Tuesday, October 22, 2019

Postnuptial Agreements- Part I

        A Postnuptial Agreement, sometimes known as a Marital Agreement, is an agreement between two people who are married and are either thinking about divorce but have not yet decided to divorce, or are considering divorce but are hoping that such agreement may help them stay together.
Why might you want to consider a Marital Agreement?  Here are a few scenarios that may make a Marital Agreement worth considering:

1. You are having marital difficulties. You are not ready to divorce but you want to protect certain assets in case you do get divorced.
2. You and your spouse have very different ideas about money.  You want to save money and (s)he wants to spend money.  The marital agreement is a way that you could possibly protect your savings or insulate you from your spouse’s debt if you get divorced.
3. You have decided to divorce, but one of you will lose their health insurance if you divorce, so you stay married to keep the health insurance but you lay out the terms now of what your divorce agreement will look like.
4. One of you has family money, you did not enter into a prenuptial agreement, and you want to protect that your premarital family assets in the event of divorce.
5. You are happily married and have been so for a long time but you have had a number of friends who have gone though some horrible divorces with some bad results and you want the assurance that this will not happen to you.
6. You are not ready to get divorced but you are separating and you want some ground rules around what will happen while you are separated. This might include what happens with accumulated assets or debts during the separation and how you will support the children. It may include a parenting plan, college savings etc.
These are just a few examples of reasons that parties have sought Marital Agreements that I have seen and helped mediate.  Essentially, think of a Marital Agreement as similar to a Prenuptial Agreement (done prior to marriage) but, well, post-nuptial, (after and during marriage).
      A Marital Agreement is more like a prenuptial agreement than a divorce separation agreement.  This is primarily because unlike a divorce separation agreement which is filed with the court and becomes a court order, prenuptial and postnuptial agreements are essentially contracts between the couple.  They are not filed with a court and do not become court orders. The idea, however, is that in the event of a divorce, the parties (and hopefully both parties still agree) will ask the court to implement the terms of the Marital Agreement and that becomes the basis for the divorce judgment.
     Like most contracts, the Marital Agreement has two main purposes. One is to memorialize what you have agreed to so that in case your memories are different as to what was agreed to, you can refer to the Marital Agreement. The second is for enforcement purposes. That is, if one party does not abide by the agreement, there are legal consequences.  Here again, the main difference from a divorce agreement is that the Marital Agreement is not filed with the court and is not a court order.  What that means is that if one person does not “comply” with the terms, the other party cannot file a Complaint for Contempt asking the court to find the breaching party in contempt. The consequences of a “breach” of the terms of the Marital Agreement will depend in large part on what terms are contained in the agreement itself.  That is, there may be provisions in the agreement about what happens in the event of a breach, including payment of attorney’s fees. If the parties ultimately file for divorce, the remedy would be to try and convince a court to uphold the terms of the Marital Agreement. Short of filing a divorce complaint, the only remaining remedy would be to file either a breach of contract action, a complaint in equity or some other action to enforce the agreement.
There is one more key difference between a Marital Agreement and a divorce agreement.  As stated above, a divorce agreement becomes a court order which is final and binding.  If one party breaches the terms, he or she can be found to be in contempt of court. Although provisions concerning children are always modifiable in the future, provisions concerning property division are final and not modifiable. So, in a divorce agreement for instance, if you agree to waive the right to your spouse’s retirement at the time of divorce (and the court approves the agreement), once you have done that, that agreement is not modifiable. Even if it later proves to be very unfair.
With a Marital Agreement, there is a second look.  Let’s say you agree in your Marital Agreement to each waive the right to each other’s retirement in the event of divorce. Let’s say you stayed married for 10 years after the agreement and now you decide to divorce and one party has retirement assets of $1,000,000.00 and the other has retirement of $20,000.00.   When the court is asked to enforce the Marital Agreement, the judge will look at whether the agreement was fair when it was signed and whether it is fair now, 10 years later. If a judge decides it is not fair and reasonable when it is being enforced, the judge can reject that provision.
Fortunately, at least in Massachusetts, there have been several cases which clearly lay out the requirements and possible limitations of Marital Agreements.  We will explore those cases in the second part of this series.
To summarize, Marital Agreements, despite some limitations, are very useful in at least two important ways:  1) A Marital Agreement can clearly lay out a couple’s understanding of what they agree should happen in the future in the event of divorce;  and 2) the Marital agreement can lay out some expectations, ground rules and agreements about how financial matters will be handled during the marriage.