What are Postnuptial Agreements?
Postnuptial agreements are contracts made after the parties have entered into a marriage. They serve to establish the parties’ rights in the event the relationship later ends. They can also be used to determine what should happen while the marriage continues, if certain contingencies occur, such as where one spouse receives an inheritance, or a child of the marriage is disabled. As with pre-nuptial agreements, post-nuptial agreements are often the result of difficult discussions and negotiations. It is, therefore , important for the parties to this type of agreement to consult with independent legal counsel. In other words, each spouse should have a separate attorney to represent him or her.
Because of the timing of a post-nuptial agreement (during the marriage, and not prior to it), various equitable factors will impact the enforceability of such an agreement under New Jersey law, as set forth below:
The courts in New Jersey recognize that the current trend around the country is to permit post-nuptial agreements which cover the topic of alimony and to recognize them as binding contracts.
The Legal Enforceability of a Postnuptial Agreement
As postnuptial agreements have gained in popularity they have become an increasingly common subject of discussion. A prevalent question among the postnuptial agreement community is whether or not such contracts are necessarily enforceable when couples decide to split up. Take, for example, Peter Andre and Katie Price. They have been separated for just under a year and in that period, they have bickered about their pets online and ended up in court over the rights to the former family home. Now, it appears that they have come up against their postnuptial contract – she wants another £500,000 payout for her to relocate herself and their two children to a larger property. As part of our series exploring some of the facts and figures behind prenuptial agreements, we have written a topic by topic guide to postnuptial agreements. As part of the guide, we wanted to look at the legal validity of postnuptial agreements and how they stand up in court. Just like with prenuptial contracts, you high likelihood of following enforcing a contract that you have drawn up after the wedding (understanding that this can vary jurisdiction) largely depends on the standards set by the legal system in your area. In America, the legal validity of postnuptial agreements will depend on the individual state laws but generally is not void for any reason which might make a prenuptial contract invalid, such as fraud or coercion. The Enforcement of Premarital and Postmarital Agreements Act determines what requirements such contracts must meet for the courts to enforce them, including: • Contracts must be written and signed voluntarily by both parties • Terms must be disclosed fully and fairly and must be conscionable at the time of signing • Both parties must receive independent legal counsel before signing The standards of legal validity both here in the UK and across America are incredibly strict, placing considerable importance on the retraction of rights by the signatories and the ability of the court to enforce a sensible contract.
Many Considerations in Court Enforcement
Whether a postnuptial agreement is enforceable can hinge on a number of factors, from the circumstances of its inception to the specific contents of the document. Generally, a court will enforce such a contract if it was made fairly and within an atmosphere of trust and open disclosure. Key factors that could influence enforcement include the following:
Mutual Satisfaction of Needs. A court is more likely to enforce an agreement that satisfies the needs of both parties than one that appears to favor one over the other. In other words, the agreement should state that each party has received adequate value in exchange for the marital rights and obligations he or she has relinquished. This protects fairness in case of divorce. Essentially, each party needs to be getting something that he or she wants or deems necessary to maintain health or well-being. If one spouse is getting the entire financial reward at the expense of the other, the agreement may not be enforceable.
Fairness. Courts want to ensure that a postnuptial agreement is fair and reasonable. An agreement that is unduly unfair to one of the spouses at the time of marriage may be considered unconscionable and thus unenforceable. For instance, an agreement that completely deprives one spouse of any rights to marital property may be struck down, unless the spouse received some other compensation of equal value.
Full Disclosure. Adequate disclosure is required when spouses enter into a postnuptial agreement. If one spouse does not fully disclose financial assets and obligations to the other prior to signing, a court may determine that the contract is invalid. There must be a full and honest accounting of all significant financial facts, and a record of this documentation should be made.
Coercion. Contracts that are freely entered into by both parties and in concert with one another are more likely to be enforced by courts. A postnuptial agreement where one spouse coerced the other into signing with undue threats or pressure will not pass muster.
Case Examples of Postnuptial Agreements
1. Weintraub v. Bock, 78 AD3d 1087 (N.Y. App. 2010). Signer of the postnuptial agreement was already aware of husband’s infidelity at the time of signing. Signer was 46 years old.
Court concluded that "after a sufficient period of independent negotiation during which [plaintiff] was already aware of his infidelity and had an opportunity to consult counsel outside of the emotional turmoil of an imminent divorce," his agreement to the terms of the postnuptial agreement constituted a "change of mind" and therefore its provisions were enforceable.
2. Shabazz v. Williams, 120 A.D.3d 1097 (N.Y. App. 2014). Wife was unrepresented by independent counsel at the time execution of the postnuptial agreement and husband continued to pay for her lawyer’s services. The parties were not informed of the mediation process.
There was no indication that either party was unaware of the mediation process; without inquiry into the timing and purpose of the postnuptial agreement, the trial court erred in invalidating it.
3. McMackin v. McMackin, 823 A.2d 823 (N.J. Super. Ct. 2003). Postnuptial agreement was executed mere weeks before plaintiff’s cancer surgery and husband was aware of the diagnosis at the time of execution.
Under the circumstances of this case , the court held that mere reference to the fact that the plaintiff was aware of certain facts was insufficient to create an adequate basis to find that plaintiff accepted a substantially less beneficial position. Where, as here, the wife’s attorney negotiated the terms of the agreement, and the wife checked the terms with him and understood the significance before signature, she had sufficient information to render the acceptance valid.
4. In re Estate of Horton, 347 N.Y.S.2d 598. Cohabitants entered into a written agreement providing that the survivor would take all of the other’s property "by right of joint tenancy." After one of the cohabitants died, the other alleged that the agreement was part of a scheme to defeat the testator’s children and that he had reserved the right to change his mind.
There is no statute of limitations for attacking post-nuptial contracts. To uphold the agreement, clear, convincing and satisfactory proof must be submitted. The court found that the cohabitants had discussed the plan for joint tenants with rights of survivorship at length and that at least the terms of the agreement were fully understood. The court rejected the claim that the agreement was made under duress because the testator had refused to sign a will as requested by another co-tenant.
Common Mistakes with Postnuptial Agreements
While it may seem logical that you would be able to draft a Postnuptial Agreement with your spouse, so long as it is fair, free of duress, and properly executed, there are common pitfalls that can cause one to challenge the validity of an otherwise valid agreement. In fact, the majority of cases in which the validity of a Postnuptial Agreement is challenged is based upon the following arguments:
- Lack of full & fair disclosure: While the parties could enter into a Postnuptial Agreement without exchanging enough information to enable the other spouse to voluntarily come to an agreement, it is very dangerous to enter into such an agreement without full and fair disclosure, because it could lead to problems later when the party who was not privy to the discussions wants a greater share of the marital assets than his/her spouse agreed to give via the agreement.
- Duress or coercion: If a Postnuptial Agreement is signed where one spouse is clearly under duress, forcing the agreement out of the other spouse, it will likely be unenforceable. If a financial settlement is not placed in front of a party until right before the divorce is scheduled, it is likely that the party would say yes to the agreement, but may have been in duress.
- Reviewing lawyers: The parties do not use their own attorneys. This is important when drafting the agreement because if the parties want to make the agreement enforceable, each party must have counsel representing them when the agreement is signed, and the parties cannot sign a waiver of counsel.
- Time to review & understand: Many Postnuptial Agreements are filed in the current context, which means they have to be reviewed in a quick time period prior to the execution of the agreement, but it is recommended and even required under some circumstances that parties have attorneys reviewing them and that they have enough time to read, understand and seek the advice of counsel before executing the agreement. If the Court finds that there was not enough time for review, the agreement maybe declared void.
- Representations: If there are representations in the agreement stating that each party made disclosures and he/she had no problems understanding the terms, then shortly thereafter, one party says that he/she did not have the time to review and understand the agreement prepared by the other party’s attorney, the trier of fact will be hard pressed not to believe the party that prepared the agreement, and this can result in the agreement being void.
Best Practices for an Effective Postnuptial Agreement
To ensure the enforceability of your postnuptial agreement, you must be careful in how you draft and negotiate the terms. While every agreement is unique and should be customized to your particular situation, there are a few general tips you should consider.
First, both you and your spouse should fully disclose to one another your income, assets, debts, and anticipated future income and assets . Second, the agreement should contain terms that are fair and reasonable at the time the agreement is signed, and you should not attempt to take unfair advantage of your spouse. Third, you should review the agreement with an experienced family law attorney to ensure you understand your legal rights. An agreement that leaves either spouse without recourse under the law if it does not comply with minimum requirements is not likely to be enforced. Lastly, you and your spouse should sign the agreement voluntarily and without coercion from the other.