Postnuptial Agreements Explained
The purpose of a postnuptial agreement is to set out with specificity the agreements between two married people. In agreeing to certain financial obligations or in structuring how real property will be held or owned, the parties are both protected by such an agreement. Typically, a prenuptial or ante-nuptial agreement is entered into prior to marriage and its purpose is to set up the same kinds of agreements, obligations, etc. where the parties have not yet committed to living together as husband and wife. In that regard, below are further specifics about postnuptial agreements in general . One difference between a postnuptial and a prenuptial agreement is that a very specific period of time may not be stated as to when a prenuptial agreement was entered into, thereby sometimes making it difficult to specifically ascertain the exact date of the agreement itself. A postnuptial agreement may sometimes clearly reference the date on which it was executed and drawn up. In some cases a postnuptial agreement may actually be in the form of a settlement agreement in which all of the terms are specifically addressed, such as all of the issues which would need to be addressed and settled in the event of divorce, except for the actual divorce. Both a prenuptial agreement and a postnuptial agreement must be signed and notarized.
Advantages of a Postnuptial Agreement Lawyer
The advantages of working with an attorney when preparing your postnuptial agreement include:
- Specific education to your unique circumstances necessitated by state statutes. Each state and territory has different statutes and non-statutory requirements, from both the substantive standpoint as well as the procedural side of the law, that must be followed in order for your postnuptial agreement to be valid, enforceable and binding.
- Customization of the terms of your agreement to conform to your unique circumstances. As mentioned above, each state and territory has different non-statutory requirements—specifically and generically—regarding the terms of a postnuptial agreement. It is easy to underestimate the importance of these requirements. Not following them can invalidate an otherwise valid postnuptial agreement. It is critical to ensure that the terms of your postnuptial agreement are tailored to your specific circumstances and subsequently compliant with all of your state and territorial requirements.
- Standardization of the process by which your postnuptial agreement will be achieved, produced and finalized. The steps necessary to have a valid, enforceable and binding postnuptial agreement vary from state to state and territory to territory. There are non-statutory and statutory requirements you will need to satisfy before, during and after the drafting and execution of your postnuptial agreement. With the assistance of an experienced postnuptial agreement attorney, you can be confident that the steps necessary to e-execute a correctly drafted postnuptial agreement will be followed.
- Validation of your postnuptial agreement. An experienced family law attorney can review your postnuptial agreement and ensure all procedural as well as substantial requirements are met. This will ensure that you have a finalized postnuptial agreement in place that complies with the law and, in turn, is binding and enforceable and, therefore, will be given full effect and weight by a court.
Essential Elements of a Postnuptial Agreement
When it comes to developing a postnuptial agreement that will benefit you and your spouse, the components of the document are crucial. Numerous issues must be addressed in a manner that will stand up to legal scrutiny should you both ever need to call upon the terms of the document. The most common components covered in postnuptial agreements include:
Asset Division and Distribution
Most marriages involve each partner bringing assets into the relationship. These assets include everything from cash, vehicles, and homes to investments and retirement accounts. All of these must be categorized according to which party owns them to properly divide them in the event of a divorce.
Debt Responsibility
It’s not just your assets that must be addressed. Your liabilities, or debt, have to be divided as well. Most people understand that combining income and assets with their spouse also combines their debts, so it stands to reason that those will also need to be dealt with in a divorce.
Spousal Support
The expectation of monetary support is the main reason postnuptial agreements were created. It’s not often that one spouse is required to pay a similar amount for alimony during a postnuptial agreement if the document otherwise holds up in court. Even so, it’s imperative that this piece be a part of the document, as it gives added strength to your final divorce decree and limits what a judge can do if the terms of the agreement are broken.
Alternatives to Divorce
This is one component that does not always make it into postnuptial agreements, but which some find useful. In the course of negotiating the terms of the agreement, you and your spouse may decide that there are certain alternatives you would consider to divorce. Mediation and collaborative divorce are popular options for many couples.
Your shared desire for alternatives may build into your agreement, so discuss your options in detail with your attorney beforehand.
If the details above sound daunting, they can be when it comes to drafting a postnuptial agreement. There are many other components that must be configured and addressed in a timely manner, such as property ownership, inheritance, exclusive possession, choice of law, and dispute resolution. Having a skilled attorney helping you every step of the way is best so you and your spouse can tackle the process together.
Common Misunderstandings
Often, couples may feel hesitant to draft a postnuptial agreement. It is important to address these hesitations so that informed decisions can be made about the process.
Myth #1: "Drafting a postnuptial agreement is basically like signing a divorce agreement."
Fact: Whether or not a divorce will follow the drafting of a postnuptial agreement doesn’t need to be decided at the time of signing. Couples who are happy in their marriages but want legal clarification on future separations enter into postnuptial agreements. A postnuptial agreement will not cause a divorce, nor will it obligate an unhappy couple to divorce.
Myth #2: "I don’t think I need a postnuptial agreement because my spouse and I don’t have a lot of money."
Fact: Financial agreements are beneficial to couples even if they don’t have a significant amount of assets. Most failing marriages have money issues at the core of the problem. Having a financial safety net in case of divorce would benefit couples with limited assets because they can predict the minimum amount of financial support they will receive from the divorce.
Myth #3: "We already have a prenuptial agreement, so we don’t need a postnuptial agreement."
Fact: A postnuptial agreement can be helpful for couples who already have a prenuptial agreement, but changes to the financial situation occur after the prenuptial agreement is made. For example, if the couple’s financial situation has resulted in one party being the primary breadwinner while the other stays home to raise children, the postnuptial agreement would allow for these parties to legally outline financial obligations despite the shift in financial power.
Myth #4: "Postnuptial agreements are only for people who are entering into a second marriage."
Fact: A common misconception is that only those approaching their second marriage should consider a postnuptial agreement. However, marriages are legally protected under state law, and postnuptial agreements protect both parties. While second marriages may be more likely to seek postnuptial agreements due to the need to divide pre-marital assets, first marriages should also utilize a postnuptial agreement to set expectations and regulate themselves for anything that could happen in the future.
Selecting a Lawyer
Not every attorney is suited to handle a postnuptial agreement and, as with other agreements, it is important to choose an attorney who you trust, can communicate well with, is experienced in drafting these types of agreements and, preferably , someone whose style for drafting contracts meets your particular needs and expectations. It is a good idea to talk to friends and family members about their experiences working with an attorney and of course to find out what experience your attorney has in crafting an enforceable postnuptial agreement. Like most things in life, you want an attorney who specializes in marital agreements.
Steps for Drafting a Postnuptial Contract
So, how does one actually go about creating a postnuptial agreement? The first step is to retain an attorney. After an initial consultation, a draft of the agreement will be prepared. Once you and your spouse review that draft, there will likely be a round of negotiations. The agreement will usually go through multiple drafts until all provisions are acceptable. Some issues may even require the involvement of experts like financial planners, real estate appraisers or CPAs. A final draft will be presented to you for signing. If you are separating but not heading to divorce, you should absolutely consider entering into a postnuptial agreement with your spouse. A postnuptial agreement can provide you both with peace of mind and financial stability and can turn your failed marriage into a successful one.
Legality and Enforceability
For a postnuptial agreement to be enforceable, there are certain basic requirements that must be met. Postnuptial agreements fall under the heading family law agreements. Other agreements that could be found in this category are prenuptial agreements, separation agreements, and settlement agreements. For all of these family law agreements to be enforceable, both parties must fully and fairly disclose their assets and liabilities at the time the agreement is entered into. Further, both parties must have received independent counsel, and the agreement must be fair to both parties.
One of the most important reasons for being represented by separate counsel is because of the one year statute of limitations found in New Jersey Statute 25:1-5. The statute provides that for any agreement under the statute to be enforceable , it must be executed by the parties and not reviewed by a judge within one year of execution and entry of judgment. A postnuptial agreement that does not provide for disposition of property in the event of death, dissolution, or separation of the marriage may be enforced as a contract between the spouses in accordance with the principles of law applicable to contracts or it may be enforced pursuant to Section 4 of the act. Section 4 was designed in order to avoid an inequitable result if one of the parties were to die before the one year period expires. However, Section 4 can only be used in this specific circumstance.