Defining Postnuptial Agreements
Postnuptial agreements are a type of contract entered into by a married couple (or a divorced person) after the marriage has taken place, the purpose of which is to determine the property rights of the parties and/or other issues, including custody or support for children of the marriage, in the event of a subsequent divorce or death. They differ from prenuptial agreements in that the timing of the agreement’s execution is different, however, they generally serve the same purpose- to determine rights between the parties with regard to their property in the event of a subsequent divorce.
There has been some concern in some states whether or not an agreement entered into after the wedding ceremony will be enforced because it is in essence a contract between husband and wife, and whether there is adequate consideration for the agreement . To address this concern, many rules have developed, including the requirement that the parties consider their respective existing obligations to children born of a previous marriage, that the agreement be entered into freely by both parties without duress or fraud, and that consideration be given by the party against whom the agreement is enforced….
There are some limitations on these requirements as well. Courts have determined that parties may enter into a postnuptial agreement with consideration provided by the natural love and affection between the husband and wife or alternatively the maintenance of the status quo between them. In addition, many courts will not look at the adequacy of the consideration as long as the basic requirements of a contract are met.
Criteria For Enforceability
Legal Requirements for Enforceability of Postnuptial Agreements
While often less formal than a prenuptial agreement, a postnuptial agreement is still not bond only between two parties, and therefore must meet certain legal requirements to be deemed enforceable. Among these is the requirement that both parties are entering into the Agreement voluntarily. If a postnuptial agreement was entered into under force or duress, the courts will not deem it valid. In addition to voluntary consent, certain details must be included for the agreement to be valid.
Both parties to the agreement must have full financial disclosure. If either party withholds financial information from the other, the agreement can be rendered invalid. The full financial disclosure generally includes any and all expenses, assets, liabilities, and income for both parties. If one of the parties owns property and income from that property, it is important to disclose that information to make sure there are no surprises in the future.
In addition to full financial disclosure, each party should have independent legal representation before entering into an agreement.
Common Obstacles To Enforcing Agreements
While we have already introduced some of the common issues and defenses to divorce agreements, you should also remember that those defenses can be asserted against postnuptial agreements. One of the most common challenges to enforcing a postnuptial agreement is a claim that the agreement was procured as the result of coercion or fraud. Under New Jersey law, even a contract that has been entered into voluntarily and knowingly can be ignored if the person who signed that contract was tricked into doing so, or if the contract was the result of undue influence. In the case of postnuptial agreements, it will often be necessary to determine the dynamics of the marriage itself, especially in cases of significant income disparity or where there is a history of physical or verbal abuse. That being said, the basic safeguards to enforceable contracts are the same for both pre and postnuptial agreements as well, so a significant income disparity should not be lethal to an agreement unless the spouse with the higher earnings can be shown to have forced the agreement on his or her partner.
The Role Of The Laws Of The Relevant State
The enforceability of postnuptial agreements is often affected by the specific laws and variations that exist among the states. Some states impose different obligations on the independent attorney to be retained by the other spouse and require that such independent attorney be physically present when the agreement is signed by the parties . In order to avoid having a postnuptial agreement invalidated based on unclear outcome or a question with regard to enforceability, have the agreement drafted to comport with the law of the forum state. Prior to executing a postnuptial agreement the parties should each have an independent attorney review the matter with them and be present when the agreement is signed.
Case Law And Court Summaries
Recent court rulings around postnuptial agreements have shown a trend toward enforcement of postnuptial agreements under certain conditions:
Pinkard v. Pinkard, (2016).
In the 2016 case of Pinkard v. Pinkard, Maryland’s highest Court addressed the issue of whether prenuptial agreements can be enforced as postnuptial agreements. The Court found that after marriage, parties are free to execute, and courts are bound to enforce, postnuptial agreements that are not procured by fraud or undue influence and are not unconscionable. The Court underscored the applicability of Montgomery and Gaffney to address the enforceability of postnuptial agreements executed in the State of Maryland, thereby codifying, at least with respect to a postnuptial agreement, the prior courts’ holdings. The Court further held that although each case must be decided on its own merits, the inherent contract principles of consideration, capacity, freedom from undue influence, notice, good faith, and purpose, govern the enforceability of postnuptial agreements.
Ganeshappa v. Malhotra, (July 2012).
In Ganeshappa v. Malhotra, the Pennsylvania Superior Court addressed the first case of its kind in the Commonwealth of Pennsylvania. In this case, the parties executed a postnuptial agreement several months after their marriage in which they waived their rights to share in marital property. Of note, the Agreement failed to make the required provisions for the inclusion of the minor child. Thus, the appellate court vacated the lower court’s decision to enforce the Agreement.
Tilley v. Tilley, 769 So.2d 1054 (Ala. Civ. App. 2000).
In Tilley v. Tilley, the Alabama Court of Appeals reversed a trial court ruling which set aside a post-nuptial agreement because the trial court found that the husband had failed to provide equal share to his wife of anticipated retirement benefits. The trial court erred in finding that the agreement was unenforceable because it was a contract of adhesion. The appellate court found that the trial court had failed to focus on whether, under the totality of the circumstances, the agreement unreasonably favored the husband. The appeal court only looked at the issue in terms of fairness and equity. Reversed.
Jon Murray v. Jonathan Murray, Nos. DN-11-02506 and DN-11-02507 (Ormewood Park (GA) District Court, February 27, 2012).
This case was an inter-parties dispute over the parties’ post-nuptial agreement. The marital estate of the parties was valued at $60,000. The trial court found that the Agreement provided for the wife to receive $20,000 as her share of the marital estate, and the husband would keep the remainder of the value – $40,000. The court indicated that the parties intended for the Agreement to be binding, and that it clearly represented the intent of the parties to make an equal allocation. This case illustrates that while agreements that divide property unequally may be upheld, under certain circumstance, there must be an appropriate clear written reason as to why the distribution is fair and equitable in the particular circumstances of that particular case.
Strategies for Creating a Postnuptial Agreement
When creating a postnuptial agreement, New Jersey law requires that both parties make honest and full disclosures to the other regarding their assets and liabilities. This means that both parties generally need to provide financial documents to each other. Obviously, you don’t want to disclose everything in your closet or provide your spouse with the pin number to all of your accounts, but it’s still important to be as honest as possible and to provide sufficient information that the court will then be able to establish the "fairness" of the agreement should it be necessary. Consider consulting a forensic accountant to help determine what documents and information would be best. Again, although it is not required under current new law, if both parties have separate counsel to draft the agreement , this will be valuable and will help the court establish that the agreement is fair both at the time of the agreement and at the time of divorce, if necessary.
Many judges will ask that the parties complete a Case Information Statement, which lists out all of the marital assets and liabilities, the income of each party and the needs of any children. The judge may require an active Case Information Statement at the time that the agreement is signed and even the time of prospectively filing a divorce action. Also, there could be a demand at the time of a divorce for the parties to exchange all of the same financial documents that are exchanged during a divorce. In addition, many judges also require the parties to file an Affidavit of Disclosure along with the final agreement.