Postnuptial agreements, also known as post-marital agreements, can be invaluable tools for couples who want to define their property rights during marriage. However, like any contract, these agreements must be carefully written to ensure they are enforceable. California courts expect postnuptial agreements to meet specific criteria, and those that do not may not be upheld if challenged in Court.
Suppose you are considering entering into a postnuptial agreement with your spouse. In that case, it is imperative that you understand the general requirements that must be satisfied to implement an enforceable contract under California law and how that postnuptial agreement will operate during marriage under California law. Below is an explanation of postnuptial agreements, including how they differ from prenuptial agreements and how to ensure they are legally enforceable.
What Is a Postnuptial Agreement?
A postnuptial agreement is a contract between two spouses in which one or both partners agree to define certain rights to their assets during and after marriage. That is, a postnuptial agreement is an agreement to depart from the default rules under the California Family Code that would otherwise apply in the absence of such an agreement and instead have the spouses define property rights and obligations under the specific, agreed-upon terms set forth in the contract. These agreements can accomplish tasks such as:
- Transmuting otherwise separate property to the community estate, such as naming a house bought by one spouse before marriage as the couple’s community property.
- Transmuting otherwise community property to one spouse’s separate property.
- Confirming either or both spouses’ separate property as their separate property to avoid characterization issues that often arise at dissolution.
- Defining how community assets and debts will be divided or assigned at divorce.
- Outlining how assets and obligations will be managed during the marriage and upon divorce.
- Outlining how assets and obligations will be divided and allocated should one spouse predecease the other spouse during the marriage so that the postnuptial agreement is consistent with the predeceased spouse’s estate plan and testamentary wishes.
- Specifying the terms of spousal support orders in the event the parties divorce (Disclaimer: spousal support provisions in postnuptial agreements are often the most challenged provisions in postnuptial agreements, and the enforceability of such provisions often depends on the Parties’ relative financial circumstances at the time of divorce, among several other considerations. For these reasons, it can be difficult to enforce terms and limitations specifically related to spousal support in postnuptial agreements.)
Post-marital agreements cannot determine matters of custody or child support in advance. Other than this exception, they can accomplish many of the same tasks as a prenuptial agreement.
Differences Between Postnuptial and Prenuptial Agreements
Prenuptial and postnuptial agreements have many similarities but are not entirely identical. Both can be used to alter a couple’s property rights within their marriage. However, they differ in two significant ways under California state law.
The obvious difference is that a prenuptial agreement is signed before a couple marries, while a postnuptial is signed after marriage. This gives rise to the second, less apparent difference: post-marital contracts often face more legal scrutiny, as the parties have already entered into a confidential relationship upon marriage that imposes specific fiduciary duties between spouses that do not exist before marriage, such as when a premarital agreement is entered.
In California, prenuptial agreements are generally assumed to be valid and enforceable if the Parties have complied with the statutory requirements set forth in California Family Code §1615, which requires: the parties to exchange full and complete financial disclosures of all assets and debts before executing the agreement; each party was represented by independent legal counsel; there were seven (7) days between the date the final agreement was exchanged and the date the agreement was signed; the agreement was voluntary and not signed under fraud, duress, and undue influence; and each had the requisite capacity to enter the agreement.
Because these agreements are signed before the couple marries, the contract is considered an “arms-length transaction” akin to business partners. It is presumed that if either party did not agree to the terms, they would have refused to sign the contract or called off the wedding.
Postnuptial contracts are viewed differently. Because they occur after marriage, they impact rights, duties, and obligations that the spouses have already been granted by virtue of having already entered into marriage. Courts scrutinize any agreement that affects pre-existing rights more carefully than contracts that affect potential future rights, such as those defined in premarital agreements.
In addition, judges may be more alert for signs of coercion surrounding these agreements. Because many couples have significant financial discrepancies within their marriages, there is the potential that one spouse could coerce the other into signing an unfair contract. Similarly, there may be situations where the Parties have assumed specific responsibilities during marriage, such as when one spouse focuses on their professional career, and the other assumes child-care responsibilities. Under such circumstances, there will be a significant disparity in the parties earning capacity and accumulated assets if they divorce. This may result in the court scrutinizing certain provisions in the postnuptial agreement based on the Parties’ relative circumstances at the time of divorce, even if the postnuptial agreement was entered into without coercion at the time of execution.
The Importance of Managing Postnuptial Agreements Correctly
The additional scrutiny surrounding postnuptial agreements does not make them less valuable. It simply means couples should work with experienced family law attorneys to develop an enforceable contract. There are some fundamental criteria that courts look for before declaring a postnuptial agreement valid, including:
- Is it written down? While many other oral contracts will be enforced, these agreements must be written to be considered valid due to the complexities involved.
- Is it executed correctly? California requires these agreements to be signed by both parties and officially notarized before they are considered in court.
- Is it fair? While an agreement can benefit either spouse, it cannot be “unconscionable” or significantly and unjustly favor one party at the other’s expense.
- Was it signed without coercion? A contract signed under duress is considered invalid. Both spouses must sign the agreement voluntarily, without unfair pressure or threats of physical, financial, or other harm.
- Did both parties receive full disclosure? A contract is not binding if one party signs it without fully understanding what they are agreeing to. It will not be enforceable if either spouse has concealed information about their assets, debts, income, or other matters connected to the agreement.
- Did both parties have unbiased legal representation? California courts require both parties to have access to unbiased legal representation before signing the postnuptial agreement due to the potentially significant impact of the agreement on the couple’s future.
Even if these fundamental criteria are met, the Court can still find a post-marital agreement unenforceable if not effectively and efficiently prepared. It will then be forced to use California law or the most recent valid prenuptial or postnuptial agreement to divide a couple’s assets. Given such, it is imperative that you consult with a skilled family law attorney, like the experts at Flicker, Kerin, Kruger & Bissada LLP, if you and your spouse are considering a postnuptial agreement.Our experienced attorneys have years of experience drafting enforceable postnuptial contracts for clients in the Bay Area. We are available to guide you through the complex process and prepare a postnuptial agreement tailored to your unique circumstances. Learn more about postnuptial contracts by calling our Menlo Park or San Ramon office for your consultation today.