Defining the Purpose of Postnuptial Agreements
Despite the relative decrease in the number of marriages in recent decades, many North Carolina couples still opt to use this age-old institution as a way to one another. In fact, according to the Centers for Disease Control and Prevention (CDC), there were 2.1 million weddings in the United States in 2017, the most recent year for which there are statistics.
The fact that lovebirds continue to tie the proverbial knot leads to two questions: what if, after living with one another for a few years, a couple decides that it was a mistake to marry, and what can be done to remedy the situation? While divorce can resolve the issues relating to an unintended marriage , it is typically expensive and when there are children involved can be heartbreaking. An agreement to cohabitate can be a solution to the disappointment of an unintended marriage. Enter the postnuptial agreement.
A postnuptial agreement is a contract between spouses entered into as a way to address important issues that may arise during the marriage or in the event that the marriage is dissolved. In the event of divorce – or prior to – spouses can enter into a postnuptial agreement that is executed by the parties, in order to save time and expense during the divorce as part of a settlement of the terms of the divorce.
Postnuptial agreements differ from prenuptial agreements in that they cannot be entered into to memorialize an agreement relative to pre-marital property. They both differ from a separation agreement, to the extent that a separation agreement terminates the economic rights of the Parties prior to a divorce.
Requirements Under North Carolina Law
When addressing a postnuptial agreement, the question of whether your state recognizes the validity of such an agreement and what is required for it to be enforceable comes into effect. In North Carolina, as in many states, while contracts between married people are not recognized as enforceable contracts, per se, postnuptial agreements are viewed as enforceable contracts between actually married people. A postnuptial contract is governed by the law of contracts. Accordingly, issues of consideration, contract formation, mutual assent between the parties, the intent of the parties, and other principles of contract law apply. Any postnuptial agreement in the state must have three invariable conditions: In addition, the postnuptial agreement must be formal. The agreement must be in writing and each party must sign it. While a notary public is not required for a postnuptial agreement, the agreement must not only be signed but also formally witnessed. While the parties could choose to waive the requirements of a witness, the parties would be far better off to comply with all of the formal requirements and allow the postnuptial agreement to be enforced. North Carolina has not adopted the Uniform Premarital Agreement Act which governs prenuptial agreements, although many provisions within that act are used for postnuptial agreements in the state, as well.
Common Terms and Provisions
The terms of a postnuptial agreement can be as unique as the couple themselves. Most provisions in such documents fall into the following categories:
Asset Division: This may include identification of the premarital and marital property owned by each spouse along with the distribution in the event of divorce or the death of one of the spouses. The agreement may also allocate certain property as separate property or identify property that will be jointly owned.
Debt Responsibility: In the event of a divorce, the parties may agree on payment responsibility for debts based on their source or extent. Debts may be categorized as separate or marital, allocated among them or overall, or classified as assumed by each party.
Spousal Support: This may include specific amounts of monthly alimony, conditions that could affect such payments or termination triggers. The parties may also agree to waiver of alimony, which may be enforceable even if circumstances change in the future.
Child Support: Parents may decide how child support obligations will be distributed in the event of separation or divorce, including provisions for direct payments to school or medical providers rather than to the receiving parent. The parties may shift child support obligations to provide for additional alimony obligations in lieu of child support.
Benefits: You may determine how pensions, retirement accounts, life insurance policies and other benefits will be handled if a divorce occurs.
Dispute Resolution: In the event of a divorce, the agreement may direct parties to attempt mediation before seeking court intervention. The parties may also agree in advance on which state’s laws will govern and where any legal action will be brought.
Ownership of Business Interests: If an interest of one spouse was obtained during the marriage, that portion may be subject to division in a divorce. Separating business interests may require a more detailed allocation of those interests, future capital contributions and ongoing individual contributions.
A postnuptial agreement is custom-designed to address your family’s needs.
Advantages of Having a Postnuptial Agreement
When considering the question of whether in fact a postnuptial agreement is the proper strategy, we often look to one of five categories of benefit to see if this option makes sense. While this is not an all-encompassing list, these are very common categories that we have seen through the years:
- Financial Planning—Postnuptial agreements allow couples to make long-term financial planning decisions. These decisions tend to cover things like retirement accounts, pensions, life insurance, health insurance, etc. A common concern is for stability and security for the long-term, and a period of uncertainty in this critical area could cause a substantial amount of stress on a marriage.
- Peace of Mind—Many people feel that money problems are a great source of strife in a marriage. Using a postnuptial agreement, you could cover your long-term financial decisions in advance to allow for focus on other important matters.
- Protection in the event of Divorce or Separation—In a divorce or separation, certain concerns can be addressed, legally, in a way that can protect either yourself or your spouse if others predate the marriage. For example, if you have children from a prior marriage or have significant assets of a certain type that predate the marriage, a postnuptial agreement might provide a way to shield those items from equitable distribution.
- Protection in the event of Death—A postnuptial agreement allows parties to take the long-term decisions of Trusts and Last Will and Testament planning out of the equation, and allow them to move on with the business of living.
- Special Needs Child—If you have a special needs child (or multiple children with special needs), there will be concerns that need to be addressed in the postnuptial agreement as to the future care and support of that child or those children. Sometimes an award of incentivized spousal support, as opposed to a flat dollar amount, makes sense for a spouse that may have particular needs. Often times there are non-marital children, as well, and the parties need to address the long-term decisions about support in the event of death or divorce. It is a good idea to draft a complete plan detailing how these children are supported and what level of support is expected from each party, so as to avoid litigation down the road.
Potential Challenges and Factors to Consider
While a postnuptial agreement can be useful for a couple, there are also certain challenges and considerations when implementing this contract. In many instances, spouses have difficulty discussing financial issues in marriage, and this can be even more of a challenge for newlyweds who have never had an open discussion about their respective finances. For this reason, a postnuptial agreement may be a struggle to negotiate and draft, even if the underlying issues seem manageable. The tension that may already exist about other marital issues can be further exacerbated when a spouse interprets a postnuptial agreement as an indication that the other spouse is untrustworthy. While a postnuptial agreement can be signed at any time, it may be inappropriate to move forward when circumstances are extremely unpleasant for one spouse. In other words, if the purpose of the postnuptial agreement is to preserve the couple’s relationship , but they are fighting night and day about their finances, it may not be a good time to proceed with the contract.
As with any other contract, there is also the possibility that a spouse may attempt to avoid liability under the postnuptial agreement at some point in the future. This is why it is so important to ensure that the postnuptial agreement is not unfair and that both spouses had an opportunity to provide input during the drafting process. Although the value of the property covered under the agreement may increase over time, there can be no expectation that the terms in the contract will be suited for the couple at all points in the future. Spouses may also draft a postnuptial agreement with the expectation that they will continue to work on their relationship and use the agreement as a means to safeguard their assets while doing so.
How to Make a Postnuptial Agreement
If you are considering postnuptial agreements as a way to solidify your marital expectations and foster open communication with your spouse, you can benefit from taking a methodical approach for crafting the best agreement possible. Keep these tips and steps in mind: As with any legal contract, both spouses should consult with a family law attorney prior to drafting the postnuptial agreement. This will help ensure that the interests of both parties are represented, and that the agreement is drafted in accordance with the law. It is critical to full and honestly disclose your income, assets, debts, and financial expectations to your spouse at this stage in the process. This will ensure that your postnuptial agreement is not considered unconscionable due to one spouse being "in the dark" about the other’s finances. Carefully discuss any and all details of the agreement with your spouse. Be clear about the reasons for the agreement, and work together to create terms and conditions that are amenable to both. Once the terms of the agreement are settled, you should each consult with separate independent counsel to review the terms and ensure that they are in your best interests. The next step is to have both spouses sign the agreement, which must be notarized. Once filed with the Register of Deeds, the agreement will be legally enforceable, just like a prenuptial agreement. While a postnuptial agreement does not have to be reviewed or updated, it is always good practice for you and your husband or wife to revisit the document on a regular basis as circumstances change. An agreement should not be considered static; rather, it should evolve with both you and your spouse over the years.
When Should You Retain Attorney Services
Navigating the process of drafting a postnuptial agreement can be a complicated matter. It is strongly recommended that you involve an experienced family law attorney who can help ensure the agreement is legally binding and offers the intended protections for you and your spouse. Postnuptial issues tend to arise following the signing of a settlement agreement, or even after you’ve been through a divorce, even if it was amicable. You may even be hesitant to order the agreement after discussing some of these matters with your spouse, as you might not want to offend them. You may lack the legal knowledge required to draft a postnuptial agreement that will protect your interests. You might even be afraid that it will damage the goodwill of your relationship by immediately bringing up the concept of postnups and settlement agreements. Your attorney is here to help. If you think that a postnuptial agreement may be in your best interests , sit down with your family law attorney to determine if an agreement is right for you and your spouse. They can assist you in determining what you need from the agreement to feel satisfied, or even in explaining why a postnup is a good idea. They can also help you understand the legal terms and concepts involved, as well as the potential protections an agreement could offer you. If you hire a skilled and experienced legal professional, they will be able to handle all aspects of the postnuptial agreement so that it is legally sound in every sense.