Should Prenup or Postnup Require Arbitration?

Arbitration is Often in a Prenup or Postnup Without Considering Whether it Should Be

Most lawyers start a prenuptial or postnuptial agreement with a template or old agreement. Some lawyer groups, bar associations and legal publishers provide outlines or templates for common documents. Most prenuptial and postnuptial templates include binding arbitration. Many attorneys include arbitration because it’s in the template.

Best Not to Include Arbitration in A Prenup or Postnup

After practicing family law since 1992 and writing hundreds of prenups and postnups, I advise against an arbitration requirement.

Binding Arbitration Lets the Arbitrator Do What They Want

Most arbitration provisions require binding arbitration, allowing the arbitrator(s) to ignore the agreement and favor one spouse without recrimination. “Binding” means no appeal.

Non-Binding Arbitration in a Prenup or Postnup

An alternative to binding arbitration is non-binding arbitration. This can mean it is purely advisory and either party may request a trial, or it can bind the trial court but permit appeal. Permitting appeal substitutes the arbitrator(s) for the trial judge but allows a court of appeal to review the case as if the trial had been in court. Non-binding arbitration that permits appeal requires careful writing of the marital agreement. It must specify a court reporter will be present the same as in court, must detail how the rules of evidence and procedure will apply, and how it will be paid for. Without a court reporter, a court of appeal will dismiss an appeal. If the agreement does not specify how to apply the rules of evidence and procedure, the court of appeals will approve whatever the arbitrator does procedurally.

Arbitration Is Expensive

A filing fee in court is a few hundred dollars and helps pay the judge, court reporter and court staff. In arbitration, the parties pay all that. Binding arbitration eliminates the need to pay a court reporter, but the arbitrator must be paid, and there’s no right to appeal an unfair decision. The arbitrator will be an experienced lawyer or former judge, and will cost thousands. So will the court reporter, but less. Applying the rules of procedure and evidence lengthen the process and, because the arbitrator and court reporter are paid hourly, increases cost.

A Judge Can Require an Arbitrator Even if Both Spouses Agree Not To

Some prenups and postnups require arbitration without exception. If both spouses agree to divorce and abide by the agreement, some judges still require they pay for an “arbitrator’s opinion” approving the divorce decree. The agreement can be written to require arbitration only if a disagreement occurs but must still specify the terms of arbitration and whether it is binding.

A Panel of Arbitrators for a Prenup or Postnup

An unfair or biased arbitration is less likely with a panel of three arbitrators, but each must be paid, tripling the cost. A sizeable estate might justify this cost because arbitration is private. Court proceedings are not.

Arbitration Provides Privacy for Large Estates

With a sizeable estate requiring privacy and discretion, a spouse could refuse to arbitrate as leverage in negotiation. That might justify specifying the terms and details of non-binding arbitration in the prenup or postnup.

Wait to Decide if Arbitration is Appropriate

If the prenup or postnup contains nothing about arbitration, both spouses, or a spouse’s estate if one has died, can agree to arbitrate and the rules for arbitration when the issue arises. It’s impossible to predict when a marital agreement will be used and what the circumstances will be, and best to wait until then to decide whether to arbitrate and what rules to apply, except with a sizeable estate where cost is less of a concern than privacy and discretion.

Contact Us for Your Prenup or Postnup Agreement

If you are about to sign or create a prenup or postnup, contact us. We can help you determine whether you need to include arbitration in your agreement.