Posted by: koherston | March 9, 2016

Prenuptial Agreement Invalid in McMinnville, TN: In re Estate of Hillis

Facts: Husband and Wife were married in 1992. The day before the wedding, Wife presented Husband with a prenuptial agreement drafted by Wife’s attorney.

The prenuptial agreement reflected the parties’ agreement to relinquish any right each would have in the other’s property in the event of the death of either party. The prenuptial agreement also expressly stated Wife’s desire that her son receive her real estate.

Wife was diagnosed with cancer in 2010, for which she had surgery. Shortly thereafter, she executed a will leaving Husband a car, some personal property, and a life estate in her real property.

Wife’s cancer returned, and she died in December 2012. Her will was admitted to probate. Upon learning of his meager beneficial interest under Wife’s will, Husband filed a petition for an elective share, which in this case would be 40% of the net estate.

After the trial, the trial court ruled the prenuptial agreement was invalid because it did not provide an adequate disclosure of Wife’s assets.

Wife’s estate appealed.

On Appeal: The Court of Appeals affirmed the trial court.

In Tennessee, prenuptial agreements are binding if they are entered into freely, knowledgeably and in good faith and without exertion of duress or undue influence upon either spouse. Prenuptial agreements must meet this standard whether they are construed in the probate context or the divorce context.

There are two ways to prove a prenuptial agreement was entered into knowledgeably. First, one can show the spouse seeking to avoid the agreement was provided with a full and fair disclosure of the nature, extent, and value of the other spouse’s holdings. Second, in the absence of sufficient disclosure, the agreement may still be enforceable if one demonstrates that disclosure was unnecessary because the spouse seeking to avoid the agreement had independent knowledge of the full nature, extent, and value of the other spouse’s holdings.

Whether one spouse had sufficient knowledge of the other spouse’s holdings depends upon the particular facts and circumstances of each case. Relevant factors include the parties’ respective sophistication and experience in business affairs, the duration of the relationship prior to the execution of the agreement, the time of the signing of the agreement in relation to the time of the wedding, and the parties’ representation by, or opportunity to consult with, independent legal counsel.

Tennessee law does not require that a spouse have knowledge of the specific appraised values of the other spouse’s assets, but knowledge of the other spouse’s overall net worth is necessary.

After reviewing the record, the Court upheld the trial court’s ruling invalidating the prenuptial agreement, explaining:

Here, it is undisputed that Husband was not provided with any disclosures of [Wife’s] holdings when he executed the antenuptial agreement. Accordingly, the agreement can only be binding if such disclosures were unnecessary because Husband had sufficient independent knowledge of [Wife’s] holdings….

There is no evidence to support a finding that Husband knew the extent or value of [Wife’s] business interest, bank accounts, and investments, which were significant, when he signed the agreement. Therefore, there is no factual foundation upon which to conclude that Husband had knowledge the “full nature, extent, and value” of [Wife’s] holdings.

Accordingly, trial court’s judgment that the prenuptial agreement was unenforceable was affirmed.

K.O.’s Comment: In a footnote, the Court of Appeals notes something interesting about this particular prenuptial agreement.

The 1992 antenuptial agreement, which consists of only two pages, reveals that the possibility of divorce was not a consideration because it does not discuss the parties’ property rights in the event of a divorce — only death — giving true meaning to the phrase “until death do us part.”

In re Estate of Hillis (Tennessee Court of Appeals, Middle Section, February 25, 2016).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce and Family Law Attorney.


Responses

  1. Really good re McMinnville Prenup. Loved the comment. Thanks!


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