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Until 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.
There’s a new article on Huffington Post by Laurie Israel on Marital Mediation.
“As a divorce lawyer and divorce mediator, my divorce clients describe problems that led to the failure of their marriages. These problems seem to be universal. There might be anger and frustration about sharing household duties and creating income for the family that finally caused a breakdown. Some marital failures were a result of concrete problems relating to livelihoods and financial security. Other couples report problems associated with lack of time, diverging interests, in-laws, difficulty with children. Whatever the problems are, at the end of a marriage the spouses no longer want to live with each other.”
Read full article.
If you and your spouse are putting in place a mutually-agreed upon postnuptial agreement, the signature is pretty important. Below is a recent case document published in New York.
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
1527
CA 10-00368
PRESENT: SMITH, J.P., PERADOTTO, CARNI, LINDLEY, AND SCONIERS, JJ.
BERNARD DIPIZIO, PLAINTIFF-RESPONDENT,
V MEMORANDUM AND ORDER
DOROTHY DIPIZIO, DEFENDANT-APPELLANT.
HOGAN WILLIG, AMHERST (GEFFREY GISMONDI OF COUNSEL), FOR
DEFENDANT-APPELLANT.
LIPSITZ GREEN SCIME CAMBRIA LLP, BUFFALO (JOHN A. COLLINS OF COUNSEL),
FOR PLAINTIFF-RESPONDENT.
Appeal from a judgment (denominated order and judgment) of the
Supreme Court, Erie County (Janice M. Rosa, J.), entered December 17,
2009. The judgment granted in part the amended complaint to enforce
the parties’ postnuptial agreement.
It is hereby ORDERED that the judgment so appealed from is
unanimously affirmed without costs.
Memorandum: As limited by her brief, defendant appeals from a
judgment granting in part the relief requested in the amended
complaint insofar as that judgment brings up for review a prior order
entered in December 2008. That order, inter alia, denied defendant’s
motion to dismiss the amended complaint seeking to enforce the terms
of the parties’ postnuptial agreement. The contention of defendant
that the postnuptial agreement is unenforceable because her signature
was not acknowledged as required by Domestic Relations Law § 236 (b)
(3) was raised for the first time in her reply papers and thus was not
properly before Supreme Court (see Schissler v Athens Assoc., 19 AD3d
979; Hoyte v Epstein, 12 AD3d 487, 488). Indeed, the court did not
address that contention in its December 2008 order. To the extent
that defendant further contends that the court erred in denying the
motion because the postnuptial agreement was obtained as a result of
plaintiff’s misrepresentations concerning its contents and because
plaintiff failed to comply with the terms of that agreement, we
conclude that defendant failed to submit any evidence to support that
contention. Rather, defendant merely relied on conclusory allegations
in support of the motion, which plaintiff disputed (see generally
Dominski v Frank Williams & Son, LLC, 46 AD3d 1443).
The contention of defendant that her motion should have been
granted because the Judicial Hearing Officer (JHO) erred in
incorporating the terms of the postnuptial agreement into a September
2002 order discontinuing and dismissing defendant’s divorce action is
raised for the first time on appeal and thus is not properly before us
(see Ciesinski v Town of Aurora, 202 AD2d 984, 985). In any event,
that contention is without merit. We conclude that the JHO did not
abuse his discretion in discontinuing the action upon the consent of
both parties or incorporating the terms of the postnuptial agreement
into the September 2002 order inasmuch as the incorporation of those
terms was a condition of discontinuance that the JHO “deem[ed] proper”
and, indeed, that the parties requested (CPLR 3217 [b]).
The original document is here (pdf).
Want to learn more about postnups? Read more information about postnuptial agreements here.
Lynn Brenner has been a personal finance columnist and business reporter for more than 20 years. She recently wrote an insightful column about prenuptial and postnuptial agreements for a marriage where one spouse has children from a previous relationship.
Question:
My partner and I are in our late 50s, and have been together for 4 years. We plan to be together for the rest of our lives, but we’re wondering what the ramifications of marriage would be on finances.
I’m especially concerned about my home, which is solely in my name and will be paid off in a few years. If we were married and my husband needed long-term nursing home care, would my home be an asset that might be lost? I seem to remember when my grandmother went into a nursing home in her final years, they required that her home be surrendered as payment. We have agreed that my home will eventually go to my children. I don’t want to risk losing it.
Are there any other financial pros or cons we should be aware of when considering whether or not to legally tie the knot?
Answer:
You don’t just need legal advice on how to protect your house in the event that either of you needs long-term care. You also need to put your agreement that your kids will ultimately inherit the house in writing — not because you distrust your partner, but because state law will supercede your agreement unless it’s in a legal contract.
Your marriage is a unique relationship that you create together. But it’s also a legal partnership with rights and obligations regulated by the government…
…A good prenuptial or postnuptial agreement protects your spouse as well as your kids. In your case, for example, your agreement could say that your children will inherit your house when you die, but that your husband will have the right to continue living there for his lifetime if he survives you. (If so, the agreement should also spell out who will be responsible for the cost of maintenance and capital improvements to the house while your surviving spouse lives there.)
Read the entire article.
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:
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.
The UK Law Commission is considering changes to regulations around postnuptial agreements. This may be a result of the result of several recent celebrity postnup disputes involving millions of dollars.
From Family Law Week:
The Law Commission has published its long-awaited consultation paper Marital Property Agreements.
The consultation paper asks, first, whether couples should be able to enter into a binding agreement not to seek ancillary relief in the event of divorce or dissolution and, secondly, whether such agreements should be able to encompass all of a couple’s property or to contain only terms relating to preacquired, gifted or inherited property. This latter approach, characterised as a “community of acquests” model, is not intended to replicate the law in any of the European community of property jurisdictions.
The Commission makes no assumption about the answers to those questions. But the consultation paper goes on to look at some of the detail of the law that would have to be framed if such reform were to take place. In doing so, the paper looks first at the formalities that might be required for an agreement to have that effect, and then asks whether there should be any circumstances in which the court might nevertheless have a role to play. For the purposes of this discussion the Commission has coined the term “qualifying nuptial agreement” to denote an agreement, post-reform, that is capable of excluding the court’s discretionary power and so bypassing the law of ancillary relief. Such an agreement would be able to be enforced as a contract.
More from the Independent Online.
The UK is looking at making US-style prenuptial agreements legally binding after high-profile divorce cases such as the split-up of former Beatle Paul McCartney and Heather Mills, and the separation of a former JPMorgan Chase investment banker from a German heiress.
Any change in the law would need the approval of parliament.
The Law Commission said it doubted a change to the law making prenups binding would have “dramatic effects” on the institution of 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.
Postnuptial agreements in Michigan may be valid, says Michigan attorney Cameron Goulding. In a recent post, he discusses how the court has viewed the issue:
It is my opinion that a properly drafted postnuptial agreement is valid in Michigan and will be upheld by the courts. In a 2008 Michigan Court of Appeals case, Wright v Wright, 279 Mich App 291 (2008), the author of the opinion, Judge O’Connell, stated that such agreements were against public policy. However, at the 9th Annual Family Law Institute Seminar on November 12, 2010, Judge O’Connell stated verbally and in his written materials that this was an “oops” and that he was wrong in stating this in such a manner.
In my opinion what this means is that the agreement in the Wright case was not valid because it encouraged the husband to divorce his wife, was written in contemplation of divorce and that the particular agreement in that case was against public policy, not all post nuptial agreements. I have in fact written “midnuptial” agreements which the parties agreed to follow when they divorced which avoided the requirement of litigation.
Read the whole article on Cameron’s website. Here is our previous coverage on postnups.
As expected, Frank McCourt has objected to the December 7th decision that the postnuptial agreement was invalid.
Frank McCourt, who is fighting his ex-wife over ownership of the Los Angeles Dodgers, objected to a judge’s tentative decision invalidating a postnuptial agreement that he says makes the team his sole property.
In his Dec. 7 decision, California Superior Court Judge Scott M. Gordon incorrectly suggested that an entire paragraph of the 2004 postnuptial would need to be severed in so far as it dealt with a conversion of marital property that didn’t meet requirements under California law, lawyers for McCourt said in yesterday’s filing.
Only part of that paragraph needs to be cut and the enforceability of the remainder of the agreement should be reconsidered based on only that change, according to McCourt’s filing.
From Bloomberg. Read more about postnuptial agreements.
With the McCourt postnuptial agreement case finally settling, there’s a new celebrity postnup to dominate the headlines. According to news reports, Courtney Cox and David Arquette are considering a postnuptial agreement as part of their separation. Most likely, they are considering a postnuptial agreement because it could help them alleviate financial conflicts which are impacting their relationship. Very few details have leaked to the press, but we have a run-down below.
Courtney Cox and David Arquette have been known as a happy couple who not only live together but often work together. It was a shock when they announced that they were separating. At this time the couple has agreed to a trial separation rather than an outright divorce. California divorce laws seem to create a certain scenario for rocky marriages that are close to passing that first decade of marriage. Based on California law if a marriage lasts over 10 years it is considered a long term or lengthy marriage. The divorce of a long term marriage often means that the spouse who earns more may be required to pay spousal support or alimony for an indefinite time. If a marriage ends in divorce before ten years alimony is usually required for about half of the years that the marriage lasted. Couples such as Cox and Arquette who are approaching the 10 year mark and are experiencing marital problems may feel more pressure to separate based on the economics of these laws. This often leads to the lesser earning partner wanting to stay together past that mark and the higher earning spouse to want to end it as quickly as possible.
Houston Divorce Blog
Cox, being the main breadwinner in the family, is trying to get Arquette to sign a postnuptial agreement now that they’ve split, according to the magazine. (A postnuptial agreement can be used to protect income that might be generated during a separation, but before the divorce is settled.)
The Today Show
Courteney Cox and David Arquette aren’t divorcing yet, but they’re spending a great deal of time discussing their financial future,
The Huffington Post
While the tabloids are rumbling over whether David Arquette and Courteney Cox are planning to sign a post-nup, you don’t have to be celebrity to make one. Both prenuptual and postnuptual agreements are set in place by a couple to make sure that their various financial issues are resolved in case they decide to split. But while a prenup is signed and sealed before the lovebirds walk down the aisle, a postnup is often executed when a troubled married couple is trying to make a go of their marriage, but is nervous it won’t work out.
New York Daily News
Courteney Cox recently publicly discussed her trial separation from husband David Arquette. According to People magazine, Cox spoke to Australia’s TV Week and emphasized the fact that the couple is separated, but they are not divorcing at this point in time. Cox told the TV station that she and her husband of eleven years have grown apart. The couple has a six-year-old daughter together. They reportedly brought her trick-or-treating together on Halloween.
Orange County Divorce Blog
It has been reported today that Courtney Cox and her husband David Arquette are to split after 11 years of marriage. The couple have released a joint statement that confirms a “trial separation”. Before proceeding to a final divorce and permanently dissolving the marriage, many couples may ‘separate’ for a period of time either to consider the future of the marriage or because they wish to base a divorce on the fact of the separation rather than some “fault” based ground. This may of course mean that the parties live apart which may create interim concerns for each party, especially regarding financial matters. It is possible for any agreement the couple reach during a separation to be enshrined in a Separation Agreement (also known as a Deed of Separation). A Separation Agreement can be a useful mechanism to state the parties’ intentions and to deal with practical issues following separation. If the parties do subsequently divorce is a useful record of what the parties’ intentions were at the time of separation. This could potentially protect your position if, for example, your assets / income increased dramatically in the future at the time of a divorce.
MLP Solicitors Blog
For background information on postnups, visit our postnuptial agreement page.
