What is a Post-Marital Agreement?
A post-marital agreement (also known as a marital property agreement) is a written contract entered into by married parties that either establishes or refers to their respective property rights. As the name suggests, a post-marital agreement is executed after a marriage has taken place. This is in contrast to a prenuptial agreement, which is entered into prior to a marriage taking place.
A post-marital agreement often serves the purpose of waiving rights that would ordinarily arise by operation of law with respect to property acquired during a marriage. For example , spouses may agree in writing that certain property will constitute the sole and separate property of one spouse. Post-marital agreements may also be utilized in order to provide for the orderly division of property in the event a proceeding for dissolution is later instituted.
A post-marital agreement is also sometimes entered into by spouses who wish to obtain a priority in the distribution of community property over a creditor with respect to the credit of the other spouse.
Other than the timing of the agreement, the requirements for a valid post-marital agreement are similar to those for a valid prenup.
Requirements of the Law in California
In California, as with the formation of any contract, the parties to the agreement must give their consent to the agreement, which consent must be freely given. In the context of a post-marital agreement, however, it is imperative that the consent to the post-marital agreement not be based on the belief of one party that the contract will have some protective benefit when, in reality, it might not.
For example, under California law, there is a "fiduciary relationship" that is created by marriage, which means that the marriage creates a duty of the highest good faith and fair dealing; the "confidential relationship" to which the law refers means that the spouses have the right to the utmost degree of trust and confidence in each other. This fiduciary duty may be breached if one of the parties enters into the post-marital agreement without truly disclosing his or her assets or the true value of the assets. If one party can prove that the other spouse either withheld or concealed information regarding assets or the value of assets, it may create defenses to the enforcement of the post-marital agreement.
In the family law arena, the agreement must be "fair and reasonable, the parties must execute an enforceable waiver of their statutory rights, the document must be free of fraud, and the parties must have the ability to enter into such an agreement." Although a written post-marital agreement is not a requirement under California Family Code section 1611, the premise that an enforceable contract must be in writing affects the legal requirements for the creation of a post-marital agreement. A post-marital agreement executed by the parties following their marriage must satisfy the requirements of California Civil Code section 1624, i.e., there must be a writing signed by the parties.
Specifically, Civil Code section 1624(d)(5) provides: "No action upon an agreement [between married persons] shall be brought unless the agreement is in writing, and is signed by the party to be charged, or some note or memorandum thereof is made in writing, and is signed by the party to be charged. An agreement otherwise void under this section is enforceable if it is specifically enforceable in equity."
Advantages of Post-Marital Agreements
Advantages of a post-marital agreement are numerous. For example, property acquired during marriage is community property and will be divided equally, except for property received from a prior relationship or an inheritance or gift from a third-party. Agreeing that a particular asset is separate property can minimize strife should the marriage end in divorce. If the parties have children, perhaps from a prior relationship, they can protect the children’s interests by stating that certain assets are to be distributed to them. Post-marital agreements can also cover estate planning issues such as distribution of retirement benefits, insurance proceeds or what happens upon the death of a spouse.
A couple may clarify terms of a prenuptial agreement that are no longer applicable as circumstances change over time. Or if you have gotten married for a second time, the post-nuptial agreement can address such things as protecting assets so they are not considered marital property in the event of death or divorce. If a spouse has substantial debt at the time of marriage, the post-marital agreement can protect the other spouse from being responsible for that debt.
It is also common for a post-marital agreement to clarify the couple’s financial situation and division of expenses. One party may have a substantial amount in debt and the other may have student loans but a higher income. The parties may agree that one spouse will assume the debt and the other will pay ongoing expenses. Or they may negotiate a more complex schedule.
One memorable case involved a divorced couple who separately remarried over the next many years. They were later widowed and then reconsidered marriage a second time. After many months of dating, they were ready to tie the knot again, but wanted some legal protections since they each had substantial assets to protect. A post-marital agreement was a perfect solution for the couple.
How to Draft a Post-Marital Agreement
Just as prenuptial agreements require careful pre-marital planning, post-marital agreements require careful attention to drafting. Unlike the United States Supreme Court, which will not review an agreement under a strict scrutiny standard, the California Court of Appeal is likely to apply the standard of review for contracts; that is, the specifically stated requirements of the statutory standard and the general requirements of contract formation. In particular, post-marital agreements, like prenups, are carefully scrutinized for whether the statutory provisions are satisfied, and any other contracts are likewise considered for abnormal circumstances that require deviation from the general rules. Post-marital agreements, like prenups, must be in writing, signed, and must have certain specific terms. Finally, most agreements are subject to the general requirements for contract formation (ex. offers and acceptance).
There are, however, some specific requirements in addition to the requirements for contracts in general that are unique to post-marital agreements. Unlike prenups, post-marital agreements do not need to be "contemporaneously executed" at the time of marriage. This means that both parties could have been married for years or decades before signing their agreement, unlike prenups where the agreement must be entered into before the marriage.
Post-marital agreements also do not necessarily require that the parties have a full and accurate disclosure of finances so as to satisfy the "informed consent" requirement for contracts. Although it is usually good practice for the parties to have a full disclosure of finances prior to entering into a post-marital agreement, it is not a legal requirement. (See our recent article, Equal Disclosure & Post-Marital Agreements.) Finally, the agreement does not need to set out any explanation for how the agreement came about. It is up to attorneys to include any dealings on why the parties are forgoing the statutory requirements of prenups and entering into a post-marital agreement.
Importantly, a post-marital agreement does not address anything related to child custody and child spousal support — nor should it. There is no way to determine the child’s best interest at the time the post-marital agreement is executed, so it is important that post-marital agreements do not attempt to address child support or child custody/visitation issues. Ideas for child and spousal support may be raised, but the parties should understand that the court always has jurisdiction to determine issues of child/spousal support and visitation/custody children based on the current circumstances at the time of filing of divorce. That is, the court will not invalidate a post-marital agreement between two adults based on the parents σf the parties children.
Typical Mistakes and How to Avoid Them
There are a number of common mistakes that couples make when creating post-marital agreements or even post-nuptial agreements. It’s been said, "An ounce of prevention is worth a pound of cure," here are a few ways to avoid the potential pitfalls of an agreement and ensure that the agreement is legally sound:
One reason that there is often pitted against the other is a lack of understanding as to what is actually being agreed to. A casual glance at many contracts can be mind-boggling, but post-marital agreements are critical to your entire relationship from that point and beyond. If something doesn’t make sense, ask questions! While there may be terms that are not 100% clear, and there are probably technical legal words that don’t make sense to the average person, if you did not thoroughly read every provision of the agreement and you sign it, you cannot go back and blame it for anything you didn’t like. So ask questions .
Post-marital agreements are designed to be an accurate reflection of the areas of your life that have impact in the event that you separate or divorce. In order for this to be an accurate reflection, both parties need to be completely open and honest about their income, assets, debts and liabilities. If one party (or both parties) are hiding assets, have undisclosed income (perhaps due to a side business), or did not provide accurate information about debts or other liabilities, the agreement can be voided in its entirety. Talking about the financial state of the marriage can be difficult. In some cases, there may be one spouse that is clearly the one with most of the knowledge while the other is still in the dark. But in order for an agreement to be enforceable and binding, both spouses must be honest, forthright, and provide all information requested in a reasonable and timely manner. Otherwise, either one or both could be in for an unpleasant surprise later on.
Enforcing a Post-Marital Agreement
Two parties can enter into a post-marital agreement in California if they are: (1) married, and (2) they have entered into a written agreement in which they have agreed on the property rights the parties possess, and/or on other financial obligations of the marriage within the scope of Family Code section 1602(a). A party may move the court to enforce the agreement if the other party refuses to honour their obligations under the post-marital agreement.
In general, a post-marital agreement becomes unenforceable if a party demonstrates that it was unconscionable when signed, or when it became effective, because it failed to make an express waiver of the spouse’s spousal support rights pursuant to Family Code section 1615(a). Under Family Code section 1615(c), the court may set aside a post-marital agreement on a showing of failure to make disclosures as required by Family Code section 2105 before execution. Post-marital agreements are also voidable on a showing of lack of capacity to enter into a contract due to mental incapacity as defined in the Family Code section 1615(b), or upon a showing of fraud. The authenticity of a signature to a post-marital agreement is tested pursuant to Family Code section 2107.
Frequently Asked Questions
Frequently Asked Questions on California Post-Marital Agreements
Can my spouse and I revise our post-marital agreement?
Yes, as long as you both agree to the modification. You and your spouse can decide to change the terms of your pre-marital or post-marital agreement at any time. It is important to note that the agreement must be in writing and signed by both parties in order for the changes to be valid.
Should I have independent counsel (a lawyer) review my post-marital agreement?
Yes, and this is a requirement if the agreement will determine spousal support. Having an attorney review and advise you on your rights, obligations, and the law will give you a better idea if the terms of the agreement are beneficial to you, as well as whether you understand the agreement . This is especially important because after your agreement is signed, it may be difficult to change. Also, many terms within the agreement cannot be changed later – for example, terms dealing with spousal support may not be changed after the entry of your divorce judgment.
What happens if my circumstances change?
A post-marital agreement can generally be changed at any time by mutual agreement between you and your spouse, and a post-marital agreement is modifiable when there has been a material change in circumstances related to the agreement. However, if you and your spouse have already divorced, then the terms of the post-marital agreement will dictate what, if any, remedies will be available to you.