What Is A Postnuptial Agreement?
In the context of marital law, a postnuptial agreement is a written contract entered into between a married couple that addresses a variety of issues pertaining their assets and finances. While prenupital agreements are entered into prior to marriage, a postnuptial agreement is executed after the marriage has taken place.
Lawfully compliant postnuptial agreements serve a number of purposes for newlywed couples, including:
Postnuptial agreements present numerous advantages for couples given a wide variety of circumstances. It is worth noting, however, that entering into a postnuptial agreement requires full and fair disclosure of each party’s financial assets .
To that end, a postnuptial agreement is a legal contract between husband and wife, and must be in writing and signed by both parties. If a postnuptial agreement is executed, and one party later files for divorce, some courts have determined that certain provisions in the contract would control how property would be divided. Other courts, however, have declined to enforce such provisions on the basis of public policy, and further noted that the court would likely appoint an attorney of record for the parties’ minor children if such children were not consulted or were not allowed input in the agreement.
Legal Requirements In Pennsylvania
One of the most important aspects of a contract is that all parties involved understand and agree to the terms and conditions. This is especially important with the postnuptial agreement because, unfortunately, it can be used against one or both parties in times of conflict. Therefore, in order for the postnuptial agreement to be valid we must have legally enforceable elements of the contract.
There are a couple of requirements that must be met for a postnuptial agreement to be valid in Pennsylvania. First, the parties must be legally separated from each other. Second, there are some things that must be completed the same way as a premarital agreement. Specifically, the document must be in writing, signed by both parties, contain a fair disclosure of assets, and be notarized.
What most people don’t know is that the postnuptial agreement must also be entered into voluntarily, after fair disclosure, and after sufficient time has been afforded to each party to review the document and its terms with independent legal counsel. Failure to do this will result in the agreement probably being set aside by the Court. It should be noted that the Court will take into account "what is fair." In these cases, the Court will generally look at the lifestyle of the parties.
Why Choose to have a Postnup
After the wedding bells have faded and the honeymoon is just a distant memory, couples often turn their focus to building a life together. This can lead many to inquire about postnuptial contracts. Common reasons why married couples in Pennsylvania may choose to draft a postnuptial agreement include: Asset Protection. As the marital relationship progresses, either spouse may find that he or she has accumulated significant wealth that he or she wants to protect in the event of a divorce or separation. Business Ownership. If either you or your spouse enters the marriage with a family business or starts a new business during the marriage, a postnuptial agreement may help to ensure that the business assets do not become a marital asset subject to distribution in the event of divorce. Estate Planning. If you and your spouse are in a second or subsequent marriage, a postnuptial agreement can help address sensitive issues relating to estate planning, particularly if either of you has children from a prior marriage. Financial Planning. If you or your spouse has an equal or higher earning capacity or are entering the marriage with significantly less wealth, a postnuptial agreement can help to protect the significantly higher earning spouse financially in the event a divorce is filed. Safeguards for Children. If either you or your spouse has children from a prior relationship or a previous marriage, a postnuptial agreement can help to address financial obligations toward the children in the event of divorce.
Challenges and Limitations
It is important to remember that while postnuptial agreements can be useful tools, they are not a panacea. That is, in certain circumstances they may be invalid or unenforceable. For example, a Pennsylvania postnuptial agreement may not be enforceable if it contravenes the Pennsylvania Divorce Code, which sets forth the proper procedure for divorce. For instance, a postnuptial agreement that prohibits a party from ever seeking a divorce elsewhere, would be invalid. Another potential limitation is that the terms of the postnuptial agreement must be conscionable. The court will not enforce an agreement that is deemed grossly inequitable. Generally, if the postnuptial agreement is entered into shortly before the parties separate, or if there was evidence of either fraud or duress, the court will not enforce the agreement.
A postnuptial agreement may also become invalid if there has been a material change in your life circumstances. For instance, if you agreed to an equal division of debts, but then incurred substantial debt in a failed business venture, the court may determine that this is so inequitable as to be unconscionable. In other cases, a court may look at a postnuptial agreement in light of other factors. For instance, if the couple titles debt to one spouse during the marriage, the court may look at these debts and assets to get a fair and equitable result for both parties.
Creating a Valid Postnuprial Agreement
Successful postnuptial agreements in Pennsylvania must be in writing, signed by both parties and notarized. They must also be accompanied by an affidavit made under oath by both parties. Successful postnuptial agreements are contractual in nature and therefore require compliance with some basic contractual requirements of the law to be enforceable. The following is a brief outline of the steps involved in postnuptial agreement formation, while each step has its own pitfalls.
Usually, one party proposes that the parties enter into a postnuptial agreement . Negotiation between the parties occurs at this stage. It can be done either assertively or collaboratively. In the best case scenario, an agreement is reached in the interim.
The attorney drafts the agreement based upon the negotiation. The parties agree to the terms of the agreement and both sign it after it is notarized. The attorney drafts the affidavits for both parties.
A successful postnuptial agreement will likely involve the use of attorneys. The agreement can be drafted, reviewed and finalized by one attorney or multiple attorneys, i.e. each spouse’s own attorney.
Modifying or Voiding a Postnuptial Agreement
While the time period for entering into a postnuptial agreement is important because it affects the enforceability of the agreement, for the most part, once a postnuptial agreement has been entered into and signed, it has the same binding legal effect of a prenuptial agreement. Therefore, a postnuptial agreement entered into after 20 days prior to the date of the marriage, whether a postnuptial agreement entered into after 20 days prior to the date of the marriage is valid and enforceable . . . is no different than a similar postnuptial agreement entered into before 20 days prior to the date of the marriage." Riemer v. Sive, 883 A.2d 1197 (Pa. Super. 2005).
Postnuptial agreements may be modified by the parties, but the burden of showing that a modification agreement should not be enforced rests on the party requesting the modification. See Pruss v. Pruss, 70 A.3d 837 (Pa. Super. 2013). In that case, the husband had found lucrative employment in Indiana and moved there, though he kept an interest in his Pennsylvania business. After some period of time, he and his wife agreed to the terms of a new agreement, where all but about 10% of the husband’s income was classified as Pennsylvania income, so that it could be considered for equitable distribution in the event of divorce. When the husband attempted to modify the agreement to classify 30% of his income as Indiana income, the court ruled that he was relying solely on mere suspicions that his income was too low for him to afford his expenses, and he failed to meet his burden that the agreement should not be modified.
Postnuptial agreements, once entered, can also be revoked by the parties, as in any other contract. However, a party seeking to have it revoked must prove that the underlying contract was invalid due to fraud, duress, unconscionably, or a lack of free will, and this is likely to be a significant challenge to overcome. Hunter v. Heiser, 2016 Pa. Dist. & Cnty. Dec. LEXIS 373 (Pa. C.C.P. 2016).
Pennsylvania law requires courts to enforce marital agreements, much like other contracts. If the language of the agreement itself is clear and specific, the court will enforce the agreement as drafted under the theory of freedom to contract. This is true, even if the agreement itself would appear to be unconscionable. However, this is not to say that a postnuptial agreement cannot be held invalid, if any of the parties can prove that the agreement was invalid under general contract principles of fraud, duress, unconscionably, or mutual mistake.
Case Examples of Pennsylvania Postnuptial Agreements
For example, John and Megan were married for 10 years before deciding to enter into a postnuptial agreement (PNA). In this case, the PNA was drafted and executed in October of 2016. John and Megan had greater wealth as a couple than when they first married and they wanted a PNA to address the new marital property that they had accumulated during their marriage. Their PNA addressed the division of their joint bank accounts, real estate holdings and retirement funds as well as the parties’ division in payment of joint and household bills. The PNA also addressed alimony and spousal support that takes effect if the parties are divorced or separated and mandates that the other spouse must continue paying health insurance premiums for the other until such time that the divorce is final and effective. Lastly, the PNA contains a clause specifying that the parties mutually agree to move to a particular county in Pennsylvania to effectuate their divorce and that they will waive personal jurisdiction of the action in any other county.
John and Megan voluntarily entered into an enforceable PNA. The PNA provides protections for each of them should they ever divorce. In addition, John and Megan have also addressed the present issues that plague many couples AFTER living under the same roof and that is who pays what bill and how much. The PNA that Megan and John entered into addresses how they will split bills and pay for things through the duration of their marriage. One can only hope John and Megan will never need to rely on the PNA for its intended purpose but it is nice that they have addressed the issues.
In another example, Sarah and Joe were married for 27 years before deciding to enter into a PNA. Their marriage was marred with infidelities on both sides. Joe and Sarah had not been socializing with their common friends very much over the past few years and Sarah had invited Joe to join her to dinner with their divorce attorneys to develop their PNA terms and conditions. Joe had reservations about what the PNA would mean for his proceedings as he filed for divorce earlier but showed up to dinner to appease Sarah. Well , after-some chicken marsala and a couple glasses of red wine, Joe and Sarah walked away with a comprehensive PNA addressing their business and personal accounts, equity in their home and retirement, Joe’s ownership in his professional practice and affiliation agreements. Their arrangement did not address how they would deal with personal property because they decided that it was too much to address in one sitting. They did however make a lot of good points and covered the basics of the marital division. Joe and Sarah both walked away thinking that the dinner was productive. Joe, however left that dinner with a bad case of heartburn and anxiety. Would the PNA be enforceable? Could they still get a divorce? If so, could either party afford to move out and what will happen to the kids? After spending a good 30 minutes Googling "postnuptial agreements," Joe had a lessened case of heartburn and realized he should think more on the fine details of the PNA. He consulted with his divorce attorney to finalize the remaining terms of their agreement before he signed a document that had not been finalized. Later, Joe sought counsel to provide guidance on the Divorce Complaint he received from Sarah. Joe learned that a PNA may be an enforceable agreement to guide the parties in dividing their other assets but does not negate the availability of equitable distribution of property. Joe also learned that he did not need his wife’s signature to proceed with filing for divorce. Joe and Sarah eventually moved through the divorce process and settled without much conflict. Although Joe was concerned that the PNA would have been moot, it was a guide and an avenue to not have to make every decision from scratch when their divorce action began. Joe walked away with money in his pocket because he had an enforceable PNA.