It's Legal – “Love is in the air!”

A prenuptial agreement that is not substantively fair may nevertheless still be found valid by the courts if it is procedurally fair
By Bill Wood | Jan 31, 2013

When Elizabeth said to Robert, “How do I love thee, let me count the ways” she didn’t go on to say “now let’s count the money!” Maybe she should have.

When Donna met Ken she was in her 30’s, working as a waitress and earning maybe $25,000 a year, with a net worth less than $100,000.

Ken was in his 70’s, with a minimum net worth of $15 million and perhaps as much as $93 million.

Both resided in Blaine, WA, where his office had a view of the Peace Arch and she worked in a local café.  They began dating in the fall of 2000.

Ken, an entrepreneur at heart, had developed several businesses by the time they met, including casinos in South Dakota, an armored car business and a string of duty-free stores stretching along the U.S.-Canadian border.

Each had been married several times before, but Ken was smitten again and asked Donna to marry him.

She finally agreed and a wedding date in September of 2001 was set.   Ken’s net income in that year was nearly $1 million.

About two weeks before the wedding, Ken asked Donna to sign the prenuptial agreement his lawyer had drawn up.

She and her lawyer met with Ken and his lawyer to discuss the agreement, some revisions were made, and she and Ken signed the document five days before the wedding.

A “PreNup” is a contract like any other, but has some special attributes because the parties are not dealing at arm’s length.

Their relationship is not “just business” but personal and involves feelings and emotions, so a PreNup calls for the exercise of good faith, candor, and sincerity in all matters regarding it, and its validity is based on all the circumstances surrounding the agreement.

A prenuptial agreement that is not substantively fair (that is, it fails to provide a fair and reasonable provision for the party complaining about it) may nevertheless still be found valid by the courts if it is procedurally fair (there was a full disclosure by the parties of the amount, character and value of their property of each, and the agreement was entered into freely, voluntarily, with independent legal advice and with full knowledge.)

Either one will do; it either must be fair in its terms, or fair in how it came to be signed.

This has been the clear law in Washington reiterated in Friedlander v. Friedlander in 1972, and yes, for you readers who were here then, the couple in that case getting divorced did indeed involve those Friedlander’s.

Very wealthy Ken died in 2009 after eight years of marriage.  Ken’s Will provided that upon his death Donna was to receive $25,000 for each year of their marriage (the yearly earnings for her when they met) plus a flat sum of $750,000, payable in installments, a house to live in and some other property. Their PreNup stipulated that all of Ken’s separate property and the income from it that existed before the marriage were to remain his separate property.

Shortly after his death, however, Donna promptly filed claims against Ken’s estate, asserting among other things that the PreNup was neither fair and reasonable nor entered into with full disclosure from Ken as to his wealth, that it should be therefore disregarded and that all of his property should be considered as community property, of which, ahem, she would get one-half.

The trial court said “I don’t think so” and upheld the agreement, as did the Court of Appeals last month.  So Donna was told she would receive what was left to her in Ken’s Will, no more and no less.

The reasoning of the Court on appeal seems to be based on several things.  Donna received gifts of money during the marriage so she could buy property and thus accumulate her own assets.

She had her own lawyer review the PreNup and signed a statement that she had received a full disclosure of Ken’s financial assets.

They were married for eight years and she never raised an issue.  At the behest of her husband she applied for casino licenses in South Dakota in her own name.

Although initially denied, she was eventually awarded licenses after citing language in the PreNup and producing a copy as evidence that the licenses would be her separate property.

Donna’s lawyer reviewed the PreNup and she signed a statement that she received full disclosure of Ken’s financial assets.

The Court ruled that she should not be able to come forward now and plead that “it’s all so unfair.”

The Court explicitly stated that it was not reviewing whether the terms of the prenuptial agreement were reasonable.

What weighed against her was the fact that although she tried to testify that she had never seen a full listing of Ken’s assets, she signed a declaration before the marriage that she had seen such a list and was satisfied.  Further, the Court said, the question of whether her own lawyer adequately represented her interests was beside the point.

She chose him and was apparently satisfied at the time with the job he did.  In fairness, we don’t know what instructions she might have given her lawyer.

If you look up the case and read it (just search for Donna Kellar v. Estate of Kenneth Kellar) you might agree with me that the tone of the opinion seems to make quite clear the Court had no sympathy for her situation or arguments.

So what should we remind ourselves of as we fall madly in love, at least with regard to PreNup’s?

For one thing, if there is a PreNup involved be sure your lawyer… but you have figured out that one.

Full disclosure of assets is necessary, and perhaps most of all, what the agreement you sign actually says is of paramount importance.  After all, counting the ways of love doesn’t mean you shouldn’t also count the money.

 

This article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Publishing this article does not create an attorney-client relationship between the author and any party. The opinions expressed in this article are the opinions of the individual author and not of any other individual person or entity.

Comments (0)
If you wish to comment, please login.