What Is a Postnuptial Agreement?
A postnuptial agreement is a written contract entered into after a couple is married. It can deal with virtually any aspect of the couple’s relationship, finances, or children, and will ultimately be about how the couple proceeds in the future. It is not designed to be a way to resolve any present differences or issues the couple may have. They are designed to provide either some security to a disadvantaged spouse or to provide structure to protect certain assets of one spouse from being included in a property division if there is a future divorce (as is often done with separate accounts such as retirement plans or pensions). They can also establish financial rules or limitations as a way to protect the future financial interests of the other spouse.
For example, a couple heading into retirement may want to be sure that their retirement or pension benefits are protected from any missteps of their spouse. In that case, the couple could enter into an agreement that restricts the amount a spouse can withdraw from a retirement account, establishes joint input on investment decisions, amongst other things. While this may seem unnecessary when the couple are still married and happily together, should there be a divorce down the road, the spouse with the retirement account would have the added security to know that their plan was established with input and agreement of his or her spouse .
An example of a postnuptial agreement is a document dividing certain interests in a family business or the income generated from a business. If one spouse or the couple owns a business, it may be difficult to determine the fair market value of the business, the value of any intangible assets, or the amount of cash already distributed by the business. If the business is successful, the couple may want to agree on a way to split future distributions but may not want to split the business itself or go through the detailed valuation of the business. A postnuptial agreement can be a way for the parties to agree on the issue of business income distribution but set aside other issues to be determined at a later date.
Sometimes, couples choose to enter a postnuptial agreement to allow themselves time to address what is at the heart of the issue in the marriage. For some couples, counseling will result in a desire to address the issues in the marriage in a structured environment. For other couples, though, they may need more time to work out what they want for the future of the marriage. A postnuptial agreement can act as a bridge that allows a couple to continue their marriage while addressing issues that are important to them.
The most important thing to remember about a postnuptial agreement is that, in Virginia, both spouses must enter the agreement willingly. They are not designed to be weapons to use against your spouse. They are designed to pick up where the couple would be if they were to separate or divorce.
The Requirements for a Postnuptial Agreement in Virginia
In Virginia, postnuptial agreements are governed by the Uniform Premarital Agreement Act, which is codified in VA Code §§ 20-147 through 20-154. The criteria for a valid postnuptial agreement in Virginia is in VA Code § 20-150, which provides that a postnuptial agreement would be enforceable if:
- the agreement is in writing;
- it is signed by both spouses regardless of whether it is acknowledged before a notary public;
- the agreement is entered into voluntarily without undue influence, coercion, or mental incapacity; and
- the agreement is not unconscionable when the Agreement was executed or was unfair because of failure to disclose certain information or failure to provide a reasonable opportunity to seek advice of counsel, unless the right of one spouse to such independent legal counsel is expressly waived.
The last two criteria for a valid postnuptial agreement in Virginia (voluntariness and conscionability) are terms that are also used in Virginia for prenuptial agreements, but are not specifically defined in Virginia statutes, resulting in case law to narrow these terms. For instance, in an effort to ensure that postnuptial agreements are entered into voluntarily, a Virginia court can draw several inferences as to whether a postnuptial agreement was entered into voluntarily. In Moore v. Moore, 170 Va. 30, 195 S.E. 703 (Va. 1938), the court affirmed an equitable rule of presumption so that mere attestation or acknowledgment of the written postnuptial agreement by the respective spouses cannot be taken as affirming the signatures in the face of a denial by either spouse that the document was ever signed. Furthermore, if a postnuptial agreement is entered into a close temporal proximity to an event such as separation or litigation, there may be a rebuttable presumption that the agreement is affected by undue influence. See Heller v. Heller, 48 Va. Cir. 77, n. 10 (Fairfax Cir. Ct. 1998) (although finding the signing of the agreement within five to seven days of the divorce hearing did not, in itself, constitute undue influence, this circumstance may raise certain red flags as to the spatial and temporal proximity of events).
Furthermore, the legal binding nature of a postnuptial agreement is similar to that of a contract. While there must be mutual agreement between parties as to the terms of a postnuptial in order for the agreement to be enforceable, similar contracts in Virginia law are said to be binding even in the event that the terms of the agreement are contingent on a future event. For instance, in Buntin v. Buntin, 238 Va. 65, 380 S.E.2d 669 (1989), Virginia courts recognized that the terms of the property settlement agreement were enforceable even though they were contingent on the obtaining of a divorce in another state.
Must-Have Provisions for a Postnuptial Agreement in Virginia
The key provisions of any Virginia postnuptial agreement fall within three categories:
The husband and wife will agree to a division of their assets and debts. This generally addresses any anticipated litigation arising from the division of assets and debts in the event of divorce. A postnuptial agreement can be a useful alternative to a prenuptial agreement that will provide the same kind of litigation avoidance in the event of divorce.
In any divorce proceeding in Virginia the Court will inquire as to the property and debts of each party. Even if parties have a prenuptial agreement their provisions will be incorporated into the final decree or order. Having a postnuptial agreement in place that can be incorporated into the order will save time and expense for the parties and avoids the adversarial process needed to determine property division in a divorce proceeding.
With respect to property division, a Virginia postnuptial agreement will generally address the following areas:
Concern of a third party lender with respect to a spouse’s interest in marital property to the extent that they believe such an property interest places their collateral at risk. Each lender and/or title insurer will have its own policies and procedures. It is not uncommon for a lender to refuse to make a loan when it believes a postnupital agreement contains restrictions on selling the property, carrying a second mortgage, or that would otherwise limit their security interest in the property.
It is essential for the parties to work with their lender and a good Virginia real estate attorney in the same way they would when negotiating a postnuptial agreement. The parties should fully disclose the existence of the postnuptial agreement to their lender prior to signing it. The lender will then be able to go through the agreement to ensure that the wife’s interest in the property does not place their collateral at risk.
Virginia courts place control over the division of property and debt solely with the parties. It is up to the parties to agree how they are going to address the division of these assets after divorce.
It must be clear who will be responsible for specific assets and debts after the divorce. Failure to address specific asset and debt division may result in litigation down the road after the postnuptial agreement is incorporated into the final divorce order. In cases of high conflict divorces custody and property issues are inextricably linked.
By including provisions addressing how property will be divided in divorce proceedings the parties effectively reduce the likelihood of costly litigation. A good Virginia divorce lawyer can help the parties focus on the most important issues while avoiding the most costly litigation traps that lie in the path of couples seeking to negotiate a Virginia postnuptial agreement.
Pros and Cons of a Postnuptial Agreement
When contemplated adequately before entering into such an agreement, a postnuptial agreement can be beneficial to both spouses. However, it is important to consider the potential drawbacks as well. This is particularly true for couples who have children.
Pros
In the best-case scenario, a postnuptial agreement can clarify how marital assets will be divided after death or divorce, and even resolve issues like spousal support and debt repayment. Getting this process finalized early on takes a lot of stress off your marriage, making for a more harmonious atmosphere.
Put simply, a postnuptial agreement is usually created with your individual best interests in mind. Because of this, it serves to protect and preserve not just your financial assets but also your legal rights.
You do not need to go through any complex legal proceedings to obtain a postnuptial agreement. As long as you and your spouse both agree to the terms, you can draft and sign the contract without having to go to court.
From a practical standpoint, entering into a postnuptial agreement is the easiest way to do all of these things while still married. If you decided to go through the traditional divorce process, you would end up spending considerably more time and money getting everything worked out in court. You would also be exposing your financial situation to public scrutiny, which is something that many couples prefer to avoid.
Cons
A postnuptial agreement does more than simply seal the deal on the division of assets: It can also seal the deal on the end of the marriage itself. Essentially, it can make the decision to divorce easier on both parties by bringing closure to the issue.
Postnuptial agreements are not legally required to be registered or reported with the state after being signed. This means neither spouse has to disclose the contents of the agreement during a divorce or death proceeding. While this can come in handy in certain situations, it can also pose a major drawback for the spouse who feels they are wronged, such as in cases of infidelity in the marriage.
Essentially, a postnuptial agreement puts restrictions on how your assets can be shared with your spouse, which may still be viewed in a negative light by their family. While this might be seen as an undesirable trait in a future spouse, it might not be so bad for your spouse to have some protection against your family if they decide to get married after you have passed away. In addition, if your assets were inherited and are distributed according to a postnuptial agreement, your family will not have any legal grounds to question it.
Postnuptial agreements are not legally required to include lawyer review, nor do they have to be notarized. Some couples may choose to take a more informal approach to these agreements and simply sign a handwritten note outlining how they want their assets divided without including any kind of legal review.
Again, while this can save time and money upfront, it can actually cost you significantly more in the long run if the terms of your postnuptial agreement are seen as overly one-sided and are contested.
How to Create a Postnuptial Agreement in Virginia
Creating a postnuptial agreement in Virginia involves several steps that must be adhered to in order to draft an enforceable agreement. First, either spouse may initiate the process by approaching the other about the idea of the draft. After deciding to pursue a postnuptial agreement, both spouses should consult separate legal counsel to receive objective, competent advice.
During the initial consultation with counsel, the following items may need to be discussed prior to drafting the agreement: If the parties have not yet agreed to the terms of the agreement, negotiations may begin between counsel for both spouses. If the negotiations reach a deadlock, the use of mediation may be required so that a neutral third party can help them work through their issues. It is important to note that , at least one year before the postnuptial agreement is executed, each spouse should provide the other with expert appraisals for certain items like investment accounts and property. Otherwise, the agreement is voidable due to lack of full and fair disclosure. After finalizing the terms of the agreement, the spouses will sign off on it along with their lawyers. In some jurisdictions, the agreement may need to be notarized to be enforceable. If either spouse ever decides to challenge the validity of the postnuptial agreement, the burden will be on the challenged spouse to prove that the agreement is voidable because of a failure to adequately disclose assets.
When Can a Postnuptial Agreement Be Challenged
Like premarital agreements, a postnuptial agreement in Virginia is generally enforced as written unless it becomes unenforceable due to changed circumstances, facts or law, or if it was based on fraud, duress, or other factors that would have disallowed it from the start. This is known as the doctrine of freedom of contract and it gives parties a great deal of control over their own agreements. They may dictate the terms according to their specific concerns during and after their marriage.
However, while the ability to draft a postnuptial agreement allows for flexibility and autonomy, it must also be done carefully and with the mutual intent of both parties. If there are material changes, one or both parties may wish to revisit the agreement. Alternatively, one party may try to avoid the enforcement of the agreement either by claiming extant fraud or duress over the other, or by saying that it was made under substantially different circumstances than exist at the time of its enforcement.
In Virginia, a court may modify or even void a postnuptial agreement if it lacks required disclosures of assets at the time the agreement was negotiated and between which no significant changes have occurred, or because it is unconscionable. Determining whether there has been an unconscionable change is a complicated legal question which is usually made by a court of appeals. This is a situation which is becoming more common than ever, due to the increase in divorce rates at relatively long periods of being married.
Examples: Postnuptial Agreements in Virginia
John and Mary were a professional couple in Northern Virginia. After several years of marriage, Mary found a lucrative opportunity to advance her career in another state. As a condition of taking the job, she would need to separate from John and move for a year to accept the position. But neither of them wanted the year away from each other to be an extended separation without clear and agreed upon rules for when it would end. They sought the advice of their family law lawyers and came away with the decision to enter into a postnuptial agreement that would set out ground rules for the future – namely, that they could keep separate bank accounts, medical decisions be made jointly, and that they would spend 5 weekends a year together away from the kids. The plan worked and Mary took the job far away. Once the year was up , they live happily ever after.
Sara and Dave were a Virginia couple who decided to enter into a postnuptial agreement just before their marriage. After all, it was a rocky courtship and they weren’t confident that they would remain together in the long run. They entered into an agreement that essentially restated that they would keep their finances completely separate. Unfortunately, just a few years later, they decided that even that was a poor idea because they didn’t like the isolation such an arrangement created. Eight years later, they divorced but only after several years of fighting over the enforceability of the arrangement. The end result was a six figure attorney’s fee award for both sides while the postnuptial agreement was found to be completely unenforceable.