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Friday, September 11, 2015

Florida Supreme Court Gives Expansive Protection to Husband’s Separate Property under a Prenuptial Agreement

A divorcing wife asserted that because a 20 year old prenuptial agreement made no specific reference to enhancement in value of nonmarital property attributable to marital labor or funds, the enhancement in value to the husband’s assets during the marriage is subject to equitable distribution. Similarly, the agreement did not specifically provide that the husband’s earnings will be his separate property, so the wife sought a finding that these were not protected under the prenuptial agreement.

The agreement did provide that the property “owned or hereby acquired by each of them respectively” would be free of claims of the other spouse. It also provided that “each party agrees that neither will ever claim any interest in the other’s property,” and if one party “purchases, [a]cquires, or otherwise obtains, property in [his/her] own name, then [that party] shall be the sole owner of same.”

Both the District Court of Appeals and the Supreme Court found that the above general waiver language was broad enough to protect enhancement in value of property and the husband’s separate earnings as separate property of the husband, thus denying the wife an interest in those assets upon divorce. While the ruling is fact specific based on the specific language of the agreement, it does call into question other lower court decisions that found earnings and appreciation to be marital property subject to division when they were not specifically described as separate property in the agreement.

Of course, these issues can be entirely avoided by providing specific waivers as to these items in the prenuptial agreement.

As an aside, the fairness of a marital agreement can be an issue in the enforceability of that agreement in Florida. In Casto v. Casto,  508 So.2d 330 (Fla. 1987), the Florida Supreme Court found that unfairness or unreasonableness can negate enforceability, although full and complete financial disclosures will still allow for enforceability even if the agreement is unfair or unreasonable. Casto continues to apply to postnuptial agreements in Florida. Prenuptial agreements are now governed by Fla.Stats. Section 61.079 – that statute similarly voids prenuptial agreements if unconscionable, with a savings if there is full and complete financial disclosure (measured at the time of the agreement and not at divorce) even though there were disproportionate wealth between the spouses, due to the $1.9 million the spouse would obtain under the agreement.

Hahamovitch v. Hahamvitch, Florida Supreme Court Case No. Sc14-277 (September 10, 2015)

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