What Exactly Is A Postnuptial Agreement?
A postnuptial agreement is a contract entered into by a couple after they have been married. The contract may address how they will divide their marital assets if the couple decides to divorce – or it may address the contract’s own terms. The contract can take any form the parties agree to, and there are few rules as to its form. For couples who recognize the benefits of an asset division agreement, with the flexibility that a postnuptial agreement provides, a postnuptial agreement is a good alternative to a prenuptial agreement.
There are many reasons why a couple would wish to enter into a postnuptial agreement . Some couples prefer to enter into a postnuptial agreement when a structural change, such as a business offering or a significant inheritance, occurs. A couple may choose to leave the most routine of circumstances open to marital negotiation (since their particular needs will not be likely to change), and just regulate the terms of a divorce.
Many times, the circumstances which prompt the entry of a postnuptial agreement relate to the addition of a child, a change in income, or an unexpected inheritance. In these cases, a couple often believes that it is a better idea, especially if a divorce occurs years down the road, to have an agreement that sets forth how the child or the increased income or inheritance will be affected by a marital termination.
Postnuptial Agreements Under Pennsylvania Law
In order for a postnuptial agreement to be enforceable by a Pennsylvania court it must satisfy certain requirements. In 2019, the Pennsylvania legislature passed and the Governor signed into law the Uniform Premarital Agreement Act which is now found in 23 Pa. C.S. ยง3101 et seq. The new law also applies to both postnuptial agreements as well as marital agreements. A postnuptial agreement can only be enforced by a Pennsylvania Court if it conforms with the legislative requirements under the Uniform Premarital Agreement Act.
In general, the following legal requirements must be satisfied in order for a postnuptial agreement to be enforceable in Pennsylvania:
While not a statutory requirement, postnuptial agreements must also be drafted by competent legal counsel as an agreement with a waiver of support, a waiver of alimony, a waiver of equitable distribution and other rights under the Divorce Code is very complex and require proficient drafting to avoid being declared invalid by the court.
In our experience, the most important requirements are that the agreement must be signed voluntarily by both parties and that both parties completely disclose (or have opportunity to disclose) their income, assets and liabilities.
Prenuptial Agreements v. Postnuptial Agreements
While postnuptial agreements are often confused with prenuptial agreements, they are in fact quite different. Pleasantly, many people spend years in happy marriage never having to contemplate a divorce or separation. However, circumstances change and with them, financial realities. Pennsylvania law does not prohibit spouses from entering into a postnuptial agreement that addresses matters that arise during their marriage. Most postnuptial agreements stem from circumstances arising during the marriage rather than prior to the marriage. So, for example, marital separation agreements are typically negotiated at or during a time when the parties are not completely committed to remaining married. On the other hand, a postnuptial agreement may well be entered into after years of a happy, even blissful marriage, but the arrival of circumstances such as significant salary increases for one party, children in college, retirement, unexpected expenses, illness, etc. necessitate a reassessment of the terms of the prior prenuptial agreement. Like a prenuptial agreement, a postnuptial agreement allows parties to determine in advance the division of property and the rights and obligations with respect to support and their minor children. In Pennsylvania, as a general rule, there is no difference between a postnuptial agreement and a prenuptial agreement, other than the timing of the agreement. While specific circumstances give rise to the need for a postnuptial agreement, examples include substantial changes in income or worth, disabilities, serious medical conditions, passing of family members, changing in inheritance or estate laws, the need to divide ongoing business interests, the need for additional protections afforded a spouse due to long-term care issues or elective life-threatening surgery, and pre-engagement situations (including negotiations about marital arrangements after the marriage is curtailed by illness or debt). Unlike a prenuptial agreement, a postnuptial agreement can be entered into during the marriage and will be enforced in the same manner as a prenuptial agreement. Of course, as with a prenuptial agreement, a postnuptial agreement may be set aside if it does not comply with the Statute of Frauds (not in writing), is not signed voluntarily, lacks financial disclosure, or is not fair and reasonable.
Common Terms Found in Pennsylvania Postnuptial Agreements
Common Provisions in Postnuptial Agreements in Pennsylvania
A Pennsylvania postnuptial agreement may contain provisions that address many issues. However, particularly in the area of support and property division, the terms of a postnuptial agreement will be subject to the standard applicable to pre-nuptial agreements under the Domestic Relations Code. A common provision in many postnuptial agreements is the distribution of property, both marital and separate. Property division is often a significant issue in many postnuptial agreements, because parties to postnuptial agreements do not necessarily need any reason to enter into the agreement. They are not seeking the protection of assets from possible bad acts by the other (like in a pre-nuptial agreement). Often a postnuptial agreement is created when the husband and wife realize that there has been a deterioration of the marriage, and wish to work towards separating out the issues prior to an actual divorce complaint being filed.
The distribution of property provides that the property set forth on an attachment to the agreement will be divided in the manner that the attachment describes. This provision will also run through the distribution of debts. The advantage of a postnuptial agreement is that, unlike a separation agreement, there is no mandatory requirement for court approval. This aids drafting and negotiation, and parties can generally decide themselves how to divide their property and debts. Overall, property provisions are very common in a postnuptial agreement.
A spousal support provision in a postnuptial agreement provides the parties with the distribution of spousal support, post-primary support (pre-divorce) support, and alimony. Parties may opt to forgo support and alimony altogether.
Many postnuptial agreements will include a waiver language of "The Husband and Wife understand that this agreement may change in the future, but this agreement will remain in full force until it is ended by law or mutual agreement." The primary reason for including this language is to ensure that the postnuptial agreement is not terminated due to passage of time or the parties’ intimate relations.
Often a provision in a postnuptial agreement will call for there being no interest in the other’s retirement benefits. A provision may state that each party waives their rights to the other’s retirement benefits (that are not listed on a schedule to the agreement) and that the waiver will not be set aside for one year because of any lawful reason.
Other common provisions may include a non-disclosure clause, an anti-lapse clause, and a recognition clause. The parties will also acknowledge that the postnuptial agreement has been read by each party, with both competent counsel or having had the opportunity to have the agreement reviewed by counsel. The parties will also acknowledge that the agreement was not based on coercion or fraud.
The Advantages of a Postnuptial Agreement
The potential benefits of a postnuptial agreement include:
Element of Certainty My experience in domestic relations tells me that most marital problems can be avoided if expectations are clear. Every married couple is different and each family dynamic is unique. What works for one family might not work for another. When a married couple enters into an agreement that is enforceable in court, they put their expectations in writing. As a matter of law, the parties have agreed to the expectations. In short, both parties enter into the marriage with the benefit of a clear understanding of hopes and dreams.
Security Because of the security that postnuptial agreements offer, many people pay careful attention to the drafting of those documents. I have regularly drafted agreements for Pennsylvania couples that address income and expenses, bonuses, stock options , and even time off of work. While these agreements certainly cannot anticipate everything that could happen in a marriage, my experience has been that the financial elements of a marriage can be addressed to mitigate the impact of post-nuptial disputes down the road. It is also important to get the agreement right the first time and since I frequently draft these agreements, I have experience in finding the balance between what is realistic and when an issue should be addressed again down the road.
Fewer Court Appearances Since post-nuptial agreements are enforceable as contracts, the existence of an agreement can often resolve disputes without the need for discovery, experts, and unnecessary court appearances. In other words, if the agreement clearly addresses the issue, a judge will enforce the agreement. While this is not always true, it is true often enough to be a decided advantage to enter into an agreement.
Pitfalls and Precautions
Drafting a postnuptial agreement in Pennsylvania requires addressing the circumstances that may lead to one spouse wanting to file for divorce; however, it also entails a thorough discussion of various challenges and considerations. One factor that complicates drafting a postnuptial agreement in Pennsylvania is that the timing often does not indicate that the applicant expects the marriage to end. By the time a spouse approaches the other about a postnuptial arrangement, the marital tensions may have developed to the point of no return. While the applicant may genuinely want to preserve the relationship, the other spouse may harbor little positive feelings. A spouse seeking a postnuptial agreement may also act from a position of financial disadvantage. Particularly in cases where a marriage features a major power imbalance within the relationship, the primary wage earner may coerce the other spouse into signing an agreement that could leave them with meager to nonexistent financial means in a divorce settlement. Couples may feel like financial stressors in their lives make it impossible to draft a mutually consensual arrangement. For example, a spouse may be unable to afford divorce while still making payments on a mortgage, school tuition and other necessary expenses. The risk that a spouse could file for divorce at any time could compel them to reconsider other aspects of the relationship.
How a Postnuptial Agreement Can Be Established In Pennsylvania
Creating an enforceable postnuptial agreement in Pennsylvania is relatively straightforward, but it is important to make sure that the final agreement complies with Pennsylvania law. To create a postnuptial agreement in Pennsylvania, follow these steps: The initial step in creating a valid postnuptial agreement involves the exchanging of financial disclosures. While financial disclosures are often required for premarital agreements, they are even more necessary in the creation of postnuptial agreements because individuals who create them while married may do so in an attempt to protect their spouse from earlier debts. On the other hand, individuals who do not share full financial disclosures with their spouses may be placed in a situation where the assets that they believed were their sole property may be claimed by their marital partners during divorce proceedings. Many decide to hire legal experts to complete their postnuptial agreement. Lawyers for both parties can explain the terms of the agreement and offer advice. Additionally, lawyers may review drafts and negotiate certain aspects of the agreement to ensure fairness. Carefully consider the details that you include in your postnuptial agreement. Common issues addressed in agreements include which spouse will be responsible for certain debts and whether one party will be responsible for any spousal support payments in the event of a divorce. Ensure that the agreement contains enforceable language that complies with Pennsylvania law. Before signing the postnuptial agreement, you and your marriage partner should have the chance to review the document independently. It is highly recommended that individuals have their own legal representation review the agreement. Finally, both parties should attach signatures to the agreement to acknowledge their acceptance of its terms.
Postnuptial Agreement Enforcement by Pennsylvania Courts
Within the Commonwealth, there is a significant body of case law involving marital agreements because they are very common and the circumstances surrounding each marital agreement vary from case to case. One recent Superior Court decision upheld an agreement that a party would not seek any form of alimony and the wife could not receive any assets aside from joint accounts from a business that was to be divided. The Superior Court for the Commonwealth of Pennsylvania held that since the wife was experienced in the business, she could have hired others to run the company if needed.
In another case, the Superior Court of Pennsylvania overturned an Agreement involving a high income earning spouse who gave up substantial spousal support payments over the course of their 20 year marriage . In that case, Husband owned his own medical clinic and earned $600,000 per year. Despite the fact that the parties were represented by separate counsel before signing the agreement, the Court overturned the Alimoy agreement. It found it was unreasonable for one person to force another to sign over their right to spousal support upon divorce when the person forcing the agreement was a dentist and the person being forced to sign away their rights to spousal support was a nurse.
The key in the above noted cases and others is not so much whether the Agreement will be enforced under the Law, but rather the circumstances under which the Agreement is made and whether or not the Agreement is unconscionable.
