A postnuptial agreement, or postmarital agreement, is a legal contract created between spouses after a couple is already married. It functions similarly to a prenuptial agreement, setting out the terms of how assets, debts and income will be treated during the marriage and divided in the event of a divorce or separation. While prenuptial agreements are established before marriage, postnuptial agreements are drafted and signed after the wedding. This distinction introduces unique considerations and motivations for couples considering a postnuptial agreement.
Why Consider a Postnuptial Agreement?
- Missed Prenuptial Agreement Deadline:
- In many cases, couples intended to set up a prenuptial agreement but ran out of time before the wedding. The state of California has a waiting period between the finalization and signing of the agreement. When time constraints prevent completion of a prenuptial agreement, a postnuptial agreement can be a viable alternative, and should be completed shortly after the marriage.
- Addressing Financial Strife:
- Financial disagreements can place a strain on a marriage, potentially leading to divorce. Some couples use postnuptial agreements to resolve financial disputes, removing a major source of conflict. By clearly defining how assets, debts, income and expenses will be managed, you can focus on maintaining your relationship without financial discord.
- Redistribution of Assets:
- Postnuptial agreements can redefine ownership of assets acquired during the marriage. This can involve changing what would be considered community property under state law into separate property. For example, instead of equally sharing assets, you might agree to a different division, such as 70/30 or even 100/0 of some or all assets, based on your individual needs and agreements.
- Retirement Benefit Considerations:
- For older couples, particularly those who are part of the so-called “gray divorce” trend, retirement benefits can complicate divorce proceedings. If you or your spouse have defined benefit plans and have made specific elections at the time you retire, a postnuptial agreement can ensure that you both continue to receive your rightful share of the benefits. In some cases, you may choose to stay married legally to maximize these benefits while dividing all other aspects of your marital estate.
Legal Considerations and Court Scrutiny
Postnuptial agreements are generally subject to greater scrutiny by courts, than are prenuptial agreements. This is primarily because by law, married couples have a fiduciary duty to each other, requiring them to act in good faith and deal fairly with one another. When drafting a postnuptial agreement, it is essential that you are both fully informed, act willingly, and understand the implications of the agreement.
To ensure fairness and avoid unconscionability, courts will examine the following:
- Full Disclosure:
- You both must be fully aware of your financial situation before and after the agreement. This includes understanding what your interests in your assets, debts and income were prior to the agreement and how those interests will change once the agreement is signed.
- Voluntary Agreement:
- The agreement must be entered into willingly, without coercion or undue pressure from either party.
- Fairness and Equity:
- The agreement should not be so one-sided as to be considered unconscionable. If one spouse ends up with significantly more assets than the other, the court may find the agreement unfair and void some or all of the agreement.
Initiating the Postnuptial Conversation
Discussions about postnuptial agreements can stem from various scenarios:
- Mutual Recognition:
- You may both recognize the need for a formal agreement to address financial differences, lifestyle expectations, or other specific issues.
- Legal Consultation:
- Discussions about postnuptial agreements may arise during a consultation with an attorney when you or your spouse express concerns about your financial strife but wish to remain married. Your attorney might suggest a postnuptial agreement as a solution to resolve these differences.
Postnuptial agreements can provide a structured and clear approach to managing financial issues within a marriage. By addressing these concerns proactively, you can often prevent misunderstandings and conflicts, thereby strengthening your relationship and ensuring a fair distribution of assets in the event of a divorce or separation.
Lisa R. Murray is an experienced attorney specializing in Collaborative Divorce and Mediation. She can help you determine the goals in your divorce and post-divorce life. She can be reached at 650-523-8262.