What Is a Postnuptial Agreement?
A postnuptial agreement is pretty much what it sounds like, a contract signed after the marriage or domestic partnership between the parties that defines property rights in the event of a divorce or separation. Like a prenuptial agreement, a postnuptial agreement must be voluntary and executed by both parties. In fact, a postnuptial agreement will be held to an even higher standard of scrutiny than that of a prenuptial agreement since it involves waiving community property rights after the marriage. Basically, it’s a contract between two people who are already married to each other.
In California, a couple can enter into a postnuptial agreement when they are married or registered as domestic partners. The Domestic Partner Rights and Responsibilities Act of 2005 (the Act, Civil Code sections 297 et seq . ) allows a registered domestic partner to enter into a post-registered domestic partnership agreement with his or her partner. Some established rights and responsibilities include: the right to adopt children, the right to receive spousal support, the right to community property, the right to community debt relief, the right to health care decision-making power, the right to life insurance beneficiary designations, etc.
If a postnuptial agreement is entered into while married the spouse is generally exempt from the fiduciary duties of disclosure which are imposed on a prospective spouse. California courts are generally very strict with the requirements necessary to render a prenuptial agreement valid and enforceable. A postnuptial agreement offers the parties the opportunity to enter into an agreement without the same formalities.
Requirements Under California Law
In California, for a postnuptial agreement to be considered valid and enforceable, it must meet specific legal requirements as set forth in California Family Code Section 1615. While dress code, location, and catering options are not an issue, the postnuptial agreement must be written down and signed by both spouses to be enforceable. An oral postnuptial agreement is not enforceable in California. If a postnuptial agreement is drafted properly, there is no further need for a notary, such as there would be with a divorce settlement or a quit-claim deed.
Once both parties have signed the postnuptial agreement, if applicable, it must meet approval from one of three government entities, either a notary public, a court, or the California Department of Child Support Services (DCSS). Notary Publics deal only with child support agreements, so they are not the norm. Usually, when the postnuptial agreement is presented to the court, it is part of the divorce proceedings. The California Department of Child Support Services will approve the child support terms of a postnuptial agreement, but not any other terms outside the scope of child support.
Even if the postnuptial agreement has been approved by a notary public, a court, or the DCSS, the provisions in the postnuptial agreement are still subject to review by the court, but only in court cases regarding spousal support, child support, or asset division. During waiting periods for the dissolution of a marriage, courts must balance factors such as duration of cohabitation, time since marriage, and the validity of payments on debt, rather than the postnuptial agreement; however, California courts do have the discretion to consider the postnuptial agreement provisions in a request for temporary spousal support. Postnuptial agreements are more vulnerable to review when the court is deciding on the dissolution of the marriage.
Common Motivations for a Postnup
As with prenuptial agreements, postnups are not one size fits all. The reasons for employing such an agreement are as unique as the couples who decide they need one. Common reasons for seeking a postnup include changes in financial status (e.g., one spouse inherits money or property after the marriage), marital issues (in particular, where one spouse has been unfaithful), or even estate planning to minimize costs and potential problems in case of divorce.
Inheritance
In some marriages, there can be issues related to assets that were inherited after the marriage. If one spouse inherits a significant amount of money or property, a postnup can help ensure that those items are not in issue during an eventual divorce by designating the inherited property as belonging solely to the spouse that received it.
Marital Problems
People don’t get postnups when their marriages are going well. Obviously, a simple way to deal with issues that have arisen in the marriage is through a postnuptial agreement. If someone has been unfaithful, a postnup can define the consequences thereof. A postnup may specify that the cheating spouse relinquish all rights of spousal support or maintenance, for example, if infidelity occurs during the marriage. A postnup may also alter the distribution or receipt of property upon divorce in the event one spouse cannot trust the other to disclose assets in the event of a divorce. By doing so, both spouses have the benefit of certainty and can get on with the business of saving the marriage.
Access to Capital
A postnuptial agreement can offer a couple access to capital if they plan to buy a business or a house but cannot get traditional bank financing. In this situation, the postnup acts like a loan guarantee by one spouse and will often include the lender as a party to the postnup.
Estate Planning
Another reason to seek a postnuptial agreement is if one spouse needs to plan according to a multi-generational estate plan to benefit their parents and his or her children. The spouse may want to establish and/or maintain "bloodline" assets that go only to his/her family, not the spouse’s. A postnup may thus restrict distribution of a spouse’s family home to his/her children from a prior marriage and/or provide funds in a trust to pay alimony/maintenance to the current spouse out of that family’s trust. The current spouse, in exchange, may receive some property or support from the retained assets of the former spouse’s family. Thus, the postnup will benefit the current spouse and also prevent some assets from going to an ex-spouse if a divorce occurs. Many people are surprised to learn how often these types of postnuptial agreements occur.
In some cases, postnuptial agreements can be keys to avoid saying "I Want A Divorce Now," to the extent the spouses reconcile and don’t seek that divorce.
Enforceability Problems
The validity and enforceability of postnuptial agreements in California may be challenged on a wide variety of grounds. When considering the challenges to a postnuptial agreement, it is necessary to consider what facts must be established by which party. While a spouse may be able to open a postnuptial agreement by showing it was entered into as the result of "duress," "coercion" or "undue influence," each term can have a somewhat different meaning.
The termination of the marital relationship is itself an inherent coercive circumstance and it is unlikely that a spouse will be able to prove "duress" or "impropriety" if the agreement results from a voluntary decision to separate. A spouse seeking to set aside a postnuptial agreement may establish that the agreement was entered into under "duress" by showing that he or she did not voluntarily enter into the agreement, but was compelled to do so by fear or threats of force.
A spouse may establish that he or she did not voluntarily enter into a postnuptial agreement by proving that he or she was acting under "undue influence." A spouse seeking to establish that he or she did not voluntarily enter into a postnuptial agreement by showing that the agreement was entered into as the result of "undue influence" must prove that the other spouse (the one in a superior position) persuaded or coerced him or her into entering the agreement.
In contrast to the concepts of "duress" and "undue influence," a spouse seeking to set aside a postnuptial agreement may establish that the agreement was entered into as the result of "fraud" by proving that his or her agreement was obtained fraudulently.
If a postnuptial agreement is challenged as unenforceable because of an inadequate consideration in exchange for the obligation assumed or transfer of property, the burden is on the spouse who initially produced the agreement to establish the adequacy of consideration for all the material provisions of the agreement. The spouse defending a postnuptial agreement then has the burden to prove that the adequate consideration supports the entire agreement.
Benefits and Downsides
Benefits and Drawbacks of Postnuptial Agreements in California
When considering a postnuptial agreement in California, it is essential to weigh the benefits against potential drawbacks. On the positive side, such agreements bring financial clarity by allowing couples to explicitly define the distribution of assets, income, and other resources in the event of a divorce or death. This increased transparency can reduce future conflicts surrounding finances and simplify the often complicated process of divorce if the need arises. Furthermore, postnuptial agreements can provide peace of mind, enabling spouses to make joint decisions about their financial future, rather than leave those decisions to court determinations.
On the other hand, the establishment of a postnuptial agreement can create tensions and conflict between spouses. It can suggest a lack of trust , as the very need for the agreement in the first place may stem from a breakdown in communication. Similarly, the negotiation process can be uncomfortable and difficult, resulting in hurt feelings and even greater misunderstandings. When the agreement is signed under duress or without full disclosure of assets or debts, it can lead to further conflict. Additionally, circumstances change over time — what seems like a fair arrangement at one point may not be fair in the future. This can lead to resentment, inequality, or feelings of being trapped, particularly if the spouses’ financial situations evolve dramatically after the agreement is made.
While a postnuptial agreement can be beneficial in many ways, it is not a solution for every couple. It is important to consult an experienced California divorce attorney when considering entering into this type of contract.
Getting a Postnuptial Agreement
A postnuptial agreement in California is a contract that a married couple can enter into that clarifies how their assets will be divided in the event of divorce. Below is a step-by-step process to draft a postnuptial agreement.
Determine if a postnuptial agreement is necessary: In California, a couple already married can enter into a postnuptial agreement at any point in time. Some reasons for having one include protecting yourself from debt from your spouse, protecting your children from a prior relationship, being on maternity/paternity leave, or protecting a business.
Engagement of legal assistance: Once you have determined the necessity for a postnuptial agreement, spend the time to contact an expert in family law such as a divorce attorney or family law attorney who can assist with postnuptial agreements. Keep in mind that both spouses will want independent representation so that they can ensure their best interests are represented.
Gather up documentation: In order to draft a postnuptial agreement, one party must provide full and fair disclosure of all their finances. Without complete disclosure, a postnuptial agreement may be rendered void if it is not provided. Items such as bank statements, tax returns, stock portfolios, and other assets and liabilities will need to be disclosed. Financial honesty counts.
Negotiate agreement: Next, discuss the terms of the agreement and negotiate it. You can choose to go through mediation, collaborative divorce, or other means to reach an agreement. This is where the help of your experienced divorce lawyer will come into play.
Get it in writing: One of the most common mistakes made with postnuptial agreements in California is that an oral agreement without any details is presumed to be sufficient. Acceptance of these types of agreements does not hold up in court and having all the terms in writing is essential for a well-drafted postnuptial agreement.
Start thinking about execution: With the agreement written out and all parties consenting to the terms, the terms of the postnuptial agreement should be spelled out for all involved parties. Once everyone gives their consent, the agreement can be notarized and signed for legal protection.
When to Seek Legal Help
Before committing to a postnuptial agreement, it’s always best to get some legal advice to make sure that the agreement is being properly handled. If you are interested in creating a postnuptial agreement, your first step is to speak with a lawyer – soon after you settle on an agreement with your spouse. A qualified family law attorney can help you with the drafting of the agreement, provide advice on what’s reasonable, and ensure that all the right provisions are addressed. Legal counsel can also help to ensure that the postnuptial agreement meets all the requirements for validity under California law .
All too often, people dive into creating a postnuptial agreement without properly understanding the implications of such an agreement. The potential complexities make legal representation very important. Professional oversight can help to ensure that all the necessary terms and conditions are included; that the provisions can be properly and reasonably achieved; and that the final product is both specific enough to provide protection, but not so specific that it can’t be adapted over time should circumstances change. At the same time, a qualified attorney can help establish the legal validity of the agreement itself, so that it has the most force and effect in protecting your interests in the future.