Post Nuptial Agreement – What is it?
Understanding Post Nuptial Agreements in Maryland
A post nuptial agreement is a legal contract executed between two people who are already married. Similar to a pre nup, a post nup will typically determine how assets will be divided in the event of a divorce. Unlike a pre nup, a post nup cannot be entered into before either party gets married; hence, the inclusion of the "post" meaning after. A post nup acts as an insurance policy in the event that the relationship ends in divorce. It may mean a division of assets , but not necessarily.
Situations when a couple might consider entering into a post nup:
A couple who wants to protect one spouse who has significantly more assets; A couple who has a high income spouse and wants the lower income spouse to be taken care of in the event of a divorce; A couple who is having marital difficulties and might benefit from getting certain affairs in order; A couple who wants to create an agreement for asset distribution that deviates from the state’s formula.
Requirements for Legality in Maryland
For a post nuptial agreement in Maryland to be legally binding, it is a requirement that the contract be in a writing that is signed by husband and wife. Additionally, it is critically important that your post nup be entered into voluntarily and without coercion from the other party. Both parties must exchange full financial information and be competent to enter into the agreement. The parties may certainly be represented by counsel and it is highly advisable to seek the assistance of a qualified family law attorney. That does not have to mean that each party retain their own lawyer. A couple could retain an independent counsel to draft the post nuptial agreement and ensure that it complies with Maryland law.
Advantages of Having a Post Nuptial Agreement
When two people decide to marry and they have earned considerable assets before the marriage, or perhaps their assets were inherited and brought into the marriage for safekeeping, it only makes sense to put down in writing the formulas for distribution and the division of assets in the event of dissolution of the marriage. These plans are always subject to some negotiation and change but if there is a baseline set of categories and formulae at least it is possible to get off on the right foot.
The primary benefit of a post nuptial agreement (like a pre-nuptial agreement) is to determine, even before the event, who gets what, how it will be distributed, and when it will be distributed. To this end, the Post Nuptial Agreement is very similar to a Pre-nuptial Agreement. It enables a husband and wife to decide how they wish to handle their assets in the event of divorce. Like the pre-nuptial agreement, it is not set in stone. It can be changed if both the husband and the wife agree to do so.
Unlike a pre-nuptial agreement, a postnuptial agreement can address the issue of alimony payments. It can totally eliminate, or reduce, the amount of any alimony that an ex-spouse may have to pay. Perhaps the most advantageous of all is the peace of mind it brings. A post nuptial agreement can take the fear out of the future and the unknown. It can be a good way to prevent uncertainty and minimize discord and conflict.
One of the biggest benefits may be that a post nuptial agreement can set a date for separation. People do not like to think about splitting from their spouse but unless there are baseline factors established people may not know what to expect. For example, it may be some years or some months before spouses are really on an even footing financially. In many ways, spouses regret the way they handled the distribution of assets or worse, they fail to clearly establish the timeline for distribution with later arguments about when the money will be there. That mistake can turn an amicable divorce into a real nightmare in court.
Commonly Included Provisions
Like a prenuptial agreement, the provisions of a post nuptial agreement are unique to each individual couple and can vary widely. However, common provisions included in such agreements can encompass the following:
Asset Division
Much like a prenuptial agreement, many couples include a detailed list of all marital and non marital assets that are owned prior to, or as a result of, the marriage. These assets can be considered held solely by one person, or jointly between both spouses. This list can also be used to stipulate that spouses agree to not make a claim for spousal support, alimony or to waive any rights to property until some future date.
Debt Responsibility
In addition to asset division, many spouses also address the issue of debt division in their post nuptial agreement. This can be particularly useful for a spouse who does not intend to keep his or her spouse financially responsible for future debts. This provision can also include the ability to make claims for child support, spousal support, maintenance, alimony and more.
Child Considerations
Parents can also include provisions related to their children. These provisions may include the type and number of passes that can be obtained at a future date, should a party be eligible. In addition, a post nuptial agreement that involves child support or child custody can be reviewed and endorsed by the court provided it’s in the best interests of the child and "the parties are married or the marriage has been dissolved."
Spousal Support
The issue of spousal support can be addressed in a post nuptial agreement. An agreement can include right of waiver, provisions for a waiver of support, the right for the non waiving party to petition the court for an increase in spousal support, spousal maintenance, the right to the payment of counsel fees, and more.
Other Provisions
Additional provisions that may be included in a post nuptial agreement include:
- A waiver of the right to the elective share – A provision that states that the surviving spouse will receive the statutory amount set by law.
- Reconciliation or mediation – The right to petition for mediation or reconciliation of the marriage in the event that a couple should separate or divorce.
- Future property rights – A provision that grants the right of future property for either spouse that may or may not apply upon separation, divorce or death.
- Military considerations – A provision that addresses the right of a spouse to participate in certain military benefits. This is most commonly seen when a spouse is in a military career and the other spouse expects to stay at home with children.
- Allocation of attorney fees – The requirement that the award of attorney fees and costs will either be paid, or not paid in the event of a divorce.
Tips on Drafting a Post Nuptial Agreement
- Choose the right lawyer. While either spouse may act in his or her self-interest during the negotiation process by refusing to consult with or even appointing a lawyer for the other spouse, the key to a valid agreement is providing each spouse with a qualified independent attorney. Though one attorney may represent both parties in the negotiation, that lawyer may only be validly selected if he or she is acting in the joint interest of both spouses, not just one.
- Prepare full financial disclosures. Depending on the circumstances, have all parties prepare full financial statements disclosing income and assets. This step is not always necessary, but typically occurs so long as the spouses do not otherwise have an already amicable understanding of one another’s financial circumstances.
- Draft the post nuptial agreement . This may be done by either spouse’s attorney or by the couple themselves. Factors to consider include defining alimony rights, whether one spouse will release the other from marital estate claims and obligations in the event of divorce, distribution of retirement benefits and proceeds payable to the other spouse in the event of death, spousal or child support assessment, and the creation of wills or trust agreements that conform to the agreement.
- Review the post nuptial agreement with your attorney. Some attorneys will advise the parties to sign the post nuptial agreement at the same time, while others will counsel the spouses to sign after the document has been reviewed by both spouses’ independent attorneys. The latter is the more common practice.
- Sign the post nuptial agreement.
- Record the post nuptial agreement with the Land Records Office, if appropriate.
Challenges Associated with Post Nuptials
Challenges and Limitations of Post Nuptial Agreements in Maryland
While post nuptial agreements are not per se unenforceable, the adoption of the Maryland Child Custody Act and the adoption of the Maryland Uniform Premarital Agreement Act have created certain challenges and limitations to this type of agreement. One glaring challenge with creating a post nupital agreement is when you have a party who does not want agree to such an agreement or when the parties are unable to put together an agreement that meets the approval of both parties. This is one of the reasons the rules of effective negotiation can be helpful during the divorce process. The party behind the post nupital must be willing to advocate for it and speak with their spouse about the ways in which it will protect them both. In a perfect world, both spouses will negotiate the terms of the post nupital and dive into the details of their financial as well as lifestyle considerations without the threat of divorce motivating them. A critical challenge in the creative negotiation of the post nupital agreement is distinguishing between those terms which are intended to provide security to the other and those terms which are in lieu of dealing with actual amounts. For instance, if the post nupital agreement waives any spousal support or alimony, do the parties truly intend to do that or are they simply kicking the bucket down the road in an agreement that is not meant to be a substitute for a full blown marital settlement agreement? Are they truly waiving or does the term stub in contemplation of mere physical separation? If the question ever arises, it will be for a judge to determine whether the post nupital agreement is valid. Under the Uniform Premarital Agreement Act, the standards are rigorous- too rigorous. When the post nupital is created in lieu of a marital settlement agreement and not at the heights of romantic entanglements, the judge may have an opportunity to determine whether the waiver of support was intended to provide true security or is in the nature of a qualified answer to some other concern about what rights the non-supporting spouse would claim in the absence of that support.
Alternatives to a Post Nuptial Agreement
If post nuptial agreements do not sound like the right fit for the soon-to-be clients, there are operating agreements and trust funds. The former is simply an alternative post-nuptial agreement while the latter is a completely different arrangement that operates independently of marriage.
Trust Funds
Trust funds can be an excellent alternative to post nuptial agreements. When a couple protects their assets in a trust fund, they can designate what portion or portions go to which survivors after death. The biggest advantage to relying on a trust fund instead of a post nuptial agreement is that a trust fund is completely separate from a couple’s marital relationship. Since post nuptial agreements are inherently tied to a couple’s marital situation, a nasty divorce could taint the validity of the agreement. In theory, a court could declare the post nuptial agreement null and void because the couple’s confidential information was misused. Liability for creditors is per capita (per person), meaning that the assets in a trust fund are only available to respond to a creditor’s claim against the beneficiary of that trust fund. On the other hand, assets in a post nuptial agreement are generally available to respond to costs that arise because of marital relationship. In some states , creditors can attach property owned by the married couple – even if just one of the spouses has the legal title to that property.
Operating Agreements
Another option for couples who have chosen not to have a post nuptial agreement is to set up an operating agreement. An operating agreement provides a plan that governs their financial relationship during the marriage and defines how property will be distributed in event of divorce or death. In this case, each spouse is protected from claims or charges on the other spouse’s property or property rights. An operating agreement also avoids the prenuptial agreement requirement that each spouse file a financial disclosure of assets. Unlike post nuptial agreements, couples who have an operating agreement do not have to file any documents with the courts. However, even though an operating agreement may avoid some litigation that could arise with a written agreement, it may still be subject to judicial scrutiny. A judicial court can declare an operating agreement invalid when a couple divorces. It can also divide property even if the couple has an operating agreement, but does not have an enforced post nuptial agreement. It is important to note that if an operating agreement is incomplete, the court can modify it especially if new state laws require certain provisions that were not included in the original agreement.