A postnuptial agreement, sometimes called a marital agreement, is a contract that is entered between spouses after they marry, that governs the division of their marital assets and related post-divorce issues, such as spousal support, in the event of a divorce.
Postnuptial agreements typically address how financial issues will be addressed in the event of a divorce, including:
- Division of property: Which assets will be treated as separate property during a divorce, and how will marital assets be divided;
- Spousal support: Will spousal support be paid after divorce and, if so, by which spouse, in what amount, and for how long;
- Division of debts: How will debts be divided and paid after divorce, particularly joint debts such as credit cards, mortgages, and other loans that are in both spouses' names.
States may restrict the matters that a postnuptial agreement may address, for example, by limiting the enforceability of provisions that limit or prohibit spousal support. Ohio does not allow for postnuptial agreements, prohibiting any such contract between spouses in the absence of an agreement for immediate separation.
The principal distinction between a prenuptial agreement and a postnuptial agreement is one of timing. A prenuptial agreement is entered before marriage, while a postnuptial agreement is entered by a married couple.
Another key difference is that the parties to a postnuptial agreement are already married, such that there is no longer concern that the wedding might be called off if the less affluent partner won't enter into a prenuptial agreement. However, pressure may still exist for entry into a postnuptial agreement through an express or implied threat of divorce.
Among the reasons why spouses may enter into a postnuptial agreement,
- Failure to Enter a Prenuptial Agreement: Some couples intend to enter into a prenuptial agreement, but don't finalize the agreement before the marriage occurs.
- Updating a Prenuptial Agreement: Some couples who have entered a prenuptial agreement may find that it no longer serves their needs and, instead of simply abandoning the agreement, negotiate a postnuptial agreement to supersede the prior agreement.
- Addressing Marital Problems: A postnuptial agreement may help spouses get through a marital rough patch, by assuring both spouses that they will be treated fairly in the event of a divorce. It may seem counter-intuitive, but many people describe feeling more relaxed in the marriage once their financial concerns have been discussed and resolved.
- Estate planning: Spouses may execute a postnuptial agreement as part of an estate planning strategy. For example, a spouse with children from a prior relationship may want to negotiate a postnuptial agreement that helps protect property that they intend to be inherited by those children as opposed to their spouse.
Although potentially useful as a tool for avoiding divorce or for reducing conflict during a divorce, a postnuptial agreement should not be demanded under threat of divorce. Where a spouse demands agreement to a postnuptial agreement in order to prevent a divorce, if the agreement later challenged by the other spouse a court may find it to have been coerced and thus unenforceable.
If a married couple plans to separate or divorce, but they are not yet ready to proceed with a divorce, it makes more sense for them to negotiate a legal separation agreement than a postnuptial agreement.
When a married couple negotiates a postnuptial agreement, as laws are different in each state, it is important that they investigate the laws of their state for the entry and enforcement of the agreement. However, in broad terms, they should ensure that:
- Both spouses have access to independent legal counsel of their own choosing; and
- There is full disclosure of each spouse's income and assets, and a full understanding of the assets within the marital estate.
The negotiated agreement should be reduced to writing, reviewed and approved by each spouse's independent attorney, and signed by both spouses. Although not generally required, in some states both spouses must be represented by their own lawyers for a postnuptial agreement to be valid, and in all states that representation will help ensure that the parties negotiate a fair and enforceable contract.
Certain issues are not enforceable through postnuptial agreements. For example, a postnuptial agreement cannot dictate how child custody will be shared if the parties separate or divorce, or waive a spouse's right to child support. Similarly, provisions in postnuptial agreements that attempt to regulate marital behavior, such as a clause that imposes a financial penalty on a spouse for not performing certain household duties such as cooking, cleaning or child care, will generally not be enforced by a court.
Nonetheless, when parties negotiate postnuptial agreements as part of an effort to preserve their marriages, they may negotiate and include provisions that they know won't be enforceable in court, but that may lay a foundation for a more successful marriage. Such an agreement might be incorporated into the postnuptial agreement, or may be negotiated as part of a separate document.
Some spouses negotiate provisions in postnuptial agreements that impose a financial penalty in the event of infidelity that results in divorce. Although there is little legal authority to draw upon, courts are more likely to enforce such a provision than other forms of behavioral restriction, as infidelity is not an act that falls within the normal marital relationship.
If the parties to a postnuptial agreement divorce, ideally the agreement will address and resolve most or all of their financial issues, simplifying the divorce process. However, at times a spouse may challenge the enforceability of a postnuptial agreement on such grounds as fraud, duress, or that enforcement of the agreement is no longer equitable.
A claim of fraud involves the claim that there was a material misrepresentation on the part of the other spouse, without which the objecting spouse would not have entered into the agreement. For example, it may be alleged that the other spouse's financial disclosure was incomplete.
Courts reviewing postnuptial agreements may reject the agreements if they find that they were not negotiated in good faith. For example, if a party proposing a postnuptial agreement is secretly planning a divorce, with the purpose of the agreement being to improve that spouse's position in the divorce, a court may decline to enforce the agreement.
Even if negotiated in good faith, a court may decline to enforce a postnuptial agreement if it is no longer equitable at the time the parties divorce. For example, if spouses are healthy at the time they enter the agreement, but one subsequently becomes disabled, a court may find that it would be unjust to enforce an agreement that assumed continued good health on the part of both spouses. Some postnuptial agreements include a clause that provides that the agreement will no longer be enforceable if enforcement would result in substantial injustice to one of the spouses.
The standard that a court will apply when reviewing a postnuptial agreement can vary by state. For example, in New Jersey a postnuptial agreement must be "fair and just" to both spouses, both at the time it is negotiated and at the time it is enforced. In New York, to prevent enforcement of an otherwise valid postnuptial agreement a spouse must demonstrate that the agreement is unconscionable, a higher standard that requires that the contract be shown to shock the conscience or defy common sense.
Although most states recognize and enforce postnuptial agreements, a few states either won't enforce them or will do so only under very narrow circumstances. It is thus important to verify that your state recognizes postnuptial agreements before entering into the agreement and, if you later relocate to another state, verify that the agreement will be enforceable in the courts of your new state.