Powerful Non-Defensive Communication: A New Way to Communicate

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Postnuptial Agreements are for Parents, Not Children

Parents naturally want to do all they can to take care of their children. Sometimes this instinct leads to spouses trying to create contracts about how they will raise their children if they ever divorce. The hope is the family can be spared from a lawsuit if the parents can agree in advance. However, enforceable postnuptial agreements do not resolve issues surrounding children. They are used to define financial rights and obligations. As a general rule of thumb: if it does not deal with property, it does not belong in a postnuptial agreement.

It might seem strange that parents cannot include provisions for raising children in a postnuptial agreement. Every day parents make decisions about their children’s lives: what they eat, what time they go to bed, whether they can go to a friend’s house, etc. The difference is those daily decisions don’t affect the legal rights of the children. On the other hand, child custody, support, and visitation do.

The right to child custody, support, and visitation does not belong solely to the parents. Therefore, a private contract between the parents is insufficient to resolve children’s issues. Instead, the law balances the rights of both of the parents, the children, and the state. Each parent has a right to raise their child. Every child has the right to be raised and to have a relationship with both parents. The state has the right to oversee child rearing because of its interest in protecting children from harm.

A postnuptial agreement cannot eliminate child support payments or establish the amount that will be paid. Child support may seem like a property right since it deals with money. However, the law does not view child support as a financial right. Child support deals with the right of the child to benefit from both parents’ income. States recognize that every parent has the responsibility to financially assist in raising their child to the fullest extent that they are able. The state’s child support guidelines establish the amount of child support that is paid, not the parents.

A postnuptial agreement cannot determine who the child will live with and if the other parent will see the child. Child custody and visitation is determined by the “best interest of the child” standard. There is no exact definition of what “best interest of the child” means. There are many factors. Ultimately, it involves whether the child is in a healthy, stable, and safe environment in which the child’s needs are being met and relationships with both parents are being preserved. A judge must determine the type of custody and when visitation is appropriate in every divorce case in order to ensure that the child is in a good environment. Even when parents agree on custody and visitation, they are required to obtain approval from the judge.

Public policy prohibits spouses from determining child custody, support, and visitation in postnuptial agreements. Children are not a commodity that can be traded between parents and cannot be used as a bargaining tool. If your postnuptial agreement contains provisions for children’s issues, the court may ignore those parts and still uphold the rest of your agreement or the court may invalidate the entire agreement. The best decision is to simply not include unenforceable children’s issues in a postnuptial agreement.

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Quick Advice for Dealing with Difficult In-Laws

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Avoiding Divorce with Reconciliation Services

Over the past 40 years, marriage assistance has moved away from reconciliation efforts and towards helping couples quickly divorce. A myriad of professionals are available to help ease the divorce process, including lawyers, financial advisors, and parenting educators. However, this trend of “easy” divorce has limited the options for couples to work through their problems and save the marriage. People become swept up in the divorce process and are rarely allowed the opportunity to slow down and consider reconciliation.

Even when couples are embroiled in the divorce process, reconciliation is still possible. In a recent study, William J. Doherty and colleagues surveyed almost 2,500 people who had begun divorce court proceedings. Their researchers found that 1 in 3 men and 1 in 5 women believed their marriage could be saved despite having filed for divorce. Both spouses believed they could work to save the marriage in about 1 in 9 couples. Similarly, about 1 in 3 men and 1 in 4 women expressed an interested in reconciliation services. About 1 in 10 couples had both partners report they would seriously consider trying reconciliation services. These findings are consistent with prior research which showed approximately 10-15% of couples who separate later reconcile.

The participants’ backgrounds were also analyzed to determine which characteristics make a couple more likely to consider reconciliation. Even after divorce proceedings have begun, men are twice as likely to believe the marriage can be saved if the couple had previously attended marital counseling, and 4 times as likely to believe in saving the marriage if their spouse initiated divorce proceedings. Women are more likely to believe the marriage can be saved, even after the divorce process has begun, if it is the first marriage as opposed to the second. For both genders, a person is more likely to consider reconciliation services if the other spouse initiated the divorce: men are over 8 times more likely, and women are over 5 times more likely.

While this study cannot be readily generalized to divorcing couples across the US because the participants were limited to parents of minor children in one geographical region, the results warrant consideration. Many couples divorce when the marriage can be saved. This study shows it is reasonable to assume 10% of couples currently involved in divorce proceedings are candidates for reconciliation. Similarly, the study may appear limited because it questioned only the beliefs of the participants, not their actions. Simply because a person would consider reconciliation services does not mean that person will seek out assistance or successfully reconcile. However, believing a marriage can be saved is the first step towards making reconciliation a reality.

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Addressing Debts in Postnuptial Agreements

Spouses can use postnuptial agreements to manage debt and avoid joint liability. Through the postnuptial agreement, spouses define which debts and assets are separate and which are marital. This establishes who is responsible for specific debts.  However, it may not control what assets creditors are readily able to collect against if there are joint debts (see below). If you enter a postnuptial agreement for debt liability purposes, the agreement must be written in light of debt collection law, and the terms of the agreement must reflect the way you and your spouse actually handle finances.

Both spouses are responsible for marital debt. Separate debt is typically only the responsibility of the spouse who incurred the debt. Generally, the separate property of one spouse will not be used to satisfy the separate debt of the other spouse. However, this requires more than simply saying that finances are separate in a postnuptial agreement. You and your spouse must actually treat your finances as separate in order to be protected from liability. If not done correctly, there could be unanticipated difficulties, especially if debt problems escalate.

Postnuptial agreements are contracts between spouses. As a general concept of contract law, a contract cannot bind those that are not parties to the agreement. This means that if both spouses were jointly liable on a debt, there needs to be another agreement with the creditor to officially change liability to only one spouse. Even when debt is created after a postnuptial agreement, your behavior could eliminate debt protection. If you and your spouse do not treat your finances as separate, then outsiders will not be required to either. In this case, a creditor could contest the separate status defined by the postnuptial agreement because your actions imply that finances are not separate.

Problems become even more abundant if one spouse needs to file for bankruptcy. The bankruptcy court will look beyond the postnuptial agreement and evaluate all circumstances surrounding debt and assets. Again, if you and your spouse are not acting like your finances are separate, then the court does not have to treat your assets as if they are separate. Separate property of both spouses will be investigated, and the separate status can be disputed by creditors. The bankruptcy court, through the bankruptcy trustee, has the power to track where debt and assets originated. The bankruptcy trustee can inquire as to whether, in recent years, funds were comingled, if a spouse contributed to the purchase of the other’s assets, and if a spouse’s assets were used to repay any debts of the other spouse.

Bankruptcy courts have held that certain postnuptial agreement had the effect of concealing assets and preventing payment of creditors. In these situations, it was when the parties entered the postnuptial agreement in close proximity to when the bankruptcy was filed. The courts were then able to avoid the asset transfers between the spouses because the transfers had the effect of defrauding creditors. Even in situations when the transfer is not fraudulent, the bankruptcy trustee can avoid certain property transfers.

When entering a postnuptial agreement in response to debt, spouses need to be careful of both state and federal fraudulent concealment (i.e., fraudulent conveyance) statutes. To be enforced, a postnuptial agreement cannot be interpreted as a means of defrauding creditors. Since proving actual fraud is extremely difficult, courts rely on circumstantial evidence. Courts have used a variety of situations that may occur in postnuptial agreement property transfers to prove fraudulent concealment. These include gifts of substantial value to family members, continued possession of property after the transfer of title, and transfer of property for substantially less than market value.

One of the best ways to defend against a claim of fraudulent concealment is through the passage of time. Courts are much less skeptical of a postnuptial agreement being used to improperly shield assets when the agreement was not entered contemporaneously with debt collection actions. If a postnuptial agreement is to be useful in protecting against debt liability of your spouse, it is best to enter the agreement as soon as possible. If you wait until things get really bad, it may be too late to protect yourself.

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Why Hiring Two Lawyers Produces Better Postnuptial Agreements

Yes, spouses really should hire two lawyers when they enter a postnuptial agreement. This is true even when both spouses want to enter the agreement and when they agree on all terms. For purposes of the postnuptial agreement, the spouses are separate parties with separate rights and obligations. It may not be necessary to have two lawyers for the entire process. A couple may successfully negotiate the postnuptial agreement through marital mediation. However, at minimum, each spouse should have a separate lawyer review the document before signing it.

When determining the validity of a postnuptial agreement, courts consider whether lawyers were involved. Courts cannot force anyone to hire a lawyer.  However, in order for a postnuptial agreement to be upheld, courts do require that both spouses are given the opportunity to hire independent counsel. (In some states, and under some circumstances, it may be a requirement.) There is a concern that one spouse could take advantage of another spouse in a postnuptial agreement. As a result, courts are skeptical of agreements that were not reviewed by two lawyers, especially if the agreement appears unfair or unreasonable to a spouse that did not have separate counsel.

When people get married, the law automatically grants certain rights and attaches certain obligations. A postnuptial agreement is a private contract that changes those rights and obligations. Sometimes it is by waiver, meaning a spouse completely give up one or more rights. Other times a spouse may agree to a limitation of a particular right. A spouse may also agree to assume more obligations than the law requires.

In order to modify rights and obligations by entering a postnuptial agreement, spouses must first know what rights and obligations the law mandates. Typically, this is accomplished by meeting with a lawyer who can provide that information.  Also, postnuptial agreements can be complex. It is important that both spouses understand everything in the agreement. This is ensured when spouses have lawyers who explain both the law and the agreement itself. Courts will only uphold postnuptial agreements when both spouses know what their rights are and what effect signing the agreement has on those rights.

Another reason to use “reviewing attorneys” is that they can actually improve on the final product by asking questions, finding issues in the agreement which have not been addressed or that need to be “tweaked”.

Each party to a postnuptial agreement will need to consult with a separate attorney, as one attorney cannot represent two clients in a postnuptial agreement.  (The same holds true for a prenuptial agreement, and a divorce agreement.)  This is because there are two sets of rights involved in a postnuptial agreement.  When each spouse has independent counsel, the agreement is more likely to be upheld by a court. Separate lawyers can more effectively protect each spouse’s rights. It might be more money, but that’s better than the agreement being declared worthless if the court finds that a spouse’s rights were not adequately safeguarded.

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Demystifying Divorce Statistics

Statistics say that half of all marriages will fail. Is it really a 50-50 chance that if you choose to marry, you will also choose to divorce? Possibly not. Your personal risk of divorce might be lower than you realize. It is important to look beyond the numbers and at the data, factors, and calculations statisticians used to determine this high risk of divorce in America.

The widely publicized 50% U.S. divorce rate and high international divorce rate are not a calculation of the number of people who married and subsequently divorced. The percentage arose from a mathematical formula, calculated in way that is similar to how life expectancy is predicted. This projection is based upon the number of marriages and divorces reported in a particular year. It is not based on the same people or the same marriages. It does not distinguish between first marriages and second marriages, the duration of the marriage, age, or any other important characteristics.

According to the National Marriage Project of the University of Virginia, there are several flaws in the 50% divorce statistic. First, this percentage includes an estimation of the number of couples who will separate. As a result, it may ignore the possibility of reconciliation. Second, researchers are not consistently using the same method of calculation over time. The National Marriage Project also notes that this type of formula is most helpful in analyzing past rates of divorce. Its usefulness in predicting future divorce is limited because the calculation must assume that divorce and death rates will remain exactly the same for the entire duration of every marriage entered during the calculated year.

In fact, there are some researchers who say that the 50% rate of divorce is just plain wrong. They suggest that divorce has never as prevalent as to reach 1 in every 2 marriages. Two primary problems have been cited as the cause of misinformation: first, inconsistencies in data collection; and second, the type of data needed to accurately predict divorce is unavailable.

Other researchers claim a 50% divorce rate is limited to a very specific subset of the population. The likelihood of divorce is based on many complex factors. Certain risk factors that increase the chance of divorce have been identified, and the non-existence of these risk factors has been found to significantly decrease the chance of divorce. As more accurate data emerges, researchers are starting to see that there are really different divorce probabilities for different subsets of the population. To understand divorce rates, it is necessary to look at the personal, social, and cultural characteristics of spouses. Click here for a graphical view of divorce based on specific factors.

 

In “State of Our Unions: Marriage in America, 2010” published by the National Marriage Project, the following factors were identified as lowering the chance of divorce.

Factors

Percent Decrease in Risk of Divorce

Making over $50,000 annually (vs. under $25,000)

-30%

 

 

Having graduated college (vs. not completed high school)

-25%

 

 

Having a baby seven months or more after marriage (vs. before marriage)

-24%

 

 

Marrying over 25 years of age (vs. under 18)

-24%

 

 

Coming from an intact family of origin (vs. divorced parents)

-14%

 

 

Religious affiliation (vs. none)

-14%

The belief that the 50% divorce rate is an accurate prediction of whether a specific couple will divorce may have a detrimental effect on marriage. Joshua Goldstein, professor of sociology and public affairs at Princeton’s Office of Population Research, believes “expectations of high divorce are in some ways self-fulfilling.” If that is true, then hopefully, publication of the realities and shortcomings of divorce statistics can help create a self-fulfilling prophecy towards lifelong marriages.

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The Reality of Marital Agreements

Although more couples are entering marital agreements in today’s society, there are still a lot of myths surrounding prenuptial and postnuptial agreements. The misconceptions involve all areas, such as the purpose of a marital agreement, who should sign one, and why they are needed. If you are trying to determine if a prenuptial or postnuptial agreement is right for you, here are some of the facts you need to make an informed decision.

Marital agreements serve a variety of purposes. Most people think marital agreements are only helpful if a couple divorces, but divorce is only one situation when a marital agreement is beneficial. Marital agreements are helpful in any situation where it would be important to identify which spouse has rights to assets or is liable for certain debts. For example, marital agreements are effective tools in estate planning. If a person wishes to leave property to someone other than a spouse, such as a child of a previous relationship, spousal rights may have to be waived by agreement first.

Marital agreements are not just for the wealthy. Marriage automatically grants certain financial rights and obligations, regardless of a couple’s wealth. Assets and in some cases,  debts may become shared in the eyes of the law. Depending upon what happens during the course of your marriage, separate property could be considered to be marital property. Even if you and your partner have little assets or debt now, it does mean that will not change in the future. For example, one may undertake an unsuccessful business venture, or inherit precious family heirlooms.

Marital agreements benefit both partners. Marital agreements do not require one spouse to give up all financial rights. In fact, the court will not uphold a marital agreement unless it is fair and reasonable. A well executed marital agreement will address the needs and concerns of both partners. They are not a one-size-fits-all document; they are tailored to the specific circumstances of your relationship. A marital agreement can be as long and detailed as you need, or it can resolve only a few topics.

Marital agreements are relatively inexpensive. The monetary cost of a marital agreement should be weighed against the risks of not entering an agreement. The alternative to determining financial rights through a marital agreement is to have a court establish financial rights after a problem arises. All litigation, whether divorce, property distribution, or estate contest, is expensive and unpredictable. The upfront cost of a marital agreement is dramatically less expensive than the alternative.

Marital agreements can strengthen your relationship. The cornerstone of a successful relationship is communication, loyalty, respect and trust. However, financial decisions are a major source of stress for most couples. Marital agreements provide the opportunity to discuss important financial matters with your partner and allow you to create a financial plan for the future together. An honest conversation about marital agreements demonstrates that you and your partner trust each other enough to be open about your concerns and wishes for the future.

There are also many good reasons not to enter into postnuptial agreements.  In certain circumstances they can be a very bad idea.  A good way for you and your spouse to evaluate whether entering into a postnuptial agreement might be right for you is to discuss the matter with a marital mediator.

 

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In re Marriage of Burkle: California’s Presumption of Undue Influence

California provides for postnuptial agreements by a statute, section 721 of the California Family Code. The statute explains that spouses have a special relationship with each other that “imposes a duty of the highest good faith and fair dealing.” It requires that “neither [spouse] shall take any unfair advantage of the other” when they enter contracts, such as postnuptial agreements.

The Burkle Court explained the situations in which unfair advantage will invalidate a postnuptial agreement. Unfair advantage does not occur simply because a spouse gains a benefit through the postnuptial agreement. The point of postnuptial agreements is to gain a benefit of some kind; for example, financial security. Spouses will almost always benefit from entering an agreement, and spouses can fairly receive different benefits from the postnuptial agreement.

When both spouses receive a benefit from entering a postnuptial agreement, the transaction will be considered a mutual exchange. Under general contract principles, mutual exchange occurs when both parties promise to do something they are not legally obligated to do in return for the other party’s promise. The court will likely consider a postnuptial agreement to be fair when both spouses give up a property right in order to gain another property right. This can occur when spouses divide community property into separate property through the postnuptial agreement. In that scenario, both spouses receive the benefit of increased separate property. These mutual benefits are not unfair advantages.

To be an “unfair advantage,” as prohibited by California law, the benefit one spouse receives must occur to the detriment of the other spouse. For example, when a postnuptial agreement converts community property to the separate property of only one spouse, that spouse has received the benefit of increased separate property. If the other spouse does not receive something in exchange for giving up the right to the community property, then the transaction is to the determent of that spouse and may constitute an “unfair advantage”. When it appears that one spouse has received an unfair advantage, the court will automatically presume that the contract was obtained by undue influence.

Undue influence has a specific legal definition. It is the improper use of trust to pressure or manipulate a person to enter a contract. Requesting or suggesting that you and your spouse enter a postnuptial agreement is not undue influence. Undue influence is abusing the trust your spouse has in you so that you can get a better deal in the postnuptial agreement.

The spouse who receives the unfair advantage has the responsibility to prove there was no undue influence. If there is substantial evidence to rebut a presumption of undue influence, then the postnuptial agreement will be upheld. To successfully rebut the presumption of undue influence, you must show that your spouse voluntarily entered the postnuptial agreement with knowledge of all the facts and an understanding of the effect of the postnuptial agreement. The voluntary component can be satisfied by providing evidence there was no fraud or duress. Knowledge of the facts is shown by completing a full and fair financial disclosure prior to entering the postnuptial agreement. Understanding the effect of the postnuptial agreement is most easily proven if your spouse has independent legal counsel.

If the postnuptial agreement is fair, then the presumption of undue influence will not apply. To help ensure that the agreement will be considered fair by a reviewing court, both spouses should provide a full financial disclosure and have the opportunity to consult with separate lawyers. However, the best way to guard against invalidation of your postnuptial agreement is to provide benefits for both spouses.

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Does Facebook Cause Divorce?

For the past year, the news reported that Facebook is dangerous for marriages. The statistic that 1-in-5 divorces are caused by Facebook circulated around the internet. However, The Wall Street Journal now reports the information is exaggerated, and the “1-in-5” statistic is not the result of scientific study.  A UK company that assists people in filing for divorce found that approximately 20% of their recent clients cited Facebook in divorce petitions. No credible study has indicated that social media, like Facebook, causes divorce.

According to the Wall Street Journal:

“There isn’t much reliable research about what does cause divorce. Academic researchers don’t even agree on how to approach the question. Some have searched for predictive demographic factors, such as age and income. Others have studied married couples’ relationships to see which characteristics presage a split. Determining whether a couple is likely to break up, though, is different than identifying the actual cause.”

Facebook might not be the ultimate cause of divorce, but it may still be a factor. Social media websites have been cited in divorce petitions. Here are a few tips on how to prevent social media, like Facebook, from hurting your marriage.

  • Don’t “friend” old flames. Reconnecting with people you used to have a relationship with may lead to infidelity or jealousy.
  • Don’t air dirty laundry. While you may want to vent about difficulties in your relationship, your partner may view posting negative information as a betrayal.
  • Don’t spend more time online than offline. Social media provides a great opportunity to communicate with others, but make sure that communicating with your spouse remains the priority.
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Preparing for Parenthood

Becoming parents is one of the most emotional experiences a couple can share. Parents routinely express that it is one of the happiest moments in their lives. During pregnancy, a lot of time is spent taking care of things for the baby– attending pre-natal appointments and child-birth classes, shopping, decorating the nursery, etc. – but are you taking care of your marriage?

According to an article published in the Wall Street Journal:

“Numerous studies have shown that a couples’ satisfaction with their marriage takes a nose dive after the first child is born. Sleepless nights and fights over whose turn it is to change diapers can leach the fun out of a relationship…About two-thirds of couples see the quality of their relationship drop within three years of the birth of a child…Conflict increases and, with little time for adult conversation and sex, emotional distance can develop…A key source of conflict among new parents is dividing up—and keeping score of—who does what for the baby and the household.”

Thankfully, studies also show that couples who engage in pre-baby relationship planning can avoid the decrease in marital satisfaction. The practical approach to problem solving found in marital mediation is extremely effective in preparing for parenthood. Couples can explore their beliefs on parenting and address their expectations in a relaxed environment. Marital mediation is an opportunity for expecting parents to address financial issues of starting a family, resolve certain childrearing issues,  and even create a plan for dividing responsibilities. The experience can help strengthen marriages and ease the transition from couple to family.

When a new child is being added to a stepfamily, pre-baby relationship planning is even more important. Blended families often present a number of unique issues. For example, spouses may disagree on child rearing issues which results in children being treated differently. A couple must work together to establish clear rules, appropriate expectations, and acceptable standards for behavior for all children of the household. In marital mediation, couples can develop a unified parenting approach and learn necessary communication and conflict resolution skills.

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Marital Mediation for Newlyweds: Creating a Solid Foundation

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Postnuptial Agreements bad for public policy? The Connecticut Supreme Court said “No” in Bedrick v. Bedrick

Throughout the country, states are grappling with the question of whether postnuptial agreements are valid and enforceable contracts. Until recently, state courts were not willing to uphold postnuptial agreements, believing they offended public policy. The agreements were originally thought to be contrary to the states’ interest in promoting and protecting marriage. That rationale has proven to be outdated by the unfortunate fact that today’s marriages are just as likely to fall apart as they are to succeed, and postnuptial agreements can help married couples stay married.

Connecticut is the most recent state to declare postnuptial agreements do not violate public policy. In the case Bedrick v. Bedrick, the state’s highest court referred to the increased rate of divorce, serial marriage, and the fear many people have of financial instability that stems from divorce. When postnuptial agreements alleviate financial worries or eliminate an area of contention, spouses are able to focus on continuing their marriage. For these reasons, the Connecticut court found “no logical or compelling reason why public policy should not allow two mature adults to handle their own financial affairs.”

Connecticut, like other states, is reluctant to judge postnuptial agreements by the same standards as other contracts. Inherent in postnuptial agreements is the risk that one spouse will take advantage of the other spouse. Generally, people are less cautious when they enter a contract with their spouse than when entering a contract with a stranger. A lower level of caution may create a greater level of risk. As a result, postnuptial agreements in Connecticut are subject to a special standard of scrutiny. The postnuptial agreement must be fair and reasonable when it is created and not unconscionable at the time of divorce.

The fair and reasonable standard requires that postnuptial agreements are entered voluntarily and that neither spouse is coerced into signing the agreement. Both spouses must provide a full and fair financial disclosure of all assets and debts. Additionally, both spouses must have access to independent counsel and ample time to review the agreement before signing.

“Unconscionability” is a legal term that basically means extremely unfair. The unconscionability standard is satisfied if no injustice occurs by upholding the postnuptial agreement. On a case-by-case basis, the court considers the circumstances that took place since the postnuptial agreement was created. It evaluates the impact of unforeseen changes in marital relations, such as unemployment, the birth of a child, or moving to another state.

The postnuptial agreement at issue in Bedrick was found to be unconscionable at the time of divorce because of a major financial change. Approximately twenty years passed between the time the postnuptial agreement was last modified and when the parties filed for divorce. The most recent modification was entered before the birth of their child and before the husband’s car wash business became lucrative. The postnuptial agreement entitled the wife to only a $75,000 cash settlement and no alimony payments. However, when the parties filed for divorce, their combined assets totaled almost $1 million.

In Bedrick, the change in financial circumstances was highlighted by the parties combined efforts in increasing their net worth. During the twenty years, both spouses worked at the husband’s car wash business, and for a period of several years the wife managed almost all business operations. When the business experienced financial trouble, the wife took additional outside employment to provide stable income for the family. As a result, the Court found that an injustice would occur if the postnuptial agreement was upheld and the wife received only $75,000.

Absent a finding of unfairness or unconscionability, public policy supports enforcing postnuptial agreements in Connecticut. There is a great benefit in allowing spouses to privately resolve family financial issues. When possible, the courts will uphold postnuptial agreements to minimize the emotional turmoil of a long and costly divorce case.

Read more about postnuptial agreements.

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Marital Agreements as an Estate Planning Tool

A number of unique challenges arise when balancing the inheritances of a spouse, children from different relationships, and stepchildren. Unfortunately, the difficulties can continue after death, as lawsuits involving challenges to estate documents are more common in blended families than traditional families. A marital agreement (also known as a postnuptial agreement) can help prevent bad feelings after the death of a remarried parent.

Marital agreements (i.e., postnuptial agreements) are an essential tool for estate planning, especially for blended families. They are useful to clarify intent as to sharing assets upon the death of the spouses among the respective children of each of them. Marital agreements can put this intent into effect, if the spouses had not entered into a prenuptial agreement prior to the marriage addressing this issue. In many cases, developing a postnuptial agreement can eliminate conflict between the spouses, and among the children.

When people remarry, they tend to say things like, “I’ll keep my assets for my children, and you can keep your assets for your children.” However, an informal arrangement like that is difficult to administer and is legally unenforceable. Separate property can easily become comingled during the course of a marriage. “Mine” and “yours” becomes more difficult to define the longer a couple stays together. More significantly, the law will not uphold the verbal agreement without contractual documents reflecting the intent to keep property separate.

Many states have enacted “Spousal Elective Share” laws. These laws were designed to prevent a spouse from being completely disinherited, and also guard against substantial disinheritance. The surviving spouse has the option to receive whatever assets were designated in the estate plan or a predetermined percentage of the estate that is established by state law. The percentage a surviving spouse may elect to inherit ranges from a life interest in 1/3 to 1/2 of the estate. That means the property would be put in trust, and the surviving spouse would get the income from the investments for his or her life. In some states, the spousal elective share applies to both probate and non-probate assets, such as trusts.

Under the Uniform Probate Code, the asset distributions to an electing surviving spouse are much more complex, and may take into account other property, the length of the marriage, the existence of step children, and other factors. Some laws provide additional protections, like the ability to remain in the marital home for a certain amount of time regardless of who the house is devised to under the estate plan. The surviving spouse does not automatically inherit the larger amount, and must request application of the protective laws from the court that is overseeing the probate process.

Postnuptial agreements allow the parties to define exactly what they want, and can specifically state that the spousal elective share will not apply. There are many reasons why a nontraditional spousal inheritance might make sense: your spouse may have sufficient assets to provide for him/herself; property transfers made during your life might provide for your spouse; your spouse could be the named beneficiary on non-probate assets, such as life insurance; or the disability of your child or other loved one may compel you to leave a substantial inheritance to provide for that person. Because postnuptial agreements are mutually negotiated, the decision as to what happens to assets after death is a mutual one.

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Fair and Reasonable in Massachusetts Postnuptial Agreements

Ansin in courtUntil recently, there were two types of enforceable contracts used to define property rights upon divorce: prenuptial agreements and settlement agreements. Prenuptial agreements are executed before the parties marry, while settlement agreements are created when the parties have decided to divorce.

In 2010, the Massachusetts Supreme Judicial Court (SJC) authorized a third option, postnuptial agreements. Postnuptial agreements are created after the marriage and before the spouses have expressed intent to divorce. Postnuptial agreements more closely resemble separation agreements than prenuptial agreements. If a person does not like the terms of a prenuptial agreement, that person can walk away and avoid the rights and obligations of marriage. Once married, rights and obligations are solidified.

In Ansin v. Craven-Ansin, the SJC held that postnuptial agreements are not automatically unenforceable as a matter of public policy. However, not all postnuptial agreements will be enforced by the court. The agreement must pass a five part test. The ultimate question appears to be whether the agreement is fair and reasonable, and the other four factors help provide the evidence.

1. Did the parties have the opportunity to hire separate legal counsel?

If one of the spouses did not have the opportunity to hire an independent lawyer to review and explain the agreement, it is less likely that the agreement is fair and reasonable.

2. Is there any evidence of fraud or coercion?

It is difficult to find that an agreement is fair and reasonable when there is evidence that the agreement was made or signed because of fraud or coercion.

3. Was there a full financial disclosure?

Full financial disclosure allows the parties to make an informed decision about entering the agreement. It is less likely the agreement is fair and reasonable without it.

4. Did the parties knowingly and explicitly waive judicial division of marital property?

If a spouse did not understand what was being signed or the effect of the agreement, it is less likely that the agreement will be considered fair and reasonable.

5. Can the agreement be considered fair and reasonable at the time it was entered and at the time of divorce?

What is fair and reasonable is not easily defined. It is not a requirement that both spouses end up with an equal amount of marital property or money. It is an assessment of all the circumstances surrounding the agreement. The judge weighs various factors against one another and assesses which way the scale tips: towards a fair and reasonable agreement that is enforceable, or towards an unfair and unreasonable agreement that is unenforceable.

To analyze whether the agreement was fair and reasonable at the time it was created, the judge looks at the big picture. For example, consider the motives of the spouses. Did they enter into the agreement to financially protect children from a prior marriage? Was a spouse trying to put him/herself into a better position before filing for divorce? Also, consider the impact of the agreement. Is there a great disparity between property division under the agreement and what would happen under judicial property division without an agreement? What potential impact does the agreement have on any children? The entire context of the agreement will be highly scrutinized by the judge.

The judge then takes a second look and analyzes whether the postnuptial agreement is still fair and reasonable at the time of divorce. It is an assessment of what circumstances changed since the postnuptial agreement was written. For example, when considering the current age, health, occupation, and employability of the spouses, is it possible that one would be unable to properly support him/herself if the postnuptial agreement is enforced? If yes, it could mean that the agreement is not fair and reasonable at the time of divorce.

Postnuptial agreements can be an effective tool for spouses who want to determine for themselves what will happen to their property if they divorce. An agreement outside the excitement of an upcoming marriage or the turmoil of impending divorce could create the best result. Just remember, if circumstances change between when the agreement was written and when the divorce occurs, it could mean the agreement is no longer fair and reasonable.

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Marriage Education

We read a great interview on NPR about ‘marriage education’.  Here’s an excerpt:

Because we have a horrible I come out of the marriage therapy world and we have a terrible track record. You know, most couples who go to marriage therapists end up divorcing. It’s because it’s a medical model, you know, tell me about your childhood, let me try to diagnose you. And then I’m the doctor and I’m going to fix you your mental disorder, your character disorder. You know, the wife brings the husband in, she’s sure his mother has somehow screwed him up and the therapist should fix him. It’s a different approach.

What we’re seeing now is we’ve got all this research in our research labs and we want to get it to the public. Shows like this help a lot. But we want to put it in classes. Men love the classes. It’s like getting a playbook. Men love playbooks. You know, this is how you do this and this is what’s afoul. And this is, you know, the behaviors that predict success. And this is what to expect along the way.

And we are really excited and optimistic about the results we can get in these classes.

Full story on NPR.

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Marital Mediation Explained

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Marital Mediation and Communication

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Divorce Rates according to the Wall Street Journal and CDC

It seems like Divorce Rates and Postnuptial Agreements are the most popular topics we’ve published. So here’s a rundown on recent divorce statistics.

Divorce Rate from the US Census Bureau:

Divorce Rate from Center for Disease Control (CDC):

There’s also this Wall Street Journal data which we put into the following chart:

us divorce rate by state

Also, follow this link to see how the U.S. divorce rate compares to other countries.

* The WSJ data includes does not include Indiana and California because they don’t publish current numbers. Sources: Wall Street Journal analysis, National Vital Statistics Report, U.S. Census Bureau. Read the full WSJ article: WSJ.

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Batting Zero: Did the McCourt Postnup Destroy Their Marriage?

Below is a guest post by Laurie Israel on the McCourt postnuptial agreement. A shorter version of this article was published on HuffingtonPost.

Last weekend, I waded through the 100-page California Los Angeles Superior Court opinion on the Frank and Jamie McCourt case, McCourt v. McCourt, Los Angeles County Superior Court # BD514309 (12/7/10). This is the case where Frank McCourt asserted that he owns the Los Angeles Dodgers (now reportedly worth over $800 million) and his wife, Jamie, does not. The parties had signed a postnuptial agreement in 2004, and separated after 30 years of marriage in 2009. It is one of the most expensive divorce trials in California history with estimated legal costs at $20 million. The McCourts’ assets are reported to be over $1 billion. The Court found the prenup to be invalid. Appeals are expected.

The parties entered into the postnup at the time of Frank’s purchase of the Dodgers in early 2004. After the purchase, the couple planned a move to California from Massachusetts with their four grown sons. They planned to operate the Dodgers together with Jamie as the CEO.

In Massachusetts, the McCourts had kept their property separately titled as an asset protection strategy. As an “equitable distribution” jurisdiction, the titling of the property is irrelevant to marital rights, which are presumed to be joint in all property. California is a “community property” state where separate titling has legal ramifications in divorce.

In signing the disputed postnup Jamie’s attorney maintained that she was looking for asset protection and not to change her equal rights to the Dodgers or any of the other property titled in Frank’s separate name upon divorce. Frank asserted that Jamie was risk-adverse and had traded security in the couple’s residential properties for rights in all the business properties. Big stakes were involved. The marital estate is worth over $1 billion dollars. If the postnup had been held valid, Jamie’s share of the assets accumulated during the 30-year marriage would have been 15% and Frank’s 85%. Apparently both Jamie and Frank were actively involved in the business interests, including the Dodgers.

The McCourt case involved many legal issues in addressing whether the agreement the McCourt signed was a valid, enforceable postnup. There were detailed discussions and arguments about California community property law and whether the postnup was valid under it. There are also questions about basic contract law issues. Was there a meeting of the minds between Jamie and Frank? Did Frank satisfy his fiduciary duty to Jamie, or did he take unfair advantage of her? Did Jamie receive fair consideration in the bargain they made? Was the discrepancy in the language between the two versions (one granting him the Dodgers as his separate property, and one stating that it wasn’t) a “scriveners error” that could be corrected in Frank’s favor?

Some of the case facts as reported in the Court decision read like a comedy of errors, except it is so sad. The couple worked with their lawyer on the agreement starting in early 2004. During a very short period of time, they received many drafts and apparently barely looked at them, relying mainly on what the lawyer told them the postnup contained. The lawyer never asked the McCourts whether they had wished to alter their rights of equitable distribution under Massachusetts law in signing the prenup.

The number of drafts provided in a short period of time was mind-numbing. When the McCourts finally signed it, they signed two conflicting versions. Neither of them seemed to understand what the postnup said. For a while they forgot about it, moved to California, and worked on running the Los Angeles Dodgers franchise.

In 2007, Jamie and Frank jointly consulted with a California estate-planning lawyer to discuss putting their property into a living trust to avoid probate. The attorney reviewed the postnup for compliance with California law. This is when Jamie understood that the agreement went way beyond her goal of asset protection, and that Frank might have sole rights to the Dodgers.

Jamie instructed the estate planning attorney to “fix it”, and the California attorney prepared a draft of a corrective living trust agreement in 2008. Frank reviewed this agreement, made comments on it, and, according to the Court’s findings, requested that all of both of the parties’ separate property be changed to community property.

After the changes requested by Frank were put into the agreement in 2009, Frank still refused to sign the corrective agreement. The estate-planning attorney told Jamie she had two choices to get the matter moving: “[a] civil conversation with Frank or a nuclear bomb.” As the attorney later stated, she meant that if the McCourts didn’t start talking with each other, their marriage would explode. And that is what happened.

Frank, asserting that that Jamie’s presence as an executive at the Dodgers was disruptive, fired her as the Dodgers’ CEO. Five days later, Jamie filed for divorce and the nuclear option – divorce litigation – followed.

The contention caused by the postnup once it became a known problem may have been a contributing factor to the McCourt’s marital breakdown. In fact, the faulty prenup could have been the major cause of the breakdown. A good postnup is supposed to help a marriage. This one did not.

Here are some lessons for a successful postnuptial agreement gained from the McCourt case:

Have a family lawyer draft it. Divorce lawyers are intimately familiar with family disputes and marital dynamics. We know how important financial equity is to marriages whether they are ongoing, or whether they’re breaking down. We tend to look at postnups and prenups differently than business lawyers and estate-planning lawyers. For us, it’s not about “limiting the downside of our client in a divorce” but it’s about supporting and sustaining the marriage. Family lawyers tend not to view a postnup as simply “a business deal”, to be negotiated harshly. Estate-planning lawyers do not generally know enough about divorce law to adequately and sensitively draft a postnup.

Make sure you and your lawyer communicate with each other. The McCourts’ attorney never expressly asked the parties if they had intended their marital rights to all property (presumably equal in Massachusetts) to change when they signed the postnup. This was a crucial question and a crucial issue. Take the time to discuss all your concerns and aims with your attorney and get answers that are direct, on point, and thoughtful. Miscommunications and misunderstandings between attorneys and clients lead to bad results.

Make sure you read it carefully. There were multiple drafts provided to the McCourts in a relatively short period of time. This is enough to numb the mind of any client, as well as the lawyer. Mistakes get made. Don’t enter into a postnuptial agreement (or any agreement) in a rush. These agreements contain important terms that affect your future. Take your time. Understand it. Do not sign under duress. Don’t depend on a verbal description of what the agreement says. Read it yourself.

Make sure you know what you would get if you didn’t sign it. This is called a knowing and meaningful waiver of rights. It is discussed, as well as other factors for a valid postnup, in the recent Massachusetts postnup case, Ansin v. Craven-Ansin, 457 Mass. 283 (2010). You need to have time to review the agreement and advice as to what the agreement means. Even if you are a lawyer (as is Jamie McCourt), sometimes legal issues are so complex that an expert is needed to explain it to you. It helps to have independent counsel just looking out for your rights.

Act as a fiduciary with respect to your spouse. If you are signing a postnup (and not a divorce agreement), you are still married, and are trying to stay married. You owe your spouse the highest duty of fidelity and truthfulness as you enter into an agreement with your spouse. This means that you should be protecting your spouse’s interests as well as yours. Otherwise, you might as well just get a divorce.

Evaluate your aims and make sure the agreement is narrowly drafted to meet them. Often legal agreements have extra terms that do not closely connect to the matter at hand, but are just passed down from contract to contract. I’ve seen many of these, and other extraneous terms thrown into these agreements. They are slavishly and thoughtlessly copied from one on-the-shelf document to another by attorneys. If Jamie’s interest was asset protection, and not to change the terms of a possible divorce, it is possible that these needs might have been met in a carefully and narrowly drafted agreement and with other estate planning strategies. Especially in the context of prenuptial agreements and postnuptial agreements (when you’re presumably dealing with viable marriages), unnecessary provisions can cause great harm, which can hurt an ongoing marriage.

If you can’t resolve it, maybe it’s time to get a divorce without muddying the waters. If the McCourts had found in 2004 that they had conflicting aims during the negotiation, they either could have resolved them with or without the postnup (or by other, estate planning strategies). If not resolvable, they could have begun the divorce process without the ambiguous agreement. If that had happened in Massachusetts, all property, no matter in whose name it was titled, would have been deemed “marital” and subject to equitable distribution. That means, the judge could have made a clear-headed decision about who gets what. The parties knowing what the rules of equitable distribution are would likely have settled for a reasonable and equitable property split.

Make sure the postnup is fair. Did you ever hear the expression, “Pigs get fed, hogs get slaughtered”? We lawyers love to point this out to our clients. Often by wanting too much, they risk getting too little.

In the postnup context, it means that if your postnup is unfair to your spouse either when executed or at the time it comes into play, it is likely to be challenged in court. At the least, it will create bad blood between you and your spouse, which will spill over and affect to the children of the marriage. It will eat up your family.

A good guideline on fairness is to see if you’d be satisfied with what your spouse is receiving in the divorce. If you are, and you’re also satisfied with what you get under the agreement, the postnup is probably fair. When it’s not fair, or if it becomes inequitable over time, then it is corrosive to the marriage and leads to a nasty divorce.

I keep thinking that this is what happened to the McCourts. Instead of providing mutual financial protection, clarity, and fairness for each other, the McCourts’ postnup might have been the virus that destroyed their marriage.

Read more information about postnuptial agreements.

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