PREMARITAL AGREEMENTS
AND FIANCE(E)S FROM RUSSIA
AND UKRAINE

By: Gary G. Bala, Esquire

LAST REVISED: DECEMBER 2006

What is a Premarital Agreement?

A Premarital Agreement, also known as a Prenuptial or Antenuptial Agreement, is a contract between two persons in advance of marriage which defines their rights and benefits. Typically, it will divide property between the partners and decide issues about spousal support in case of separation or divorce. Without such an agreement, current state law requirements will determine how that property is divided and how much spousal support is justifed, if any. An agreement simply allows the couple to follow their own rules.

Who needs a Premarital Agreement?

Not everyone. It may appropriate however for certain but not all U.S. Gentlemen and Women. These U.S. Gentlemen and Women are typically in their late 40s, 50s, 60s and older, often with children from a prior marriage. They have been divorced before. They are concerned with current separation and divorce rates. They make signficant income and hold substantial assets and property. Thus, they have significant needs for asset and income protection in case of marriage dissolution. These U.S. Gentlemen and Women might have these profiles:

  1. High Net Worth Individuals - For example, over $250,000 in cash, stocks, bonds, mutual funds certificates of deposit or other investments.
  2. Property or Business Owners - U.S. Gentlemen and Women with significant real property and tangibles such as rental income property, luxury automobiles, boats or yachts, or persons who own sole proprietorships, partnerships, small businesses, corporations or professional associations.
  3. Professionals - U.S. Gentlemen and Women with professional degrees or licenses because these are typically viewed as income-producing assets.
  4. Savers - U.S. Gentlemen and Women with substantial savings in 401(k) plans, defined benefit retirement plans and profit-sharing plans, or who want to protect inheritances and gifts.
  5. U.S. Gentlemen and Women with Children of a Former Marriage - U.S. Gentlemen and Women marrying for the second or third time may want to ensure that the majority of their assets are passed on their children of a former marriage in case of marriage dissolution
    HOW MUCH CAN MY SPOUSE GET FROM ME?
    (*IF THERE IS NO PRENUPTIAL AGREEMENT)

    THIS IS THE MOST TYPICAL QUESTION ASKED BY THE U.S. GENTLEMAN OR WOMAN. THE PRECISE
    ANSWER WILL VARY BY THE FAMILY LAW OF EACH STATE. SOME STATES ARE
    "COMMUNITY PROPERTY" AND OTHERS ARE "EQUITABLE DISTRIBUTION".

    IN GENERAL, THE STATES APPLY A "SLIDING SCALE", THE LONGER YOU HAVE BEEN
    MARRIED, THE MORE SHE [OR HE] CAN SUCESSFULLY CLAIM FROM YOUR PROPERTY. WHILE
    THERE IS NO MAGIC BENCHMARK OF TIME, A U.S. GENTLEMAN OR WOMAN WHO HAS BEEN MARRIED
    THREE TO FIVE YEARS HAS MORE EXPOSURE THAN ONE WHO HAS BEEN MARRIED FOR
    ONLY ONE YEAR OR FOR ONLY SIX MONTHS.

    ALIMONY EXPOSURE IN GENERAL:

    20% TO 40% OF YOUR INCOME OR SALARY LESS WHATEVER INCOME SHE IS
    CURRENTLY MAKING, FOR A TERM OF ONE-THIRD TO ONE-HALF THE TIME OF
    YOUR MARRIAGE.

    PROPERTY EXPOSURE IN GENERAL:

    UP TO 50% OF WHATEVER JOINT PROPERTY YOU HAVE IN BOTH OF YOUR NAMES.
    50% OF ANY PROPERTY DEEMED BY YOUR STATE TO BE "MARITAL PROPERTY",
    WHICH IS USUALLY PROPERTY WHICH AROSE AFTER YOU BOTH WERE MARRIED.

    INDIVIDUAL DEBTS OF EACH SIDE WILL USUALLY REMAIN WITH THAT SIDE.
    JOINT DEBTS AFTER THE MARRIAGE COULD BE SPLIT (BUT NOT NECESSARILY) 50/50.
    IT IS RECOMMENDED THAT ANY CREDIT CARDS IN THE FOREIGN SPOUSE'S "NAME" BUT ACTUALLY
    CHARGED TO THE U.S. CITIZEN'S ACCOUNT BE CANCELLED OR LIMITED.

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:

  1. Is the agreement in WRITING which evidences the intention of the parties?
  2. 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.
  3. Did the parties FULLY UNDERSTAND the agreement beforehand? In the case of agreements with Russians and Ukrainians, the writing must be translated into their 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 foreign Spouse separately so the agreement is fully explained. [Some states such as California REQUIRE that the foreign Spouse 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)].
  4. 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 Spouse also helps to lessen any claim of fraud or duress such as "he [or she] said he [or she] would call off the wedding if I didn't sign, or he [or she] told me he [or she] would tear it up after our first anniversary, or he [or she] told me that it was a required part of the U.S. marriage or immigration process."
  5. 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 U.S. husband or wife, for example, cannot negotiate a cap on financial exposure. Rather, he [or she] 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 [or He] Get Angry and Call Off the Marriage if I Raise the Topic of  a Premarital Agreement with Her [or Him]?

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 [or he] would "call off the wedding", then the U.S. Gentlemen or Wife should probably re-consider the engagement itself.

Can I Get Away with Paying Her [or Him] "Nothing" in a Premarital Agreement?

No, you can't. Some U.S. Gentlemen and Women wish to sign a Premarital Agreement whereby the foreign Spouse 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 U.S. Gentlemen and Women 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 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 U.S. Gentleman or Woman must be willing to pay something to the foreign Spouse which the Court will say is "fair" and which constitutes a minimum "floor", in exchange for the privilege of the U.S. Gentleman or Woman protecting the remainder of their assets and income. By "sliding scale", we mean that the more the U.S. Gentleman or Woman is willing to pay (and can live with paying) the foreign Spouse, 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 U.S. Gentleman or Women actually formed the corporation and also hold the shares of the coporation, then obviously those shares are part of 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 U.S. Gentlemen and Women possess is a pension or retirement plan, such as 401(k) plan or other qualified plan. Most U.S. Gentlemen and Women are concerned with 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 U.S. husband or wife and brought into the marriage, and thus would stay with that person 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 foreign Spouse will agree to sign all future waivers and releases at a later date under the retirement plan provisions to allow the U.S. Citizen to keep their 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 U.S. Gentleman or Woman for alimony or maintenance since he [or she] may be able to pay it from other sources, present or future. Also, this does NOT mean that a U.S. Gentlemen or Woman is "off the hook" by not having to pay the foreign Spouse anything. This U.S. Gentleman's or Wife's Premarital Agreement is still tested for validity by examining whether whatever he [or she] offers the foreign Spouse is fair and reasonable to that foreign Spouse. Furthermore, caution should also be used to determine if this U.S. Gentleman's or Wife'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 [or he] 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 the foreign Spouse's 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 the foreign Spouse's 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 foreign Spouse (and the U.S. Citizen as well) to sign the agreement, and actually strengthens the couple's bonds of mutual understanding and trust in the relationship.

Conclusion

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.

SPECIAL NOTE AND DISCLAIMER:

This Article is provided as GENERAL INFORMATION ONLY and as a STARTING POINT ONLY for research, and not as legal advice or counsel either in general or specific to anyone's case. Rules and practices regarding Premarital Agreements vary by state. They also can and do constantly change. It is strongly recommended that you consult with a qualified licensed attorney: 1. familiar with the rules in your home state where you will reside with your spouse, 2. familiar with the requirements of the Uniform Premarial Agreement Act, 3. familiar with the financial obligations under the federal immigration affidavit of support as they may impact your state law Premarital Agreement in your home state and 4. familiar with the unique facts and cicumstances of your case and situation. A reasonable effort is made to update the information in this article, but because rules and trends in this area constantly change sometimes with little or no advance notice, no assurances can be given about information in this article. Reliance on any of the information in this article is strictly at the reader's own risk and liability.

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