The Allard III case may have killed one of the most valuable tools in a Michigan divorce lawyers toolbox in drafting a separation agreement after parties marry. Unlike a pre-nuptial agreement, which is entered into before a couple gets married and predetermines the outcome of a potential divorce, a post-nuptial agreement is entered after the parties are married.
In the recent Michigan Supreme Court case, Allard v. Allard, the parties signed a pre-nuptial agreement which provided among other things, that: “. . .certain property acquired during the marriage was to remain the sole and separate property of each party (i.e., part of the party’s separate estate), including “[a]ny property acquired in either party’s individual capacity or name during the marriage[.]”
The Defendant in the Allard case sought to invade the plaintiff’s separate estate pursuant to Michigan Compiled Laws section 552.23(1) (MCL 552.23(1)) and Michigan Compiled Laws section 552.401 (MCL 552.401).
By way of background and as a pillar of Michigan divorce property division law, property acquired prior to marriage (and in some cases property that is gifted or inherited during the marriage) is considered separate property and not divided in the event of a divorce. Simply put, separate property belongs to the individual who owns it.
However, the rule of not dividing separate property in a divorce has two exceptions.
The first exception to the rule of not dividing separate property can be found in MCL 552.23(1) which provides in pertinent part:
“. . .if the estate and effects awarded to either party are insufficient for the suitable support and maintenance of either party . . . the court may also award to either party the part of the real and personal estate of either party . . .”
In simple terms, when faced with dividing property a judge may invade the separate property of an individual if there is virtually no other property to divide. The public policy consideration for this exception is to limit people from being forced to rely on State assistance because they received nothing in their divorce.
The second exception to the rule of not dividing separate property can be found in MCL 552.401 which provides in pertinent part:
” . . . The circuit court may include in any decree of divorce . . . appropriate provisions awarding to a party all or a portion of the property, either real or personal, owned by his or her spouse, as appears to the court to be equitable under all the circumstances of the case, if . . . the party contributed to the acquisition, improvement or accumulation of the property . . .”
In simple terms, if a spouse helped contribute to the acquisition or improvement of property a court can divide the property even if the property was acquired prior to marriage. The public policy consideration in this exception is fundamental fairness and can be summed up by considering the notion that if you helped purchase something you should be entitled to share in it even if it is owned by your spouse.
Why post-nuptial agreements may be DOA in Michigan?
The Supreme Court in Allard directed the Michigan Court of Appeals to decide if parties can waive the court’s authority under MCL 552.23(1) and MCL 552,401 in a pre-nuptial agreement (the same theory would apply to post-nuptial agreements) and on January 31, 2017, the Michigan Court of Appeals said: NO. The Michigan Court of Appeals in Allard v. Allard III (so titled because it was the third time on appeal), the Michigan Court of Appeals decided that parties cannot waive the statutory authority granted to a judge under MCL 552.23(1) and MCL 552.401.
Applying the Allard III decision may mean post-nuptial agreements in Michigan are DOA.
As a result of the Allard III decision a judge may choose not to enforce a pre-nuptial agreement if one of the two statutory exceptions apply. Therefore, the comfort and protection provided couples when entering into a pre-nuptial or post-nuptial agreement may no longer be enforceable under Michigan divorce law.
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By: Daniel Findling