What is a Postnuptial Agreement?
A postnuptial agreement is defined as a contract executed between spouses which specifies the property settlement and financial arrangements made between them. Because the agreement is executed before a marital separation, whether physical or emotional, the postnuptial agreement should be entered into at a time in which both parties are able to deal with each other fairly and equitably, free from abuse or duress.
A postnuptial agreement may provide for financial or property arrangements in the event of a future marital breakdown , and these provisions may be enforced by the court. One benefit of such an agreement is the ability to adequately set out spousal support arrangements, particularly in a marriage of short duration, to ensure that one spouse does not unduly benefit from the relationship or place the other spouse at a financial disadvantage. Such provisions can be beneficial to a stay-at-home spouse.
A prenuptial agreement serves a similar purpose to a postnuptial agreement in that it is essentially a contract between the parties, entered into at a time in which the parties are not under any emotional or economic stress, which will come into effect in the event of a future marital breakdown.
When a Postnuptial Agreement is Legally Valid
The legal validity of a postnuptial agreement hinges on several key factors. Florida law generally recognizes postnuptial agreements as enforceable contracts, provided that they meet certain statutory requirements. The most important considerations involve the propriety of the agreement’s execution and the presence of key elements such as consideration, agreement of the parties, and the absence of material ambiguity.
To be valid as a binding contract, there has to be a "meeting of the minds" between both spouses. Like other contracts, a postnuptial agreement requires consideration; each spouse must have something of value to gain, or forfeit, in exchange for entering into the agreement. The consideration can be as simple as providing your spouse greater security or a more generous divorce settlement in the future. Be advised, however, that a postnuptial agreement can’t be used to defraud creditors. A judge may find a postnuptial agreement against public policy if it attempts to hide marital assets, avoid legal obligations or disappoint the reasonable expectations of creditors.
Although Florida does not require that postnuptial agreements be executed under oath, a postnuptial agreement that contains certain provisions must be signed by the parties in the presence of a third-party who will attest to the signatures when filed with the court. While this attestation is not required for validity purposes, it may be necessary for a postnuptial agreement to be entered into evidence in a later dispute.
A requirement of legal sufficiency for a postnuptial agreement is that the agreement be in writing, signed by both spouses, and acknowledged by both spouses. Acknowledgement is a legal term that requires that the signatures to the agreement be notarized. A notary is a designated individual that can verify the identity of the signatories to a legal document.
An important principle to remember is that each spouse must provide full disclosure of assets and liabilities prior to executing a postnuptial agreement. This means that each spouse must reveal all income, property and liabilities. Without full disclosure, a postnuptial agreement may be declared void.
In summary, a postnuptial agreement can be a legally binding and enforceable contract if it is validly executed. However, if a postnuptial agreement does not comply with the proper legal requirements it may be subject to attack in a court.
Advantages of a Postnuptial Agreement
A postnuptial agreement can provide clarity and protection for both spouses in a number of areas. First and foremost, it can protect assets acquired before marriage or gained during marriage, but not through joint effort. This is particularly important for business assets, as even those classified as separate property assets could be at risk if ownership is not protected. "Commingling" of assets is an action in which a spouse mixes separate property with marital property, thus losing the right to claim that the property is separate. Allowing your spouse unfettered access to your separate property without a postnuptial agreement may leave that property vulnerable. For example, if you own a rental property without a secure title such as a limited liability company title, your spouse could move into the property, use it as their own, and bring claims against it in the event of a divorce.
Both spouses may benefit from clear-cut financial responsibilities. For example, if a business is owned completely by one spouse, even if the couple is married, the other spouse may be required to take her share of the income and deposits out of the company bank account. Otherwise, she could be accused of "dissipation," and paying off her personal expenses instead of using the income for the growth and economic advancement of the marital community. Also, other financial details such as the payment of bills, mortgage and rent, saving for college for the children, and how charitable donations are made can be spelled out clearly so that each spouse knows his or her responsibility, and does not lose money by making the payment of a bill late, or vice versa.
Over time, parents frequently acquire substantial property, money for the children, plus personal property intended for them, as well as possibly creating trusts for them. A postnuptial agreement can specify how much the children will be entitled to and when they will receive it. The agreement can also lay out which spouse is responsible for their financial support up until the time they reach adulthood, giving each party a way of evaluating the accuracy of the expense data supplied by the other in a later divorce.
A postnuptial agreement can also be beneficial if it alleviates the need for extensive litigation during a divorce. It can be personally stressful to hear accusations, and it can drive up the cost of your legal representation. Postnuptial agreements can save significant amounts of money for the couple and reduce stress on both spouses.
Common Mistakes to Avoid
Common pitfalls that people run into when preparing a postnuptial agreement can lead to confusion, disputes between parties, and even greater financial losses down the line. It is a mistake for each party to think that he or she does not need legal advice. In fact, even the most basic agreements prepared without professional input can result in inequities that one party takes advantage of. All parties can benefit if the process is handled properly with full disclosure.
It is a mistake to think that because you’re already married and have a fair bit of knowledge about each other’s financial situation, you don’t have much to gain by preparing an agreement with full disclosure of assets and liabilities. Indeed, the knowledge that each party brings to the process, as well as the fact that the parties want a fair solution to what could be a very contentious matter , presents a great opportunity to develop an agreement that meets the mutual needs of the parties.
Many married couples with postnuptial agreements have had them prepared "on the cheap" with little more than oral discussions amongst themselves on terms, leaving many issues and critical information unaddressed. Costs charged by lawyers vary and there’s a lot of room for negotiation. It’s a significant mistake to presume your lawyer will have the patience to listen to your concept of an agreement for hours on end without charging you to produce it. A very simple case might only take a few hours of your lawyer’s time to prepare, while a complicated issue could require more.
Even when you agree on the main points in your agreement, there may be additional provisions that your lawyer will be aware of that might significantly improve its utility. Your financial situation and the purpose behind your preparation of the agreement are critical factors in determining its content, and are best addressed by a professional.
How to Make a Postnuptial Agreement
Negotiation and Discussion of Terms
Open and candid discussion between spouses is the first step in creating a postnuptial agreement. It is important for spouses to be on the same page as to what they wish to achieve by the execution of the postnuptial agreement. If there are children involved, it is critical that the spouse’s financial obligations to their children are clearly delineated.
Choice of Attorney
After the terms of the agreement are reached, an attorney must be selected to draft the postnuptial agreement. Both spouses, ideally, should retain separate attorneys to draft the postnuptial agreement and negotiate its terms. A husband and wife can, however, retain the same attorney to draft the agreement with the understanding that the attorney does not represent the individual interests of either party to the agreement but rather represents both parties. Both spouses must be fully informed, however, as to the representation and must feel confident that the agreement is acceptable.
Drafting
The postnuptial agreement should be a document entitled specifically "Postnuptial Agreement" signed and entered into by the spouses subsequent to their marriage, which sets out the terms and obligations of the parties, and which should also address the possibility of a future divorce, including the waiver of the equitable distribution claim. The postnuptial agreement should specifically address all the assets owned by the parties at the time of the execution of the agreement. It should also include what happens to those assets upon the divorce. The rights and obligations as to any children of the marriage should also be set forth.
Legal Review
Once the postnuptial agreement is drafted, both spouses should have the opportunity to have the agreement reviewed by separate counsel. The postnuptial agreement must be entered into willingly and without threat or duress. The specific terms of the agreement must be understood by both parties and suggestions made by their respective counsel should be incorporated in the agreement. The agreement must be read, understood and signed by the parties voluntarily, without any coercion or intimidation by either party to the agreement.
Frequently Asked Questions
FAQ: Creating a Postnuptial Agreement
What makes a postnuptial agreement enforceable across state lines?
A postnuptial agreement is not divorced from legal considerations applicable to divorce agreements, which means that whether a postnuptial agreement is upheld can depend on a number of factors, such as the procedural and substantive requirements of the state in which it was created. Postnuptial agreements are generally valid under the principles of contract law that govern the validity of all agreements. Some conditions for the validity of a postnuptial agreement include adequate consideration, the absence of duress, fraud, undue influence, unconscionability, mistake and the presence of an independent child in the marriage.
Often a judge’s decision about whether or not a postnuptial agreement is enforceable depends on the circumstances surrounding creation of the agreement’s clauses or the agreement as a whole. Courts may look at whether adequate assets were disclosed prior to an individual entering into the agreement, how long either spouse had to consider the agreement, and whether there was sufficient time between signing the agreement and a separation within which to modify the agreement.
When addressing whether a postnuptial agreement should be upheld, a court will typically ask "did the parties have a fair understanding of the consequences of their actions," and "did each party fully, fairly and truthfully disclose to the other the nature and extent of his or her own property"? The court may also weigh whether both spouses were represented by appropriate counsel , whether one or both spouses had independent knowledge of key financial data, whether there was a full and fair disclosure of relevant circumstances, and whether full knowledge and representation still led to an agreement with terms that are fundamentally unfair – i.e. inequitable to the extent they shock the conscience.
What happens when a married couple has a child after a postnuptial agreement has been created?
The creation of a postnuptial agreement does not change the fact that parents can agree to continue to modify or alter child-related decisions, whether this is through a specific postnuptial agreement that explicitly allows modification regardless of whether it’s in the child’s best interests or through some future modification, even in the absence of a specific agreement. The evolutionary understanding of children’s rights to the care and guidance of their parents weighs heavily towards allowing modifications that are in the child’s best interests.
What if a changed circumstance following the creation of a postnuptial agreement makes modification necessary?
Any legal agreement – including postnuptial agreements – can be modified when the parties agree. Most agreements will include specific procedures for making modifications. For any postnuptial agreement that does not include specific procedures for modifications, the parties can always create a new separate written document or jointly submit the agreement to the court for its supervision of the modification process.
