Everything You Need to Know about Postnuptial Agreements

What's Better: A Prenuptial Agreement or a Postnuptial Agreement?

For many of us, having conversations about money and the potential future end of a marriage can be uncomfortable at best. However, entering into an agreement to protect yourself can be a smart move in many situations. If you think of getting married as entering into a long-term partnership, it makes sense to establish the framework ahead of time. After all, you would not want to enter into a long-term business arrangement without having a legal contract in place.

A couple who is not married yet and is trying to determine whether to enter into a prenuptial agreement or to wait and enter into a postnuptial agreement should give serious consideration to the prenuptial agreement.

Before marriage, if one party does not like the provisions included in the proposed prenuptial agreement and the couple is unable to come to an agreement, they can simply decide not to get married. With a postnuptial agreement, the couple is already legally bound and the spouses owe a fiduciary duty to each other. There may be a concern that the provisions in a postnuptial agreement were not bargained for because one spouse did not really have a choice about signing the agreement.

History of Postnuptial Agreements in the United States

Postnuptial agreements are a relatively new development under U.S. law. Prior to the 1970s, postnuptial agreements were generally not enforceable. This was largely based on the idea that a married couple became a single unit at the time of their marriage and a single person or entity cannot enter into an agreement with itself.

In the 1970s, when more couples began divorcing and more states enacted “no fault” divorce statutes, postnuptial agreements became more common and became more widely enforced.

What Is Needed to Make a Valid Postnuptial Agreement?

To be valid and enforceable, postnuptial agreements must, at a minimum, meet the following basic requirements:

• Written – Oral postnuptial agreements will not be considered valid. Postnuptial agreements must be in writing.
• Voluntary – Both parties to a postnuptial agreement must have signed the agreement voluntarily and intentionally. Any indication that one spouse coerced or threatened the other into signing will make a postnuptial agreement null and void.
• Disclosure – Full and fair disclosure is another element of valid and enforceable postnuptial agreements. At the time each party enters into the agreement, they must each make a full and fair disclosure to the other of his or her assets, liabilities, and income. This is a critical point to understand because postnuptial agreements are designed to spell out how assets, liabilities, and support would be handled if the marriage was to end. If the information that one party relied on was not accurate or complete, the agreement will not be enforceable.
• Fair – Postnuptial agreements must not be unconscionable. A postnuptial agreement that is blatantly one-sided or that is otherwise extremely unjust toward one party, based on the facts and circumstances, will not be enforceable.
• Validly executed – Postnuptial agreements must meet the requirements of the laws of the parties’ state of residence. Generally speaking, to make a postnuptial agreement valid, both parties’ signatures need to be notarized. Some state laws may impose additional requirements, such as a requirement that the parties’ signatures be witnessed.

What Is Typically Included In a Postnuptial Agreement?

Postnuptial agreements generally include the same types of provisions as prenuptial agreements. The primary difference is that prenuptial agreements are entered into in contemplation of marriage (in advance), whereas postnuptial agreements are entered into after the couple is already legally committed.

To a large extent, what you can and cannot include in a postnuptial agreement will be governed by state law. Some of the provisions commonly included in postnuptial agreements are as follows:

• How the couple will divide property and other assets in the event their marriage ends
• Whether one spouse will pay spousal support and how for long such support payments will be continued
• How any marital debts will be divided in the event of divorce, including things like mortgage loans, credit card debt, and other loans
• How assets will pass if either spouse dies during their marriage, which may include different provisions depending on whether or not divorce proceedings were underway at the time of the death

Postnuptial agreements can also provide for custody and support of minor children in the event the marriage ends in divorce or legal separation. However, this is one area where state law can restrict the provisions in a postnuptial agreement. Some state laws say that postnuptial agreements that attempt to restrict or limit child support or child custody will be deemed unenforceable.

Different Types of Postnuptial Agreements

There are generally three different, but related, types of postnuptial agreements in the United States today.

• A means of dividing assets and providing for spousal support – The most common type of postnuptial agreement spells out how a couple’s assets and liabilities would be divided in the event of a divorce. These agreements also address alimony or spousal support and often include provisions stating that one spouse waives the right to such support in exchange for certain marital property. Property addressed and covered under this type of postnuptial agreement includes both marital property—that is property the parties acquired during their marriage—and assets or other property each spouse brought into the marriage.
• A mechanism for the parties to agree to waive spousal rights when one party dies – Postnuptial agreements can also simply provide for how the couple’s property and other assets would be divided in the event of either spouse’s death. Generally speaking, this type of agreement is designed to supersede a will or state laws, giving spouses certain property rights. By signing such an agreement, the parties agree to waive any rights they would otherwise have to inherit property or other assets.
• A template that can later be used as a separation agreement – A third type of postnuptial agreement looks and feels very much like a separation agreement. These agreements spell out how child custody, child support, and spousal support would be handled in a divorce and provide for the division of the couple’s assets and liabilities. This type of postnuptial agreement may later be incorporated into the divorce decree and can limit time and expenses in a divorce scenario.

When Couples Might Consider Entering into a Postnuptial Agreement

When a couple enters into a postnuptial agreement, it does not automatically mean that they are thinking about filing for divorce. Here are some common reasons for entering into a postnuptial agreement:

• Sometimes, couples enter into postnuptial agreements simply to clearly define each party’s wishes for the property they brought into their marriage.
• When spouses have children from previous marriages or relationships, they may want to make sure that certain assets would pass to those children no matter what happens. A postnuptial agreement can help protect children’s inheritances.
• In other cases, a postnuptial agreement might make sense when one spouse has been financially irresponsible or has encountered legal trouble during the marriage. For example, if one spouse’s spending or gambling habits are causing financial stress or one spouse has been convicted of multiple DUIs, it might lead the other spouse to consider a postnuptial agreement.
• When one spouse gets a financial windfall (inheritance, lottery winnings, significant salary bump), the couple may want to consider their finances and protect themselves and their assets against future uncertainty.
• If one spouse has stopped working to stay home and care for minor children, a postnuptial agreement can help make sure he or she will have the financial resources they need in the event the marriage ends in divorce.

When Should a Postnuptial Agreement Be Avoided?

As with any type of legal agreement, you should only enter into a postnuptial agreement after carefully considering all of the agreement’s provisions and implications. Here are some of the reasons to think twice about creating and signing a postnuptial agreement.

• There is a significant income disparity between the parties – If there is a significant income disparity in a marriage, the lower-earning spouse may find that a postnuptial agreement’s provisions would not adequately provide for them in the event of a divorce or separation. That is not to say that couples with disparate income levels should never sign a postnuptial agreement; however, they should carefully evaluate such an agreement before signing it.
• One party was not given adequate time to read or evaluate the terms of the agreement – Postnuptial agreements are legal contracts, so it is important that both parties have the chance to read and fully understand how the agreement protects, and limits, their rights. Saying you did not understand what you were signing is not likely to stop enforcement of a postnuptial agreement, so take the time to study the document and get clarification where it is needed.

As every couple’s financial picture and living situation is different, there is not a one-size-fits-all answer when it comes to determining whether or not you should sign a postnuptial agreement. The best decision for you will depend on your own financial circumstances.

How Courts View Postnuptial Agreements

Anyone considering entering into a postnuptial agreement with their spouse needs to understand that these legal documents are not ironclad. Even if a postnuptial agreement meets all of the threshold requirements to be valid and enforceable, courts may still strike it down.

In some states, postnuptial agreements may not be upheld if both parties were not given the opportunity to review and discuss the terms of the agreement with their own, separate attorneys.

Whether a postnuptial agreement will be enforced or not depends, to a large extent, on what state you live in. Some states take a hard-line approach to enforcing postnuptial agreements. If there is any indication that the parties did not make a full and fair disclosure to each other of their financial information, the entire agreement could be thrown out.

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