4.4 Veil Piercing, Premarital Agreements & Child Custody Jurisdiction

🎯 Essential Doctrinal Takeaways

• Courts pierce the corporate veil when owners treat the entity as an alter ego (commingling funds, ignoring formalities) and undercapitalization causes injustice.
• Under the UPAA, premarital agreements are unenforceable if executed involuntarily or if unconscionable when signed without fair financial disclosure.
• Under the UCCJEA, the child's 'home state' (where the child lived for at least 6 consecutive months prior to filing) has priority jurisdiction.
• The best interests of the child standard governs custody determinations; the tender years gender presumption has been abolished.

While limited liability is a foundational principle of corporate law, courts pierce the corporate veil when shareholders abuse the corporate form. Key factors include: (1) alter ego / unity of interest (commingling corporate and personal funds, paying personal expenses from corporate accounts, failing to observe corporate formalities); and (2) injustice or fraud, such as gross undercapitalization at inception given the business risks (Walkovszky v. Carlton).

In family law, economic arrangements are frequently structured by premarital agreements. Under the Uniform Premarital Agreement Act (UPAA) § 6, a premarital agreement is unenforceable if executed involuntarily, or if the agreement was unconscionable when signed and the challenging spouse did not receive fair and reasonable financial disclosure, did not waive disclosure, and lacked adequate independent knowledge of the assets.

Child custody jurisdiction is governed by the Uniform Child Custody Jurisdiction and Enforcement Act (UCCJEA) § 201. Priority jurisdiction to make an initial custody determination belongs exclusively to the child's 'home state'—the state where the child lived with a parent for at least six consecutive months immediately prior to filing. If a parent remains in the home state, that state retains exclusive jurisdiction over any second state where the child has resided for less than six months.

⚠️ NextGen Bar Examination Traps & Pitfalls

• Believing shareholder limited liability is absolute and immune from veil piercing in tort cases.
• Assuming an ultimatum to cancel a wedding automatically invalidates a premarital agreement without proving lack of financial disclosure or unconscionability.
• Allowing a state where a child has resided for only 3 months to exercise initial custody jurisdiction over an established home state.