Two Reasons Why Iowa Courts May Set Aside Premarital Agreements During Probate Proceedings

Maybe you’ve heard people say, “it’s not a problem until it’s a problem,” a familiar maxim that fits well with premarital agreements in Iowa estate dispute litigation. Also known as prenups, these agreements may sit around for years or decades before a spouse discovers an issue with the contract.

In this regard, estate dispute attorneys who regularly analyze premarital agreements sometimes encounter unfair or one sided terms in the prenup or discover that one party signed the contract involuntarily—hidden vulnerabilities that can ultimately affect a surviving spouse’s inheritance or elective share rights.

The law remedies prenup complications by allowing the courts to set aside premarital agreements when its terms are unconscionable or when the surviving spouse executed the contract involuntarily. 

Premarital Agreements in a Nutshell

A premarital agreement is a contract between spouses in consideration of marriage that springs into action after the wedding. Both parties must set the agreement in writing and execute the contract properly, according to Iowa Code. Most parties intend a premarital agreement will limit the surviving spouse’s right to inherit.

When individuals marry without a prenup or when the courts set aside an existing premarital contract, the surviving spouse’s right to inherit will often fall into Iowa’s elective share rules. 

The state’s elective share laws protect the surviving spouse’s property rights by enabling him/her to take from an estate, regardless of whether the deceased left the surviving spouse assets in a valid will or whether the deceased left the survivor no provisions at all. 

Drafting a premarital agreement is complicated, and parties must observe strict rules to make sure the courts will enforce the contract upon the death of a spouse. 

  • Full Disclosure. Each Spouse must fully disclose to the other spouse their real property holdings, assets, and debts before executing the agreement.
  • Voluntariness. Substantial evidence (i.e. affidavits, attorney notes) must show that neither party entered into the agreement under duress or fraud.
  • Separate Counsel. Each spouse must retain independent legal counsel while drafting the contract (unless properly waived) and may execute the agreement only after reasonable time has passed to consider his/her options. 
  • Fairness. The premarital agreement must not be grossly unfair (unconscionable) or hold terms that favor one spouse’s interests over the other’s (one sided). 

Why Fairness is Essential

While a few things that might render a prenuptial agreement unenforceable (i.e. capacity, improper execution), unconscionability and involuntariness allegations are usually the most complex to claim in court.

An unconscionable prenuptial agreement is a contract in which the terms are so one-sided and unfair that it would place one spouse at an undue disadvantage if the courts enforced it.

Whether a premarital agreement is unconscionable is a question of law that only a judge may settle. When considering unconscionability claims, the courts will apply Iowa Code and case law and seek answers to the following questions:

  • Disclosure. Did the deceased produce a fair, reasonable, and full disclosure of his/her assets and debts?
  • Waiver. Did the harmed party voluntarily and expressly waive (in writing) any right to said disclosure?
  • Awareness. Did the harmed party hold (or should the party have held) sufficient understanding of the other party’s assets and debts?

A premarital agreement is not enforceable if the answer to ALL three questions above is NO.

Involuntariness and Premarital Agreements

The Iowa probate courts must find presence of one or more circumstances below to rule a spouse executed his/her premarital agreement involuntarily:

  • Lack of Council. Was the harmed party represented by separate legal counsel during the draft and execution of the agreement?
  • Waiver. After being advised to seek independent legal counsel, does a separate writing exist indicating the harmed party expressly rejected legal representation?
  • Sufficient Consideration. Did seven calendar days or more pass between the time the harmed party (and his/her independent legal counsel) first reviewed the final draft of the agreement and the time said party executed the contract?
  • Reflection and Renouncement. Was the harmed party fully informed of the terms and essential effect of the premarital agreement along with the rights and obligations he/she was surrendering by signing the agreement?
  • Compulsion. Did the harmed party execute the premarital agreement under duress, fraud, or undue influence?
  • Competence. Did the harmed party hold the requisite legal capacity to enter into and execute the premarital agreement?
  • Foreign Language Requirement. Did the agreement explain the harmed party’s rights in a language that he/she was fluent in?

In short, the Iowa he courts will often find involuntariness and deny enforcement of a premarital agreement when the prenup is grossly biased against the harmed party because contract formation, mutual assent, or consideration was lacking.

Real Life Example of Premarital Agreement Unconscionability Litigation in Iowa

Earlier this year, the Iowa Court of Appeals affirmed that a premarital agreement was not unconscionable even though the contract prevented the surviving spouse from receiving a statutory elective share against property that the deceased failed to list clearly as an asset in the agreement.

The properly executed premarital agreement likewise and specifically prohibited a surviving spouse from inheriting assets from the other’s estate. After eight years of marriage, the husband passed away, and the surviving wife attempted to declare an elective share during probate proceedings.

This prompted the deceased’s heirs to bring estate dispute litigation on the grounds that the deceased’s premarital agreement barred the surviving spouse’s claim. The district court agreed with the heirs, ultimately enforcing the agreement—the surviving spouse later appealed the decision. In the Matter of the Estate of Clarence I. Laube, No. 20-1399 (Iowa Ct. App. Jan. 12, 2022).

Iowa Appeals Court Examines State Unconscionability Codes

Iowa Code section 596.8(1) holds that a premarital agreement is unenforceable when the terms in the agreement are unconscionable or when the deceased party did not provide the surviving spouse with a “fair and reasonable disclosure” of his/her assets and debts. 

In this case, the Court of Appeals first studied prenup formation to discover if the agreement was procedurally and substantively unconscionable under Iowa Code.

  • Procedurally Unconscionable. The surviving spouse’s appeal first alleged that her husband pressured her into executing the agreement and that she never read the contract. Yet, when examining the estate planning notes collected from the attorneys on both sides, evidence revealed the parties negotiated the prenuptial agreement for months, and the surviving spouse had signed the agreement exactly thirty days before the wedding.Both sides further hired separate counsel before signing the contract, and the terms of the premarital agreement were neither “highly technical nor confusing.” The agreement therefore was not “procedurally” unconscionable, according to the Court.
  • Substantively Unconscionable. Next, the appellate judges questioned whether the asset listings and debt division in the contract paralleled the parties’ actual financial conditions at the time of contract execution.

The Court established that before the parties endorsed the contract, the assets listed in the premarital agreement consistently matched the parties’ economic positions and that the agreement itself split debt burdens equally among spouses.

Therefore, the court held the decedent’s prenup was neither procedurally nor substantively unconscionable.

Late Husband Never Disclosed Century Farm Asset

The surviving spouse’s second claim alleged the prenup did not offer “fair and reasonable disclosure,” under Iowa Code § 596.8, because the deceased never revealed during contract formation that he owned a century farm. The deceased likewise failed to register the 70-acre property in the “farm asset section” of the premarital agreement, according to the appellant.

However, the deceased had properly disclosed in the agreement an ownership of $1.5M in farm LLC interests, and during probate, the deceased’s personal representative valued those LLC assets at $2.1M. Upon further scrutiny, the Court discovered the LLC actually represented the deceased’s century farm assets.

Inquiry Notice Implies Fair and Reasonable Disclosure

Evidence from the lower court further proved the surviving spouse knew that the LLC farm “had been in the family for many years,” knowledge that she received during the marriage. Said recognition, according to the court, placed the surviving spouse on “inquiry notice”—awareness that one may receive after performing a due investigation.

So, despite the surviving spouse not knowing the exact value of the LLC farm, nor its exact location, her inquiry notice offered her “adequate knowledge of the property” and fair and reasonable disclosure under Iowa Code § 596.8, according to the Court.

Finally, the Court held the reason why the century farm increased in value over the eight years of marriage was not a result of a shared asset contribution among spouses, but rather, came from an ordinary appreciation in land value. The surviving spouse therefore could not take an elective share of land appreciation on real estate that she never lawfully held an interest in.

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