While divorce can be a tense and difficult time, the added challenge of asset division may seem daunting. Often the idea of arguing through lawyers over alimony and assets is enough for some couples to delay a much-needed divorce. Although some of your assets may predate your relationship, you may begin to wonder what will be at risk during a divorce.
Here’s what you should know about dividing assets in a Connecticut divorce.
Everything is ours
In some states, if you own and have a record of your ownership of a specific asset before the divorce, it might not be subject to asset division. Connecticut, however, is different. Here, there is no distinction between marital and separate property. Connecticut law follows the principle of all-property equitable division. The court may assign any or all of a litigant’s estate to the other when allocating property. Whether you built a business or inherited an estate, it will likely still be part of the group of assets to divide between you. As you go through the process, it will be essential to consider each of your assets’ value and what equitable division means in your specific circumstances.
What if we have a prenuptial agreement?
A prenuptial agreement is often a mechanism that individuals use in seeking to protect assets in case of a divorce. A prenuptial agreement, however, may not be ironclad. “Prenuptial agreements entered into on or after October 1, 1995, are governed by the Connecticut Premarital Agreement Act.” Bedrick v. Bedrick, 300 Conn. 691, 699 (2011). Note that the court analyzes longer standing contracts under common law principles to evaluate for just results. There are several situations where a Connecticut court may find a prenuptial agreement entered into after October 1, 1995, invalid, such as:
- Involuntary agreement. A litigant challenging the agreement provides sufficient evidence to show that he or she did not enter the agreement voluntarily
- Unconscionable agreement. The court will evaluate whether the terms of an antenuptial agreement was unconscionable at the time of execution, as well as if the circumstances have changed sufficiently to render the terms unconscionable at the time of enforcement.
- Lack of disclosure. Connecticut law requires that parties seeking to enter into a prenuptial agreement to fairly and reasonably disclose the amount, character and value of assets, debts and income prior to entering into the contract.
- Lack of prior opportunity for counsel. Signing a prenuptial agreement is an important decision. A challenger may seek to provide evidence to show that he or she did not have a reasonable opportunity to consult with independent counsel prior to entering into the agreement.
The existence of a premarital agreement, alone, may not necessarily mean that divorcing spouses will not have disputes concerning the terms and conditions of antenuptial agreements. Divorcing spouses may seek to challenge, or seek to defend against a challenge to enforce a prenuptial agreement in family court.
Is an agreement that was entered into during the marriage enforceable?
Some married couples enter into agreements during their marriages to address financial issues should the marriage break down at a later time in the marital union. In many ways, the standards are similar to those for a prenuptial agreement. When it comes to postnuptial agreements, the court tends to be concerned with the marital relationship creating additional pressure and coercion for the other partner to consent. Public policy in Connecticut adheres to the principle that spouses have a special relationship that imposes fiduciary duties upon each other. For that reason, courts may evaluate postnuptial agreements – those entered into during the marriage – with “special scrutiny.” Bedrick at 703.
In Bedrick, the husband argued that the trial court erred in evaluating the prenuptial agreement under the principles of equity and fairness instead of analyzing the facts under general contract rules. The trial court found the prenuptial agreement unconscionable due, in part, to a dramatic increase in the economic status of the parties between the time the agreement was executed and the time of enforcement. The high court affirmed the trial court judgment that the increase in assets exceeded the expectations and intent of the original agreement to such an extent that literal enforcement of the contract would work an injustice.
The court recognized that a challenger bears a heavy burden. In evaluating for unconscionability at the time of enforcement, courts look to the intent of the parties in entering into the contract, as well as any relevant changes circumstances. When changes in circumstances are far beyond the reasonable contemplation of the litigants, the court may find literal enforcement unjust.
It should be noted that general contract principles remain an important aspect of prenuptial and postnuptial litigation. “Unfairness or inequality alone does not render a postnuptial agreement unconscionable; spouses may agree on an unequal distribution of assets at dissolution.” Bedrick at 705-706. For example, in Yun Zhou v. Hao Zhang, the trial court upheld the terms of a postnuptial agreement. 334 Conn. 601 (2020).
The wife argued that the trial court erred in excluding deferred compensation benefits and other forms of unvested property under the terms of the premarital contract. She claimed that inclusion of the retirement assets would have increased her share of the assets substantially. The Connecticut Supreme Court noted that the wife failed to produce any evidence in her life, the marriage or in the lives of the children to support a finding that literal enforcement of the contract would work an injustice.
In the absence of a marital agreement, or when a Connecticut courts finds such a contract invalid, the court divides assets equitably, not necessarily equally. This means that the court may assign a larger share of the assets to one litigant, depending on the individual facts and arguments in the case. Many factors should be evaluated and analyzed. Similarly, preparation and presentation of the facts is critical in obtaining the best possible outcome.