Love Hurts When You Ignore Your Prenup
Summer is, or should be, a time for all things beautiful. Part of that beauty is encapsulated in the joy of summer, non-professional reading. But if there was ever a case to be made that professional reading should be added to your summer reading list, look no further than Judge Jeffrey A. Goodstein’s page turning decision in LSS v. MS, Sup. Ct. Nassau Cty. (NYLJ May 19, 2023).
The decision, which is factually intricate, and replete with poignant legal analysis, reads like a short story—a marriage story, in fact, although without the suffocating cliches that permeate Noah Baumbach’s “Marriage Story.”
Indeed, this marriage story involved a 47-month marriage with two parties who entered the marriage with “significant assets,” and, among other things, a dispute over $1,230 worth of electronics purchased from Best Buy. But that is not the subject of this article, although that aspect of the litigation is, believe it or not, addressed in the decision.
The decision reminds divorce lawyers that we cannot control what happens after a prenuptial agreement is signed. Life happens after a prenuptial agreement is signed, and LSS v. MS shows what can happen as a consequence of disregarding the mandate of a prenuptial agreement.
Before addressing the facts of the case, it is worth pointing out that the parties in the case agreed that “the issues of equitable distribution, separate property claims, and/or interpretation of their prenuptial agreement…would be decided by the Court based on affidavits and agreed-upon exhibits to be admitted into evidence in lieu of a trial.”
It is this author’s view that the lawyers and the parties should be commended for the agreement they reached. In many cases, live testimony is needed to assess credibility, particularly when there are facts in dispute.
However, there are also cases where the demands of a live trial do not need to be placed on the court system, and LSS v. MS is proof that in certain circumstances a “trial on paper” produces a result that is just as—if not more—optimal than a trial “in person.”
Turning to the facts of the case, this article will be limited to focusing on three clauses in the parties’ prenuptial agreement, which read as follows:
The parties shall open a joint bank account after their marriage. M shall deposit into such joint account his salary and wages, at all times when he is employed, with the exception of the monies deposited into the XXXX Credit Union Account...
L shall deposit into such account her salary and wages at all times that she is employed …
The parties shall pay from the joint account their joint expenses, including but not limited to all costs in maintaining the parties’ residence, car insurance, travel and vacation costs, medical and dental expenses, automobile expenses, disability insurance not paid for by M’s employer, homeowner’s insurance, food, dining out and entertainment.
To summarize, each party sought various credits from the other and those credits related to the following (1) the wife argued that the husband “improperly used net earned income in the joint account to pay non-living expenses”; (2) the husband argued that the wife “never deposited any of her income into the joint account”; and (3) the wife argued that the husband also “underfunded” the joint account.
Now consider the court’s express, and implied, reaction to each party’s demands for credits—which were denied—in connection with alleged underfunding of the joint account and/or use of the joint account for purposes that ran afoul of the prenuptial agreement:
• “[t]he parties never followed the pre-nup. By mutually agreeing on a different method to manage their finances during the marriage, both parties relinquished their right to now attempt to strictly enforce the provisions of the pre-nup they effectively abandoned, specifically those provisions requiring that they directly deposit their salaries into the joint account” (emphasis added).
• “Wife admits to immediately ignoring and violating the pre-nup, and she explains that she never arranged for her paycheck to be directly deposited into the joint account.”
• “Husband argues that the parties did not strictly adhere to the terms of the pre-nup after getting married and mutually agreed to manage their finances differently than what was originally agreed to in the pre-nup. He explains that rather than altering his direct deposit instructions with his employer, he would provide Wife with a stack of blank checks from his separate Citibank Account. He states that Wife then wrote checks out to cash, paid expenses directly from his Citibank Account, or wrote a check to the parties’ joint account and deposited same.”
• As to the alleged use of the joint account to pay “non-living expenses,” citing a prior decision of the Court of Appeals, the court wrote that “a Court should not second guess every financial decision made by the parties throughout the marriage or drill down into every economic choice so as to examine every debit or credit made through the marriage.”
• Also note the following line in the decision about a separate set of clauses in the prenuptial agreement: “The parties agree that while they anticipated selling their separate property homes to then jointly purchase a marital residence as set forth in the pre-nup, once again, the parties changed their minds.” (emphasis added).
The law on prenuptial agreements in New York continues to evolve. LSS v. MS is no exception. In the end, it may well be the case that no matter how meticulously you have drafted a prenuptial agreement, and no matter how “bullet-proof” its provisions may seem, the conduct of your client can have material consequences after that agreement is signed.
It is not clear from the decision if the prenuptial agreement in question required modifications to be written and acknowledged. The case digest summary suggests this would be irrelevant as “various terms of the prenuptial agreement were not followed at any time by the parties” and there were “no issues of fact.”
One thing is clear: provisions in prenuptial agreements that attempt to prescribe how a laundry list of expenses are to be paid, and/or where each dollar of someone’s salary gets deposited, are perhaps best characterized as aspirational, as in, it may not be wise to count on those provisions being adhered to after the agreement is signed. In that case, it may be prudent to provide for what happens if and when those provisions are not followed, i.e., do the parties enter the world of this credit and that credit, or are credits waived and the parties let sleeping dogs lie.
It is not uncommon for divorce lawyers to tell their clients that once a prenuptial agreement is signed, it’s now time to move on with life, enjoy it, and with that in mind, drop the prenuptial agreement in a drawer to collect dust and ideally never be seen again. That is healthy advice.
However, given the evolution of New York law on prenuptial agreements, and decisions such as LSS v. MS, it is likely time to also tell your clients this: pay some respect to your prenuptial agreement if you ever want to see it strictly enforced one day. Or, to put it more bluntly, go live your life, but at the same time, refrain from giving your prenuptial agreement the middle finger because if you do, well, it appears that all bets may be off.
“Love Hurts When You Ignore Your Prenup,” by Alan Feigenbaum was published in the New York Law Journal on June 21, 2023.
Reprinted with permission from the June 21, 2023, edition of the New York Law Journal © 2023 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.