Although premarital or post-marital agreements, as they are called in Arizona – are not viewed as the most romantic documents in the world, they are an essential for business owners contemplating marriage. Carefully drafted and properly executed in accordance with Arizona law, a premarital or post-marital agreement can save a business owner time and money in the courtroom litigating ownership of business interests in the event of a legal separation and divorce.
Enforceability
To be enforceable, an agreement must satisfy certain requirements often codified by the law of the state where the individuals reside. For example, in Arizona it is outlined within § 25-202 of the Arizona Revised Statutes. These essential requirements include:
- The agreement must be made in writing and signed by both parties (the agreement does not require consideration). Although not mandated, it is standard practice to suggest that both individuals separately seek out the advice and counsel of an attorney.
- Signed voluntarily by both parties without threats of force or coercion.
- Each party must make a fair and reasonable disclosure to each other of all personal property, assets, and liabilities. Neither party can waive in any way his or her right to the other party’s disclosure of all personal property and debts.
- A properly executed agreement is automatically unenforceable if it is not in writing, signed by both parties or it is later discovered that one of the parties did not have, or could not reasonably have had, adequate knowledge of the other party’s property, assets, and liabilities.
Similar to any contract, these agreements must show that “a meeting of the minds” occurred. In other words, both parties were provided information to make an informed decision, they read and understand the agreement, and they are executing the agreement under their own free will.
The Importance of Disclosure
When a premarital or post-marital agreement has been properly drafted, both sides have made a full disclosure of their assets and liabilities, and it has been signed, the agreement will override the community property rules of Arizona by preventing one spouse from receiving half of the other spouse’s business in the event of a divorce.
Although making a full disclosure of assets and obligations may seem straightforward, it is a common area of attack in the context of these agreements. A tactic often utilized by a divorcing spouse (and his/her counsel) who seeks to invalidate an agreement is to allege that the opposing spouse did not make a full disclosure of all assets. Alternatively, he or she might claim that the opposing spouse concealed debts. This scenario is especially common when one spouse is a business owner. The non-owner spouse may claim unfamiliarity with the finances of the business and was “kept in the dark” by the other spouse.
As a result, business owners who wish to protect their assets through the use of a premarital or post-marital agreement should strongly consider including a list of their own assets and obligations – along with a list of their spouse’s property and debts – as part of the agreement itself. Additionally, both spouses should sign and date each page of the agreement, along with the lists of assets and debts.
