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Almost everyone has heard of prenuptial agreements, those contracts signed in anticipation of marriage, usually to protect the intended spouses’ finances. But most people are less familiar with postnuptial agreements, which are just what they sound like: an agreement signed after marriage. What is a postnuptial agreement? Other than being signed after the marriage, how is it different from a prenup? And most importantly, when should you have a postnup?
A postnuptial agreement is a contract between spouses, usually regarding financial matters. A postnup may address the distribution of assets in a divorce or upon the death of one spouse if there are children from a previous relationship. As with any contract, the parties to a postnup must provide consideration.
“Consideration” is a legal term that means that each party to a contract agrees to do something they are not legally obligated to do, or agree not to do something they have a legal right to do. In short, consideration refers to an exchange of some kind, a quid pro quo, or a trade that the law requires to bind the parties to their promises.
Consideration may be an unfamiliar concept, but we give and receive it all the time. For instance, if you order a gift for a friend for $50, you are agreeing to pay the seller that money in exchange for their agreement to provide the gift. This differs from a mere promise to make a gift to the friend, who in that example has given nothing in exchange.
With a prenuptial agreement, the consideration for the contract is both parties agreeing to enter into the marriage in exchange for signing the prenup. But with a postnup, the parties are already married, so there must be some other consideration. What that consideration is may depend on the reason for the postnup.
Sometimes people get a postnuptial agreement simply because they never got around to making a prenup before they got married. One reason a prenup or postnup might be appropriate is if either or both of the spouses have children from a previous relationship and want to specify what those children will inherit. Each spouse might agree to forgo certain assets designated for the other’s children.
Sometimes, a postnuptial agreement is appropriate because the couple’s financial situation has changed since the marriage. One spouse may have started a business, for instance. If the business owner wants to make sure that they will have sole control of that business in the event of a divorce, they might execute a postnup that ensures that control in exchange for agreeing to the other spouse receiving an equivalent share of other assets.
Another change in financial circumstances that commonly occurs after marriage is for one spouse to receive a significant inheritance. In order to ensure that the inherited assets remain with the spouse who inherited them, the couple might execute a postnup to that effect, with the other spouse receiving some consideration in exchange for their agreement not to seek a portion of those assets in a divorce.
Often, couples have one idea at the outset about how their marriage will work, but that idea evolves over time. A postnuptial agreement can be a way of adjusting to that revised vision. For instance, both spouses might have had professional careers when they married, but realized upon becoming parents that they wanted one parent to stay at home with the child. In consideration for the at-home parent’s career sacrifices, the other might agree to generous alimony or property division in the event of a divorce.
Sadly, one of the most common reasons a married couple might enter into a postnuptial agreement is when one partner commits adultery. The wronged partner may want to end the marriage upon discovering the infidelity, while the cheating partner may want a second chance. A postnup can be a way of negotiating that second chance. In consideration of the wronged spouse staying in the marriage, the unfaithful spouse may sign a prenup agreeing to a generous property settlement and/or alimony for the other spouse in the event the marriage later breaks down.
Entering a postnuptial agreement can be a sign of the unfaithful spouse’s sincerity, remorse, and willingness to recommit, which may be enough to help save the marriage. It’s not always an effective gambit, though. A wealthy spouse who is determined to cheat will probably do so. And a wronged spouse may agree to stay in the marriage, but bide their time just long enough to reap the benefits of the agreement.
A couple may have entered a prenuptial agreement, but extraordinary unforeseen events (like a spouse winning the U.S. Presidency) might occur, causing the other spouse to think, “I didn’t sign up for that.” A postnuptial agreement may simply be a renegotiated prenup, with more favorable terms for the spouse who agrees to stay and deal with the new, previously-unanticipated circumstances of the marriage.
Although not as widely used as prenups, postnuptial agreements are enforceable in most states. If you decide to execute a postnup, check the laws of your state to be sure you understand the requirements. In general, a post nup agreement is more likely to be enforceable if there is real (not illusory) consideration, and the terms are clear and not against public policy (such as dictating which parent would have child custody in a divorce). It’s also important for each spouse to have an attorney review the agreement to prevent later claims that the agreement was induced by fraud or signed under duress or other inappropriate promises.
To learn more about when and how to get a postnuptial agreement, contact Strickler, Platnick & Hatfield to schedule a consultation with a postnuptial agreement lawyer.
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