What is a Postnuptial Agreement?
What is a postnuptial agreement?
A postnuptial agreement, also known as a "mid-marriage" agreement, is a contract between you and your spouse. The contract is effective after marriage and defines the rights you have in the event of a divorce or death. The postnuptial agreement can also contain non-financial issues, such as who takes care of a child’s health insurance. In Nevada, a postnuptial agreement does not result is an automatic change in the parties’ spousal rights (unless it covers a change in a child’s residency, visitation, or related detail) as the parties retain the level of spousal rights afforded to a spouse by Nevada law. A postnuptial agreement should not be confused with a prenuptial agreement that is executed before you marry.
Postnuptial agreements became popular with the advent of no-fault divorce in the 1970s. These agreements attracted the attention of couples who wanted a no-fault divorce, in which one spouse would not have to prove the other was at fault for the marriage ending. However, many couples do not think they’re going to get a divorce, making a postnuptial agreement seem like a mood point—most choose the prenuptial route because even discussing divorce tends to make a spouse hostile .
Signing a postnuptial agreement allows a couple to keep assets that are separate while entering into a long-term commitment. Consider a couple where one spouse brought a thriving business into the marriage. If the couple were to separate, the business could be considered a community asset stemming from the marriage, which is subject to division. In this case, a postnuptial agreement would be quite handy. In other words, a postnuptial agreement is used regularly for business owners, second or third marriages, partners where one spouse is substantially wealthier than the other, people who are older and have no interest in building assets, and couples with children from previous relationships.
All postnuptial agreements must pass the test of being fair to both parties. If the court deems the agreement lopsided or unreasonable, it will not be enforceable. Postnuptial agreements can be essential for couples where one spouse has lost the trust of the other. For example, a spouse who has been unfaithful might be required by the offended spouse to sign a postnuptial agreement in order to save the marriage. Even so, all postnuptial agreements require a review by an unbiased attorney or accountants, and the parties must execute the postnuptial of their own free will.
Nevada Legal Requirements
In order for a postnuptial agreement to be valid in Nevada, several legal requirements must be met. These include the inclusion of a written agreement signed by both spouses, the lack of fraud or duress during the signing, and that the agreement is made voluntarily and without undue influence from either party.
A key requirement for a postnuptial agreement in Nevada is that it must be in writing and signed by both parties. This ensures that each party is aware of the contents of the agreement and has consented to its terms without any coercion. Additionally, the agreement must be voluntarily entered into, meaning that both spouses willingly agreed to the terms of the agreement without any undue pressure.
While it is not a requirement that both parties have legal representation during the drafting and signing of the agreement, it is highly recommended. Having independent legal counsel for each spouse can ensure that both parties fully understand their rights and obligations under the terms of the agreement, as well as any potential consequences that may arise if the agreement is not upheld. It also provides a level of protection for both parties in case of future disputes or legal challenges to the agreement.
Finally, the parties must have made full financial disclosure to each other when agreeing to the terms of the postnuptial agreement. This means that both parties must provide information regarding their debts, assets, and income in order to ensure both parties are fully informed when entering into the postnuptial agreement. Failure to provide full disclosure can lead to challenges to the validity of the agreement or its enforcement in the future.
Pros of a Postnuptial Agreement
When it comes to marital agreements, the topic of postnuptial agreements comes up frequently. Just like their prenuptial counterparts, postnuptial agreements in Nevada protect each spouse’s best interests with respect to property distribution and related matters – even in the face of a divorce. These agreements can be useful for many different reasons that vary from household to household. In some cases, a postnuptial agreement is simply a chance to clear up misunderstandings and assumptions about the household financial situation. In other scenarios, a spouse might want a postnuptial agreement to protect business assets, trust funds, or specific accounts that were created before the marriage. Related to this is protecting each spouse’s non-monetary contributions to the marriage through equitable compensation. For example, if one spouse has a job that allows them to make investments that positively impact the marital assets, then a postnuptial agreement is in order. The same is true if one spouse is a stay-at-home parent, and the other spouse enjoys a lucrative career. A postnuptial agreement can give credit to the family contributions that often go unseen – especially in regards to money issues.
Similarly, spouses can use a postnuptial agreement to stop misunderstandings about key financial matters, such as who pays specifically for household bills and expenses, who is responsible for allocating money to savings accounts, and how much can be spent on personal items like vacations and clothes. This is especially useful in blended families, where complex financial issues and emotional entanglements are potential sources of conflict. Without an agreement outlining each spouse’s financial responsibilities, issues can quickly spiral into resentment and even violence. A postnuptial agreement can also protect the property rights of step-children in a blended marriage, or the specific rights of a child born out of wedlock. If the marriage is dissolved, or if one or both parties pass away, a comprehensive postnuptial agreement can prevent uncertainty for all family members in terms of how assets will be divided.
Sadly, many people who live in troubled marriages are afraid to end things due to the nasty and often costly process of divorce. Postnuptial agreements provide a formal roadmap for how disagreements might be resolved in the future, or who gets what asset in the event of death. Similarly, a postnuptial agreement can shield a spouse from having to pay spousal maintenance in the future. In addition to providing profound practical benefits, postnuptial agreements can also provide strong peace of mind by helping each spouse plan for the future happiness of themselves and their children. While it may not be the most romantic process, creating a postnuptial agreement can provide each spouse with a measure of security and assurance.
Common Terms in Nevada Postnuptial Agreements
Common provisions found in postnuptial agreements in Nevada are similar to those found in premarital agreements. The enforceability of existing premarital contracts entered before October 1, 2009, the effective date of the Uniform Premarital and Marital Agreements Act are determined applying the case law upon which the agreements were based. All postnuptial agreements signed after October 1, 2009 must be evaluated under the new era of contract law criteria.
Nevada is one of a small number of states that recognizes postnuptial agreements, or agreements between spouses entered into after the marriage has taken place. The general purpose of postnuptial agreements in Nevada is to define the property rights of the parties if they choose to divorce at some point after entering into the contract.
A postnuptial agreement in Nevada may provide for the ownership of each spouse’s property, the distribution of property upon divorce, the payment of debts of either spouse and the payment of spousal support or alimony. Like the fellow community property state of California, Nevada has refused to accept the defense of "undue influence" in postnuptial agreement cases on the basis that it would not be "socially desirable" to allow a spouse to escape postnuptial agreements.
Nevada recognizes that parties to an agreement must have full disclosure of their respective incomes and assets, although a postnuptial agreement may be enforceable if one spouse waives the right to full disclosure.
While there are no statutory rules setting forth the amount of property to be awarded a spouse at the time of divorce, the courts may enforce the terms of a postnuptial agreement, provided it is properly executed.
Downsides and Limitations
While postnuptial agreements can provide valuable legal protection, they are not without their challenges and limitations. One of the foremost among these is that postnuptial agreements may not always be fully enforceable in a court of law. A court may be satisfied that an agreement has been validly entered into – but that the facts and circumstances at the time no longer match the facts and circumstances as they stand at the time of any dispute. A postnuptial agreement that was once seen as mutually beneficial may no longer seem so, and adjustment to the original agreement may be sought by one or both parties as a result.
This situation can occur after the birth of a child. Household expenses and financial planning needs may shift considerably after becoming parents, as compared to spouses with no children. The same may be true for parties who enter into a postnuptial agreement without any children, and become parents during the term of the agreement. In all such situations, a court will determine how credible and sincere the parties’ intentions were at the time of agreement and the – now-altered – facts as they stand at the time of any dispute. For this reason, it may be tempting for a party to conceal information that is required by law to be disclosed when entering into a postnuptial agreement.
However, not only is it illegal to do so, it can also create a situation where the postnuptial agreement is invalid , putting your rights to division of assets at risk of being thrown into chaos. Full and frank disclosure of assets is a requirement for establishing a valid postnuptial agreement; therefore, without full disclosure, the agreement would not be considered enforceable. Even if you honestly believed you were doing the right thing, your actions in this regard would fail to hold water and break the trust – not to mention the potential for financial repercussions – surrounding the relationship.
Further complicating matters is the fact that while a postnuptial agreement establishes the relationship of the parties with regard to premarital and marital debts and assets, a divorce decree is only effective against the parties to it when the divorce action is filed, and against the rest of the world when it is actually entered. A postnuptial agreement is not necessarily effective even in terms of the partners’ relationship with each other until the divorce decree is filed. This dynamic makes establishing and maintaining a postnuptial agreement binding and enforceable – and they can be contested in any manner that is customary to a prenuptial agreement. While a postnuptial agreement can be an effective way to answer important questions about debt allotment and asset division within a marriage, the reality of this somewhat convoluted legal procedure makes it essential that you enlist the assistance of a qualified lawyer to help you establish or contest a postnuptial agreement.
How to Create a Postnuptial Agreement
How to Draft Postnuptial Agreements in Nevada
Before you meet with an attorney to draft a postnuptial agreement, you should thoroughly discuss the reasons for divorcing – or if that’s what the couple has decided on— the specific terms of the divorce regarding child custody, visitation, division of real and personal property, the payment of health care costs, alimony and debt division. Be sure to weigh the benefits and risks of negotiating a postnuptial agreement during case preparations.
The laws are quite clear on the requirements for postnuptial agreements. It’s always best to consult with an experienced family law attorney to ensure that you meet all state requirements for a postnuptial agreement and to safeguard your legal rights.
- You must draft the postnuptial agreement in good faith and without coercion.
- You must provide a complete and truthful financial disclosure to one another during the preparation of the agreement.
- Each spouse must sign the agreement voluntarily. They should also sign the emotional waiver of counsel, which states that they have had the opportunity to review the financial disclosures with each other or a financial expert, and that they understand all financial aspects of the agreement. Otherwise, the other spouse must seek legal counsel prior to signing the agreement.
- It’s best practice (though not required), to get each spouse’s signature notarized, which proves that each spouse attached their respective signature authentically and voluntarily to the agreement.
- Each party should have separate legal counsel to help in the negotiations.
- The final agreement must be turned in to the court with the Petition for Divorce and all required disclosures and affidavits at the filing of the suit.
- Finally, the court must retain a copy of the postnuptial agreement before granting a divorce.
Modifying or Terminating an Agreement
Postnuptial agreements in Nevada can be revoked or modified according to NRS 123.125. It states, "A postnuptial agreement designated as such in its language is not subject to the requirements of NRS 123.220 and any other provisions applicable to prenuptial agreements under this chapter." Furthermore, "A postnuptial agreement may be revoked or amended in writing signed by the parties." This means that when a party and spouse want to void or modify their postnuptial agreement, their only requirement is to follow the same procedure as when they created the postnuptial agreement originally; namely, in writing and signed by parties. As you can see, the law recognizes the significance of the writing of the agreement and signatures of both parties in the event a postnuptial agreement is revoked or amended.
Unlike the legal requirements for revocation of a postnuptial agreement, some jurisprudence exists dealing with circumstances for the revocation of a postnuptial agreement. For example, in the memo decision of Simas v. Reure, 131 P.3d 88 (2005), the Nevada Court of Appeals held that a postnuptial agreement, which was entered into in anticipation of bankruptcy proceedings, was not in good faith. In this case, the court stated, "Postnuptial agreements may be set aside if obtained by fraud, undue influence or coercion, or if entered into without volition."
In the case of Washoe Medical Center v. Jaeger, 711 P.2d 862 (1985), the court voided a postnuptial agreement because the husband moved out of the home shortly before entering an employment contract with the Washoe Medical Center. The employment contract provided him with an annual salary of $90,000. During the time between moving out of the home and entering the employment agreement, the wife lived alone and paid off their bills, including the mortgage on the property . Before the employment agreement commenced, husband and wife entered a postnuptial agreement, which provided that they would share in the profits if the property was sold.
In an action to enforce the postnuptial agreement filed by the husband, the Supreme Court of Nevada voided the postnuptial agreement. In doing so, the court stated, "Under the terms of the contract, respondent [husband] retained 100 percent of the actual sales price, received a 7 1/2 percent commission for supplying the sale, had the exclusive right to pay off the mortgage, maintained the tax benefits from the sale and kept the original loan documents and the necessary stock transfer receipts-right of ownership to the real property). In effect, respondent purchased the stock of appellant [wife] in the community property." The court went on to state that "respondent did not bargain in good faith when he negotiated an allegedly genuine arms-length contract with appellant since he knew the outcome of the negotiations were to override the postnuptial agreement entered into less than a month earlier." Ultimately, the court found that the husband failed to act in good faith, rendering the postnuptial agreement void.
Neither of the aforementioned jurisprudential examples deal with a party’s inability to revoke or modify a postnuptial agreement by the mere fact that a child was subsequently born to one or both parties after the marriage. All of the examples state that parties may address that a child of the marriage was not born at the time of the agreement and, in fact, in Washoe Medical Center determination, the postnuptial agreement did not "provide for spousal support in the event of the death of the one of the parties." The take away? Spouses may, by mutual agreement, create postnuptial agreements covering a variety of issues and maintain control over those agreements by revoking or amending them if and when needed.