with their RINET financial
2. Validity of marital agreement. Whether a marital agreement should be recognized in Massachusetts is a long-deferred question of first impression. See Fogg v. Fogg, 409 Mass. 531, 532 n.2 (1991).
The wife argues that marital agreements are different in kind and should be declared void against public policy because they are “innately coercive,” “usually” arise when the marriage is already failing, and may “encourage” divorce. The wife provides no support for, and we reject, any assumption that marital agreements are typically executed amid threats of divorce or induced by illusory promises of remaining in a failing marriage. Marital contracts are not the product of classic arm’s-length bargaining, but that does not make them necessarily coercive. Such contracts may inhibit the dissolution of a marriage, or may protect the interests of third parties such as children from a prior relationship. In any event, a marital agreement will always be reviewed by a judge to ensure that coercion or fraud played no part in its execution.
3. Judicial review of a marital agreement. A marital agreement stands on a different footing from both a premarital and a separation agreement.
A separation agreement, in turn, is negotiated when a marriage has failed and the spouses “intend a permanent separation or marital dissolution.” Id. at § 7.01(l)(c). See Knox v. Remick, supra at 436 (separation agreement is “a permanent resolution of [a married couple’s] mutual rights and obligations, including support obligations between them”). The family unit will no longer be kept intact, and the parties may look to their own future economic interests. See Kindregan & Inker, supra (separation agreements, unlike marital agreements, are not executed “when the parties are still hopeful of saving a troubled marriage”). The circumstances surrounding marital agreements in contrast are “pregnant with the opportunity for one party to use the threat of dissolution ‘to bargain themselves into positions of advantage.’ ” Pacelli v. Pacelli, supra at 195, quoting Mathie v. Mathie, 12 Utah 2d 116, 121 (1961).
For these reasons, we join many other States in concluding that marital agreements must be carefully scrutinized. See, e.g., Casto v. Casto, 508 So. 2d 330, 334 (Fla. 1987) (court “must recognize that parties to a marriage are not dealing at arm’s length, and, consequently, trial judges must carefully examine the circumstances to determine the validity of [marital] agreements”); Matter of Estate of Gab, 364 N.W.2d 924, 925-926 (S.D. 1985), citing Matter of Estate of Harber, 104 Ariz. 79 (1969) (because of “confidential relationship” existing between husband and wife, marital agreements “are subjected to close scrutiny by the courts to insure that they are fair and equitable”); Bratton v. Bratton, 136 S.W.3d 595, 601 (Tenn. 2004) (same). See also ALI Principles of Family Dissolution, supra at § 7.01 Reporter’s Notes to comment e (“the problems presented
Before a marital agreement is sanctioned by a court, careful scrutiny by the judge should determine at a minimum whether (1) each party has had an opportunity to obtain separate legal counsel of each party’s own choosing
We now elaborate on those points as they apply to the marital agreement here.
a. Fraud and coercion. As with contracts generally, marital
Even though the judge in this case did not utilize a burden-shifting analysis, we see no reason to question her ultimate finding that the marital agreement was not the product of coercion or fraud. The agreement was the product of lengthy negotiations between the parties, each represented by separate, experienced counsel. The wife’s attorney testified that, consistent with the instructions of her client, she intended to negotiate an enforceable marital agreement. A vigorous exchange ensued with the husband’s counsel in which she was able to negotiate significant gains for the wife.
As to fraud, the wife argues that the husband misrepresented
b. Disclosure of assets. We have explained with respect to premarital agreements that “[fjull and fair” disclosure of each party’s financial circumstances is a “significant aspect” of the parties’ obligation to deal with each other fairly “because they stand in a confidential relationship with each other” and must have such information in order to make an informed decision about the terms of the agreement. DeMatteo v. DeMatteo, 436 Mass. 18, 27 (2002). The obligation is greater with respect to
We agree with the judge that the disclosures here were sufficient to meet this rigorous standard. The wife argues that the husband undervalued his interest in the Florida real estate, and that he committed a breach of the warranty in the agreement that such disclosures were “accurate and truthful.” The facts as found by the judge belie this claim.
The wife acknowledged when she executed the marital agreement that she had “been provided with all information requested,” that she was “afforded sufficient opportunity to inquire and investigate further financial circumstances” of her husband, and that she waived her “rights to further inquiry.” There is nothing in the record to suggest that those representations were inaccurate.
c. Waiver. By the terms of their agreement, the husband and
d. Fair and reasonable terms. We turn finally to the requirement that a marital agreement contain terms that are “fair and reasonable” at the time of execution and at the time of divorce. We do not accept the husband’s suggestion that the standard applicable to marital agreements should be the same as the one applicable to premarital agreements. See note 8, supra.
In evaluating whether a marital agreement is fair and reasonable at the time of execution, a judge should accordingly consider the entire context in which the agreement was reached, allowing greater latitude for agreements reached where each party is represented by separate counsel of their own choosing. See note 9, supra. A judge may consider “the magnitude of the disparity between the outcome under the agreement and the outcome under otherwise prevailing legal principles,” whether “the purpose of the agreement was to benefit or protect the interests of third parties (such as the children from a prior relationship),” and “the impact of the agreement’s enforcement upon the children of the parties.” ALI Principles of Family Dissolution, supra at § 7.05(3)(a), (c), (d). Other factors may include the length of the marriage, the motives of the contracting spouses, their respective bargaining positions, the circumstances giving rise to the marital agreement, the degree of the pressure, if any, experienced by the contesting spouse, and other circumstances the judge finds relevant.
Viewed at the time of execution, we agree with the judge that the marital agreement at issue here was fair and reasonable. As noted earlier, the wife was represented by experienced, independent counsel throughout the negotiations. In the event of
In determining whether a marital agreement is fair and reasonable at the time of divorce, a judge will be able to satisfy the searching inquiry we require by examining the same factors employed for evaluating a separation agreement. See Dominick v. Dominick, 18 Mass. App. Ct. 85, 92 (1984). See also Barry v. Barry, 409 Mass. 727, 730 (1991) (judge considering separation agreement pursuant to divorce under G. L. c. 208, § 1A, or G. L. c. 208, § IB, “should make a ruling at the time of the divorce that the agreement is fair and reasonable”). Thus, a judge may consider, among other factors, “(1) the nature and substance of the objecting party’s complaint; (2) the financial and property division provisions of the agreement as a whole; (3) the context in which the negotiations took place; (4) the complexity of the issues involved; (5) the background and knowledge of the parties; (6) the experience and ability of counsel; (7) the need for and availability of experts to assist the parties and counsel; and (8) the mandatory and, if the judge deems it appropriate, the discretionary factors set forth in G. L. c. 208, § 34”
The gravamen of the wife’s complaint is that she will be left with a disproportionately small percentage of the couple’s marital assets. A marital agreement need not provide for an equal distribution of assets, as long as a judge has concluded that the agreement is fair and reasonable. In her careful and detailed findings, the judge considered the factors set forth in G. L. c. 208, § 34, as well as many of the other factors we have just detailed. The wife points to no material change between the time she, on the advice of counsel, executed the marital agreement and the husband’s petition for divorce in 2006. We again see no reason to conclude that the judge was erroneous in her conclusion.
4. Conclusion. Enforcement of a marital agreement is not contrary to public policy. We agree with the judge in the Probate and Family Court that the marital agreement in this case should be specifically enforced.
Judgment affirmed.
A “postnuptial” or “marital” agreement is an “agreement between spouses who plan to continue their marriage that alters or confirms the legal rights and obligations that would otherwise arise under . . . [the] law governing marital dissolution.” American Law Institute, Principles of the Law of Family Dissolution: Analysis and Recommendations § 7.01(l)(b) (2002) (ALI Principles of Family Dissolution). See Fogg v. Fogg, 409 Mass. 531, 531-532 (1991) (same). Consistent with the ALI, we adopt the term “premarital” agreement for what is often termed a prenuptial or antenuptial agreement, and the term “marital” agreement for what is often termed a postnuptial agreement. See ALI Principles of Family Dissolution, supra at § 7.01(l)(a), (b).
In September, 2008, the proceedings having been bifurcated, a judgment of divorce nisi was entered on the grounds that the parties’ marriage was irretrievably broken down. The judgment became absolute in December, 2008. The wife neither sought to stay, nor appealed from, that judgment.
We shall refer to the husband’s interests in the trusts and business entities owned by his family as the husband’s interest in Florida real estate.
More specifically, the agreement states that the parties “desire by this Agreement to fix and limit the rights of each of them in and to any property that the other has any right, title or interest, or in the future, may obtain any right, title or interest in the event of dissolution of the parties’ marriage, in lieu of and in full discharge and satisfaction of the rights which otherwise arise by reason of their marriage.”
The agreement defined marital property with specificity and provided a mechanism for determining the wife’s thirty per cent interest.
In Fogg v. Fogg, 409 Mass. 531 (1991), this court left “to another day” the question whether marital agreements were valid, id. at 532 n.2, noting that even if “this type of agreement is valid, it must be free from fraud and coercion,” id. at 532, and affirming the judge’s finding that the agreement in that case was fraudulently induced, id. at 535. See Rubin v. Rubin, 29 Mass. App. Ct. 689, 697 (1991) (marital agreement invalid because it was product of coercion).
Several States have enacted statutes that permit the enforcement of marital agreements. See, e.g., Tibbs v. Anderson, 580 So. 2d 1337, 1339 (Ala. 1991); Boudreaux v. Boudreaux, 745 So. 2d 61, 63 (La. Ct. App. 1999); Button v. Button, 131 Wis. 2d 84, 87-88 (1986). But see Ohio Rev. Code Ann. § 3103.06 (West 2005) (“A husband and wife cannot, by any contract with each other, alter their legal relations, except that they may agree to an immediate separation and make provisions for the support of either of them and their children during the separation”). Many States have not addressed the issue. We are aware of no jurisdiction that has declined to enforce such agreements unless required to do so by statute.
The ALI takes the position that “the principles applicable to marital and premarital agreements are the same” and suggests, as some States have done, applying substantially the same standards for enforcing both types of agreements. ALI Principles of Family Dissolution, supra at § 7.01 Reporter’s Notes to comment e, citing Reese v. Reese, 984 P.2d 987 (Utah 1999). While we draw on some aspects of the ALI’s suggestions on how to evaluate marital agreements, we conclude that the principles applicable to premarital and marital agreements are not the same in all respects.
We do not require, as do some other States, that a marital agreement will be enforceable only if each spouse is represented by separate counsel. See, e.g., Minn. Stat. Ann. § 519.11(la)(c) (West 2006) (“A postnuptial contract or settlement is valid and enforceable only if at the time of its execution each spouse is represented by separate legal counsel”). Reliance on the advice of experienced, independent legal counsel, however, will go a long way toward ensuring the enforceability of an agreement. Cf. ALI Principles of Family Dissolution, supra at § 7.04 (marital agreement “rebuttably presumed” to satisfy showing that contesting party’s consent was “informed and not obtained under duress” if parties were “advised to obtain independent legal counsel, and had reasonable opportunity to do so before the agreement’s execution”). Here it is undisputed that both parties to this agreement not only had the opportunity to, but did, obtain separate legal counsel.
The wife argues that she did not receive “sufficient” consideration because the financial components of the agreements were “far less” than she was “already entitled to receive” on divorce. In this case, and likely would be in any case, this is in essence an argument that the marital agreement was not fair and reasonable. See part 3.d, infra. Because the marital agreement was supported by consideration, we need not consider whether a marital agreement needs to be supported by consideration. See ALI Principles of Dissolution, supra at § 7.01(4) (consideration not required to create enforceable marital agreement).
We do not agree with the Arizona court, see Matter of Estate of Harber, 104 Ariz. 79, 88 (1969), that the burden must be satisfied by “clear and convincing” evidence. See ALI Principles of Family Dissolution, supra at § 7.04 comment b (shift burden of proof to spouse seeking to enforce agreement, but not suggesting proof by clear and convincing evidence).
We need not recite the factual findings of the judge that identify with specificity the negotiations and the gains secured by the wife.
The wife suggests that because the parties’ younger son suffers from an illness, she was pressured into signing the agreement to preserve her son’s “happiness and stability.” The judge made no findings concerning the son’s illness or its effect on the wife’s decision to sign the marital agreement. The
The wife testified at trial that in or around August, 2004, several weeks after the agreement was signed, the parties had a discussion that led the wife to believe that their marriage was over, and the parties then sought the advice of their marriage counsellor, as well as their son’s physician, to consider a separation that would be the least disruptive for him. The wife argues that the judge erred in not allowing her to testify concerning the contents of this conversation, which she claims would have shown that the husband did not intend to stay in the marriage when he asked her to sign the agreement. The judge excluded her testimony on the grounds of “spousal disqualification.” That evidentiary rule provides that “a witness shall not testify as to private conversations with a spouse occurring during their marriage,” see Mass. G. Evid. § 504(b) (2010), but recognizes an exception for proceedings “arising out of or involving a contract between spouses,” id. at § 504(b)(2)(A). We question whether the evidence should have been excluded, given the exception to the spousal disqualification rule. Even if the ruling was erroneous, however, it was harmless. There was ample other evidence to support the judge’s finding that the husband did not fraudulently induce the wife to sign the agreement.
The ALI Principles of Family Dissolution, supra at § 7.04(5), specifies that the spouse seeking to enforce the agreement must have disclosed his income for “each of the preceding three years” and any significant future acquisitions or changes in income that the party “reasonably expects to realize within three years of the agreement’s execution.” We need not determine whether a three-year period is appropriate in this case because the wife was aware of the couple’s marital assets and income, and participated regularly in meetings with the couple’s financial advisor throughout the marriage. See ALI Principles of Family Dissolution, supra at § 7.04(5) comment g (evidence that contesting spouse has knowledge of all other spouse’s assets independent of any written disclosures will satisfy requirement of disclosure).
The judge held a separate hearing to receive evidence as to the husband’s
In connection with the divorce, the husband contacted his uncle who manages the Florida properties to obtain a rough estimate of their value. The judge credited the husband’s testimony that this was the “best method to obtain a value” for the husband’s interest in the Florida real estate.
In light of these representations, and where the evidence shows that the wife had full knowledge of the limitations on the information concerning the value of the Florida real estate, the judge did not err in denying the wife further discovery in February, 2008, on the value of the Florida properties and
We adopted a more deferential standard of review for premarital agreements in part because when “terms of a proposed antenuptial agreement are unsatisfactory, a party is free not to marry.” DeMatteo v. DeMatteo, 436 Mass. 18, 33 (2002). One party, perhaps having significant family wealth, may decline to enter the marriage unless he or she can protect these assets in the event of a divorce. Consequently, a premarital agreement may provide that on divorce there will be great inequality accorded to each party. For a spouse to relinquish statutorily proscribed marital rights to significant assets necessarily requires a more searching inquiry as to whether an agreement is “fair and reasonable.”
In relevant part, G. L. c. 208, § 34, provides that a judge “shall consider the length of the marriage, the conduct of the parties during the marriage, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties and the opportunity of each for future acquisition of capital assets and income. . . . [T]he court shall also consider the present and future needs of the dependent children of the marriage. The court may also consider the contribution of each of the parties in the acquisition, preservation or appreciation in value of their respective estates and the contribution of each of the parties as a homemaker to the family unit.”
In evaluating the agreement, the judge is not required to hold an evidentiary hearing, although she may do so in her discretion, as the judge did in this case. See Dominick v. Dominick, 18 Mass. App. Ct. 85, 92 (1984).