Are Prenuptial Agreements Enforceable in Arizona
If you are wondering are prenuptial agreements valid in Arizona, you have come to the right place. Arizona divorce laws favor prenuptial agreements.
Arizona adopted the Uniform Premarital Agreement Act in Arizona Revised Statute Section 25-202, which makes premarital agreements legal in Arizona. That statute reads as follows:
A. A premarital agreement must be in writing and signed by both parties. The agreement is enforceable without consideration.
B. The agreement becomes effective on the marriage of the parties.
C. The agreement is not enforceable if the person against whom enforcement is sought proves either of the following:
1. The person did not execute the agreement voluntarily.
2. The agreement was unconscionable when it was executed and before execution of the agreement that person:
(a) Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party.
(b) Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided.
(c) Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.
D. If a provision of a premarital agreement modifies or eliminates spousal support and that modification or elimination causes one party to the agreement to be eligible for support under a program of public assistance at the time of separation or marital dissolution, a court, notwithstanding the terms of the agreement, may require the other party to provide support to the extent necessary to avoid that eligibility.
E. An issue of unconscionability of a premarital agreement shall be decided by the court as a matter of law.
F. If a marriage is determined to be void, an agreement that would otherwise have been a premarital agreement is enforceable only to the extent necessary to avoid an inequitable result.
Prior decisions from the Arizona Court of Appeals held people are free to characterize what would otherwise be community property into the separate property of one of the spouses by entering into a valid Premarital Agreement.
However, written premarital agreements entered into before marriage are treated differently than post-nuptial agreements entered after the parties become married.
A Premarital Agreement will be enforced as long as both parties had full prior disclosure of the financial condition of the other party or such disclosure of that information was expressly waived in the written agreement, both parties voluntarily entered into the agreement, and the court does not find the agreement to be unconscionable.
A Post-Nuptial Agreement, however, is only enforceable if the court finds it to be fair and equitable; thereby making them significantly more prone to attack.
For more information on the factors a trial court is required to consider when determining whether to enforce a premarital agreement, please read our synopsis of the Arizona Court of Appeals’ decision in the case of Pownall v. Pownall.
The Arizona Court of Appeals in the case of Schlaefer v Financial Management Service, Inc. addressed the issue of whether a premarital agreement was binding upon creditors.
The conclusion from the court of appeals, in that case, was that the premarital agreement, in that case, was binding on the creditors, which prevented wife’s creditors from going after the husband’s assets for a debt wife did not pay.
Steps to Make a Prenuptial Agreement Valid in Arizona
It is always good practice to record a Notice of Entry of Premarital Agreement with the county recorders office. This Notice does not state the terms of the premarital agreement and is intended only to provide official public notice to all creditors of the existence of possible changes to community property holdings and liabilities of the spouses before granting either spouse credit.
The Arizona Court of appeals, however, in the case of Industrial Commission of Arizona v. Wright held that a post-nuptial agreement entered into during the marriage is not binding on the creditor in that case.
The reasoning of the court was that the spouses, in that case, were found by the court to have entered into the postnuptial agreement for the purpose of defrauding a creditor; which the court would not allow.
You should also know that while the existence of a valid prenuptial agreement will simplify the Arizona divorce process, the existence of a postnuptial agreement will not if the agreement is contested.
Should You Get a Prenuptial Agreement in Arizona
There are many pros and cons to obtaining a prenuptial agreement in Arizona before you mary. The pros include the fact that a properly drafted prenuptial agreement will almost eliminate any litigation between the parties in the event of a divorce or legal separation.
Another benefit of a prenuptial agreement is that each spouse can clearly define how their accumulation of assets and debts will be handled in the future leading to more certainty going into the marriage.
The cons are many. First, some people find it difficult to raise the issue of entering into a prenuptial agreement after the parties are already engaged. We would encourage couples contemplating an engagement to bring up the topic of a prenuptial agreement well prior to becoming engaged to be married.
Doing so will leave the joys of a wedding proposal unscathed by a subsequent discussion of entering into a prenuptial agreement in Arizona.
Another con to prenuptial agreements in Arizona is that neither party can clearly foresee the future and what it may be to one or both spouses. For example, if a spouse were later disabled and unable to support himself or herself, they would not otherwise receive alimony if the prenuptial agreement forbids the award of alimony in the event of a divorce or, at a minimum, may limit what that spouse may receive in alimony.
Another related problem occurs when one or both spouses create an estate plan. It can create confusion (and litigation) if the estate plan of one or both of the spouses leaves assets to the other spouse in the event of his or her death. Some poorly written estate plans can actually be construed by the court as a postnuptial agreement that modified the prenuptial agreement. It is therefore important to get it right when you draft your estate plan.
How to Make a Prenuptial Agreement Legal and Valid in Arizona
We want to talk to you about how to make a prenuptial agreement legal and valid in Arizona. There are two aspects of ensuring the prenuptial agreement drafted by your attorney is considered to be a legal, valid and binding agreement between you and your fiance in the event of a divorce.
Specifically, the two main aspects of creating a prenuptial agreement that will be enforced by a judge concern the terms of the prenuptial agreement itself and the process that was followed in the drafting and execution of the signatures on any prenuptial agreements in Arizona.
Choosing the Terms of Your Prenuptial Agreement to Ensure a Legal and Valid Agreement
Unless two people have a prenuptial agreement, Arizona laws control what financial interests each spouse will have on all assets, debts, and earnings of the other spouse. These same laws govern each parties’ potential financial interests in the sole and separate property of the other spouse. If you do not have a prenuptial agreement, Arizona law will dictate what happens to all of your assets, even those you owned prior to marriage.
Arizona has adopted the Uniform Premarital Act that governs the creation and enforcement of prenuptial agreements in Arizona. This act, along with some decisions from the court of appeals in Arizona, specifically allow people to “opt out” of the Arizona community property laws that would otherwise be imposed on both spouses in the event of a divorce.
For those that do not want to be surprised by what happens to all of their property in the event of a divorce, a prenuptial agreement allows you to by-pass those laws and provide certainty to what happens with the wealth you had prior to marriage as well as to the wealth (and debts of your spouse) that are accumulated during the marriage.
Altering Arizona Community Property Laws
One approach we use in drafting prenuptial agreements for our clients is to agree that no community property or community debt will exist in the marriage. We also include agreements eliminating any claims for community liens against the sole and separate property of their other spouse. This means the following occurs:
- Sole and Separate Property is Kept Separate;
- No Claims of a Community Lien Can be Made Against the Separate Property of a Spouse;
- All Earnings by Either Spouse During Marriage are Each Spouse’s Sole and Separate Property;
- All Assets Acquired by Either Spouse During Marriage is Each Spouse’s Separate Property;
- All Debts, Except Joint Debts, Incurred by Either Spouse During the Marriage are Separate Debts of that Spouse;
The only exception to the above rules pertains to provisions we include in our prenuptial agreements that allow the spouses to create only “joint property” and “joint debts” if agreed upon in writing and signed by both spouses during their marriage.
In practice, each spouse keeps all of their assets and earnings separate. However, they decide they want to accumulate some wealth together, such as buying a house together. So, they buy a home together and title that home as “joint tenants”. They have kept all their other assets and earnings separate but they own the house jointly.
To deal with monthly living expenses, we include provisions allowing the parties to also open a “joint” bank account and a “joint” credit card. By doing so, we have created a joint house, a joint bank account from which to pay their living expenses, and a joint credit card to pay their monthly living expenses.
So, each spouse would deposit their share of the monthly living expenses from their sole and separate account into the joint account to pay their joint living expenses, including the amount due on the joint credit card they opened.
So, we have kept everything else separate while allowing the parties to own a home together, maintain a bank account together, and have a joint credit card to pay their monthly expenses. This approach enables the parties to live and spend like any other married couple while still protecting themselves against what may otherwise be considered harsh Arizona community property laws.
There are numerous other ways to tweak this model and a specific plan can be crafted by our experienced Arizona prenuptial agreement attorneys at Hildebrand Law, PC.
Altering Arizona Spousal Maintenance Laws
Another reason some people consider entering into a prenuptial agreement is to protect themselves from the exposure of being ordered to pay alimony to a spouse, sometimes called spousal maintenance, in the event of a divorce in the future. Arizona recognizes the right of two people to agree neither spouse will be entitled to spousal maintenance in the event of a divorce. If this agreement is later found to be unconscionable by the court, a person may still be ordered to pay alimony to his or her spouse.
However, there are a couple of things you should know about spousal maintenance provisions in a prenuptial agreement. The first is the prenuptial agreement must be found by a judge to be unconscionable at the time the agreement was reached to be rejected by a court. An experienced attorney should be able to avoid that when he or she drafts your prenuptial agreement by advising you based upon your unique financial situation.
Another way to protect yourself against a judge deciding how much alimony a spouse will receive in the event of a divorce is to have a prenuptial agreement that provides for some amount of alimony over a short period of time if certain benchmarks are reached.
For example, a good prenuptial agreement may say neither spouse is entitled to alimony if the marriage lasts less than 10 years. However, a fixed amount or lump-sum payment of alimony will be paid if a divorce or legal separation is filed by either spouse in a marriage lasting 10 years or longer.
To help ensure that particular provision is enforced, you have include provisions that a spouse waives his or her entitlement to the agreed-upon spousal maintenance amount if he or she challenges the validity of the spouse maintenance or any other provision in the prenuptial agreement. This provides a very strong disincentive to challenge the clear terms of the prenuptial agreement.
We do not encourage anyone to enter into an agreement, including a prenuptial agreement, to render one of the spouse’s destitute in the event of a divorce. Instead, we suggest you consider your respective age, assets, debts, and earning ability and include reasonable provisions for support in the prenuptial agreement if it appears evident one spouse is in a drastically superior financial position than the other spouse. We simply allow you to control, as opposed to a judge, the amount of that support.
Procedure to Ensure Your Prenuptial Agreement is Legal and Valid in Arizona
Now that we know what you can do with a prenuptial agreement, the next thing you should understand is the procedure culminating in the parties signing a prenuptial agreement can come under attack in an attempt to invalidate the prenuptial agreement.
As an example, imagine what would happen if a person showed up at his or her wedding and was presented, for the first time, with a prenuptial agreement and was told they either sign it or the wedding is off. Such a situation could, without more, provide a convincing argument the prenuptial agreement was signed under duress.
So, the procedures used to enter into a prenuptial agreement are as important as the terms of the prenuptial agreement itself. So, let’s talk about the best procedures to use when entering into a prenuptial agreement to make the agreement valid and legal in Arizona
Disclosure of Financial Information Before Signing the Prenuptial Agreement
Arizona’s version of the Uniform Prenuptial Act allows both prospective spouses to waive disclosure of financial information before signing a prenuptial agreement in Arizona. Just because waiving financial disclosure is allowed in Arizona is not the same as saying doing so will protect your agreement if challenged in court.
So, our procedure with prenuptial agreements involves both sides disclosing the value of their assets, debts, and income to the other spouse, including related financial documents to back up those numbers. This disclosure becomes part of the client’s file and is specifically referenced in the prenuptial agreement.
Hiring Well-Respected and Knowledgeable Prenuptial Agreement Attorneys
Another way to ensure your prenuptial agreement is determined to be valid and legal in Arizona is to ensure both prospective spouses have well-respected and knowledgeable attorneys drafting or reviewing the prenuptial agreement before it is signed.
Our prenuptial agreements include a place for the attorneys to sign wherein they swear they have explained the terms of the agreement to their respective clients, their clients understand the document, their clients have received sufficient disclosure of information, and their client is not signing under duress or coercion.
So, if one of the spouses later files for divorce and attempts to attack the prenuptial agreement on any grounds he or she would, essentially, be impliedly accusing their attorney of not doing his or her job. That enables the spouse to attempt to enforce the prenuptial agreement to call that attorney as a witness to contradict the testimony of the spouse trying to now attack the prenuptial agreement.
Combine that with the fact each party chose a well-respected family attorney during the prenuptial agreement process and you make it infeasible a judge will reject the agreement.
Prenuptial Agreement Signing Meeting
Lastly, the process we propose to clients is to have both parties and their attorneys show up in our office to sign the prenuptial agreement. We prefer to have a court reporter present who transcribes everything that is being discussed. Our prenuptial agreement attorney, Chris Hildebrand, questions both parties to ensure they understand the documents, they are signing the document voluntarily and without duress and coercion, that their respective attorneys explained everything in the document, and they have no questions about the document they are intentionally and voluntarily signing.
Final Prenuptial Agreement Documentation
Once all of the procedures for signing the prenuptial agreement have been completed, each client has a binder containing the original prenuptial agreement, evidence of the mutual disclosure of financial information between the parties before signing the prenuptial agreement, and the transcripts from the court reporter from the signing meeting.
There you go . . . the best way to draft a valid, legal and enforceable prenuptial agreement in Arizona.
Recording of the Memorandum of Prenuptial Agreement
Lastly, your attorney should draft a Memorandum of Prenuptial Agreement that is recorded in the county recorders’ office. The Memorandum of Prenuptial Agreement is a one or two-page document that simply indicates you and your spouse have altered Arizona community property laws through a prenuptial agreement; although it does not provide specifics about your prenuptial agreement.
When that document is recorded with the court recorders’ office, it places the world on constructive notice that Arizona community property laws may not apply in your marriage. So, if a spouse runs up a bunch of debts the creditor cannot sue you for those debts because they had constructive notice that you eliminated the creation of community debt in your prenuptial agreement.
Coordinating an Estate Plan With a Valid Prenuptial Agreement in Arizona
There are estate planning attorneys who have no idea how to draft a valid and legal prenuptial agreement and there are attorneys who draft prenuptial agreements who have no idea how to draft a valid estate plan. This is a big problem and we are going to tell you why.
You may protect your rights in the event of a divorce with a well-drafted prenuptial agreement to keep all of your assets separate, but what happens if you were to pass away without an estate plan during your marriage. Well, Arizona statutes would leave all of those assets to your spouse; which is not what you may have intended to happen to your sole and separate assets.
So, it is important that your prenuptial agreement and estate plans are consistent with each other. The prenuptial agreements and estate planning documents drafted by our attorneys at Hildebrand Law, PC actually “speak” to one another. Specifically, the prenuptial agreement and estate planning packages drafted at Hildebrand Law, PC are written with language that ties these two separate legal documents together to ensure they work harmoniously with one another.
Enforcing a Prenuptial Agreement in Arizona
If you have questions about if prenuptial agreements are valid in Arizona, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona divorce and family law attorneys have over 100 years of combined experience successfully representing clients in divorce and family law cases.
Our family law firm has earned numerous awards such as US News and World Reports Best Arizona Family Law Firm, US News and World Report Best Divorce Attorneys, “Best of the Valley” by Arizona Foothills readers, and “Best Arizona Divorce Law Firms” by North Scottsdale Magazine.
Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your divorce or family law case around today.
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Chris Hildebrand wrote the information on this page about the validity of prenuptial agreements to ensure everyone has access to information about prenuptial agreement laws in Arizona. Chris is a divorce attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and actually caring about what his clients are going through in a divorce.