A recent Florida appellate court decision provides a drafting lesson in prenuptial agreements - if a spouse is to receive an interest in appreciation in an asset, the agreement should be specific on that.
In the case, a valid prenuptial agreement provided that:
6. Agreements Concerning Fran's House. The parties hereto intend to reside in Fran's house . . . . The House shall be and remain titled in Fran's name alone and, except as specifically provided in Section 6, Rudy shall have no right, title or interest in and to the House or any of Fran's Separate Property contained herein. Further, with respect to the House, the parties agree as follows:
(a) If a petition for dissolution of marriage is filed by either of the parties hereto after the date the parties are married, upon the entry of an order dissolving the marriage of the parties, Fran shall pay to Rudy a sum equal to one-half of all principal payments and any capital improvements made with respect to the House between the date of the marriage of the parties and the date on which a petition for dissolution of marriage was filed.
The parties divorced, and Rudy claimed that he was entitled to one-half of the appreciation in the House that occurred after marriage. The trial court agreed with him and awarded him that portion of the appreciation.
The court was reversed on appeal, since the plain language of the agreement only contemplates that Rudy was to receive a dollar amount equal to one half of the principal payments and capital improvements made.
It is unclear from the opinion whether Rudy thought that he was entitled to the appreciation at the time he entered into the agreement, or he just threw that argument in at the time of divorce to see if it might stick. The result here is not surprising based on the language of the agreement. The only surprising thing is that the trial court agreed with Rudy, and had to be reversed on appeal.
If it is intended that a party is to benefit by post-marriage appreciation in an asset, this should be made explicit in the agreement to avoid disappointed parties and unnecessary litigation.
Heiny v. Heiny, 38 Fla.L.Weekly D200g (2nd DCA 1/25/13)Follow @RubinOnTax Tweet