No Prenup? A 101 Guide to Postnups

More and more couples are electing to sign prenuptial agreements before their big wedding day, yet some can’t agree, don’t want to, or don’t have time to do one beforehand. After all, some people continue to believe that asking for a prenuptial agreement indicates that they expect the marriage to fail. Even if that is not the case, discussing a prenuptial agreement can be a difficult conversation to have during one of the happiest times of a relationship, making it problematic for some couples to agree on whether a prenuptial agreement makes sense for them.

Suppose you did not sign a prenuptial agreement before the wedding but wish to set forth financial rights and obligations between you and your spouse during your marriage or in the event of divorce or death. A postnuptial agreement may be an option for you to consider.

Below are some things to think about when considering a postnuptial agreement.

What is the difference between a prenuptial agreement and a postnuptial agreement?

A prenuptial agreement is a written contract signed between parties intending to marry. It outlines their financial rights and obligations if the marriage ends due to death or divorce.

People often enter into prenuptial agreements when the marriage is not their first, there are children from prior relationships, there are significant premarital assets and/or debts, or expectations of receipt of large gifts or inheritances for one or both parties.

Prenuptial agreements are generally enforceable so long as:

  • the agreement is fair and reasonable at the time of execution;
  • both parties are fully informed of or had independent knowledge of the other party’s income, assets, and liabilities prior to entering into the agreement; and
  • the agreement is considered “conscionable” at the time of enforcement.

A postnuptial agreement, on the other hand, is a written contract signed by spouses who intend to remain married. It sets for their financial rights and obligations should their marriage end due to death or divorce. A postnuptial agreement may also outline a financial arrangement for what happens during the marriage.

Both agreements involve the financial rights and obligations of the married couple should their marriage end due to death or divorce, but a postnuptial agreement is entered into after marriage and, as such, has a higher standard for enforceability.

When is a postnuptial agreement a good idea?

Postnuptial agreements may be attractive to a married couple for various reasons. While the preference is always to enter into a prenuptial agreement prior to marriage (given the greater burden on a party trying to enforce a postnuptial agreement), one of the most common reasons spouses enter into a postnuptial agreement is because they planned to enter into a prenuptial agreement but never finalized it.

Other reasons for a postnuptial agreement include:

  • to address financial issues that arise which are damaging the marriage (including disagreements over major purchases, overspending or debt);
  • an inheritance is expected for one or both of the parties;
  • a career change that may impact the future or roles/expectations of the spouses during the marriage.

How strong is a postnuptial agreement?

When you marry, you enter a fiduciary relationship where each spouse owes the other a duty to protect and preserve the marriage’s assets and not to dispose of them without the consent of the other.

A court looking at a postnuptial agreement will apply a higher standard than a prenuptial agreement due to that fiduciary relationship. The spouse seeking to enforce the agreement bears the burden of proving that the postnuptial agreement is fair and reasonable at the time of enforceable and not the product of fraud or duress. Due to this high burden, spouses entering a postnuptial agreement should ensure that the following criteria are met, or preferably exceeded.

First and foremost, both spouses need to be represented by independent counsel. While the standard is that each party had an opportunity to obtain separate legal counsel of their own choosing, it is best practice for each spouse to actually retain and be represented by independent counsel – not just have an opportunity to do so. If you are considering entering into a postnuptial agreement, it is important for both spouses to consult with independent attorneys early in the process. This ensures that the agreement is not only fair and reasonable, but that it is likely to be enforceable.

Other factors a court considers when deciding if a postnuptial agreement is enforceable are:

  • whether there was fraud or coercion in obtaining the agreement;
  • whether all assets, liabilities, and income were fully disclosed by both parties before the agreement was signed;
  • whether each spouse explicitly agreed to waive the right to have a judge decide an equitable division of assets and waived all marital rights in the event of divorce except as outlined in the agreement;
  • whether the agreement is considered fair and reasonable both at the time of signing and at the time of enforcement.

Unlike a prenuptial agreement, a court will also dive deeper into the context of negotiations between the spouses who have signed a postnuptial agreement. The court will investigate when negotiations started, whether there was undue pressure put on one spouse, whether there were special circumstances involved, including unusual health circumstances, whether the parties were living together at the time of the agreement, the background and knowledge of the spouses, the complexity of issues at play, and whether experts were involved in needed in valuing assets.

The court will also look at the experience of each spouse’s counsel. It is therefore essential not to just retain any attorney during the negotiation of a postnuptial agreement, but one who specializes in that work. If you are considering a postnuptial agreement, you should ensure that your attorney is competent and well-versed in postnuptial agreements and marital/divorce law in the state in which you are entering into the contract or intend to reside.

For more information about prenuptial agreements and postnuptial agreements, watch this webinar by Burns & Levinson Partners Robin Lynch Nardone and Elizabeth Crowley.