What is a Postnuptial Agreement?
A postnuptial agreement is a lawful agreement entered into by a husband and wife during an ongoing marriage. The legal framework of a postnuptial agreement encompasses the same principles as a prenuptial agreement (which is entered into before marriage), with the main difference being that a postnuptial agreement is entered into at a later point in the marriage. The principal purpose of a postnuptial agreement is to resolve a financial issue or prepare in advance for the possibility of a future divorce . In fact, judges tend to look favorably upon postnuptial agreements as an attempt by parties to amicably resolve how their assets should be distributed in case of a divorce and avoid any protracted litigation or costly litigation. Although not specifically authorized or prohibited by New York law, New York courts have upheld postnuptial agreements that 1) are made voluntarily; 2) are not unconscionable; and 3) have been entered into after full financial disclosure.
Advantages of a Postnuptial Agreement Under NY Law
Much like a prenuptial agreement, the benefits of a postnuptial agreement involve the addressing or rights and obligations early on and the increased impact it can have on the ultimate asset division in the event of your divorce. A postnuptial agreement is also more helpful than a prenuptial agreement in circumstances where there has been a substantial change in financial conditions of one or both spouses after the marriage contract is entered into. When this occurs, the terms of the original contract become passé and are no longer relevant. The purpose of the postnuptial agreement addresses the changed financial circumstances and protects both spouses.
When one spouse is more financially stable, the postnuptial agreement can help protect that wealthy spouse and any assets they gain. Over the years, a spouse’s role changes. If the spouse has the primary care-taking in the marriage, but has no financial knowledge, asset diversification becomes vitally important to maintaining those funds. The resulting attorney-drafted protections in a postnuptial agreement can prove invaluable in fortifying financial security for the future.
In the unfortunate event of separation, the postnuptial agreement serves as a safety net. It addresses the goals of the parties to clearly define the outcome of a divorce. If your spouse is, or has behaved in an abusive manner that makes even reconciliation impossible, then the spouse knows that the financial aspects of the divorce and division of property will be resolved.
Requirements for Postnuptial Agreements in NY
The legal requirements for a Postnuptial Agreement in New York must be met before the contract will be enforceable. Among other things, it must be entered into voluntarily and must meet certain statutory requirements.
More specifically, the New York Domestic Relations Law Section 236B provides that a postnuptial agreement may not be enforceable unless the agreement is consented to by both parties and the following statutory requirements are met. First, the agreement must be in writing and signed by the parties. Second, there must be a fair and reasonable disclosure of the property or financial obligations (or both) of each party prior to the execution of the agreement. Third, the party against whom enforcement is sought must have been provided with a notice stating that he or she has the right to independent counsel in the negotiation and execution of the agreement. Unfortunately, neither the statute, nor judicial construction thereof, gives a definitive answer as to what constitutes a fair and reasonable disclosure of his or her financial status. New York courts have generally required that independent counsel be retained by the spouse seeking enrichment under the agreement. However, "where the parties have enjoyed experienced legal assistance in determining the terms of the agreement, the requirements that the spouse seeking enrichment be represented by independent counsel are considered satisfied." In addition, the "non-represented spouse may reserve the right to subsequently seek a revision of the agreement within a reasonable time if the spouse is able to demonstrate that the facts were misrepresented to protect the interests of either spouse or if the facts now do not correspond with the material facts upon which the agreement was based." While a standard is set forth in the statute to govern the adequacy of the disclosures, there are few reported cases that actually address the adequacy of the disclosures. A fair disclosure of income and property is sufficient if it reasonably apprises the other spouse of the extent of the property. There is no rigid formula or percentage of disclosure that must be made before a court will apply the fair and reasonable disclosure test.
Typical Provisions in NY Postnuptial Agreements
Just as with prenuptial agreements, there are a number of common clauses and provisions that are often included in postnuptial agreements. Some of these provisions relate to the division of assets and debt in the event of divorce, and include the following:
Asset Division
Until New York courts hold that postnuptial agreements are enforceable like prenuptial agreements or are full enforceable in whole or in part to effect a reconciliation, divorcing spouses cannot agree to divide their assets via a postnuptial agreement. The division of assets generally occurs pursuant to New York Equitable Distribution Law, N.Y. Domestic Relations Law § 236(B).
Debt Responsibility
A postnuptial agreement may not be entered into that provides for agreement to the liability for marital debt.
Spousal Support
A postnuptial agreement wherein a spouse agrees to waive or limit future spousal support obligation is valid against challenges in certain jurisdictions, but is still not sufficiently clear. Such an agreement in New York may not be enforced to the extent that it would cause one spouse to become a public charge.
Child Support
The inclusion of child support obligations in a postnuptial agreement would be contrary to New York’s public policy. The issue of child support and "child support awards" should not be addressed by an agreement to which the child is not a party. Child support awards in New York are determined pursuant to the Child Support Standards Act, DRL § 240 (1-b).
Difficulties and Dilemmas
While a postnuptial agreement can provide many benefits for a married couple, its enforcement may be challenged on certain grounds. Whether contested on substantive or procedural grounds, the outcomes may be detrimental to the enforcement of such an agreement. The most common grounds on which a postnuptial agreement may be contested is under the substantive grounds of unconscionability. The courts in determining whether the postnuptial agreement is unconscionable look both at the substantive and procedural unfairness of the agreement as well as the parties relative income and assets at the time of marriage. If the agreement is shown to favor one party over the other to an extreme degree, a court may find that the agreement is unconscionable, and therefore unenforceable . Another ground on which a postnuptial agreement may be contested is the fact that one party was not represented by counsel. It is essential in the drafting of the agreement that each party understands all of the consequences of executing the postnuptial agreement, and therefore negotiation of the agreement before execution is necessary. Finally, if the agreement was not fair and reasonable at the time the parties executed the agreement, the agreement may be deemed invalid by the courts. Therefore, it is essential that any lease for rent controlled apartments in NYC be reassessed periodically to account for changed circumstances.
How to Formulate NY Postnuptial Agreements
To start, one or both of the spouses must actually wish to enter into the agreement. They must discuss it together and reach some agreement as to its terms. It is extremely important that the parties have the time to meet with their respective lawyers to discuss the implications of the agreement and its enforceability. My strongest recommendation is that each spouse be represented by separate attorneys. Why? Because a self-represented spouse can claim many years later that the "lawyer forced him/her into signing an unfair agreement." A party is far less likely to make that claim against his/her own lawyer. Even if the agreement itself is fair and equitable, one party will later blame his/her spouse for the disparity in incomes, assets, debt and the like. The agreement should be referred to as an "Agreement" (not a "Contract") to avoid any potential claim that there was no meeting of the minds like in an arm’s length transaction.
Another very important step is to make sure that the parties "exchange their documents" with respect to their finances so each spouse has adequate information to "know what they are giving up" in signing a fair and equitable agreement. Keep in mind that the agreement may involve a waiver of maintenance, but that would not apply to a spouse who would otherwise be legally entitled to maintenance as a result of having been married for at least 20 years.
I have negotiated many postnuptial agreements in the Boston area where the agreements are routinely signed along with stipulated divorce agreements – however, in New York, non-compliance with a statutory requirement that each party retain independent counsel before executing a postnuptial agreement can make the document unenforceable. While an attorney is not required by the New York Domestic Relations Law to sign the agreement to indicate that he/she represented a spouse, many experienced family law attorneys do sign them. The agreement must be executed before a Notary Public.
Modification or Revision of an Agreement
A postnuptial agreement, once created, should not gather dust. Life in New York is anything but static, and the triggers for change are numerous. It is advisable to revisit your postnuptial agreement – even if only to review what you have agreed to – after major changes such as:
The birth or adoption of a child. The arrival of a new family member may trigger an entire host of issues, in addition to the joy of a baby. How will you parent, day-to-day and financially, with an infant? Will your current home be suitable?
A serious illness or disability. Unfortunately, the need for long-term medical care, whether for a chronic condition, an unexpected illness, or the tragic suddenness of an accident, can befall anyone. An agreement should address who will care for a spouse with special needs, and how the resulting costs will be met.
A career milestone. In this city where careers matter, a big promotion or major professional decision may be a reason to go over a postnuptial agreement. You and your spouse should consider whether the changes in income, mobility, or travel brought about by the promotion may affect your arrangements.
The anticipated sale of property. When property is sold, the money is often reinvested, or at the least, reinvigorates a budget that may have been less than robust. Reviewing a postnuptial agreement prior to a significant property sale can ensure that the proceeds are applied appropriately and in accordance with a couple’s goals.
Planning for retirement. A postnuptial agreement should address not only the current state of the couple’s financial situation, but should also account for the next phase in the couple’s life. Working, saving, and spending are generally less frenetic when one or the both spouses have time to enjoy them. Revisit your postnuptial agreement and review your goals and agree as to how you wish to spend your time and with whom.
No one knows what the future will bring. By periodically reviewing your postnuptial agreement and updating it, you can ensure that your bargaining position is just as strong as it was the day you entered into the agreement.
Final Thoughts
In conclusion, postnuptial agreements can be an important tool for couples in New York to address potential future issues in their marriages. They can help protect individual assets in the event of a divorce or separation and can also provide clarity on areas such as child custody and support. However , it’s essential for couples to carefully consider the terms of the agreement and to seek legal advice from an experienced family law attorney to ensure that their rights and interests are protected. Understanding the terms and implications of a postnuptial agreement can help couples avoid potential legal and financial difficulties in the future.