What Constitutes a Postnuptial Agreement?
Postnuptial agreements, like their close relative the prenuptial agreement, are contracts entered into between two people who are already married. Their purpose is generally two-fold. For some people, they provide an opportunity to be more open and candid with each other about their financial situation and are an embodiment of an agreement for how the married couple want to address their financial affairs during the marriage and, if they were to separate or divorce, after the termination of the marriage. Second, like prenuptial agreements, they may offer some protection to the financial interests of one or both of the parties in the event of the death one or the other.
In this sense, the prenuptial agreement and the postnuptial agreement are similar. But there are some important differences. Unlike a prenuptial agreement, which must be entered into before marriage, a postnuptial agreement is entered into after marriage. A postnuptial agreement, however, typically anticipates the possibility of a divorce and provides a means by which to limit liability and financial exposure in the event that the marriage fails. It also provides an opportunity to clarify financial rights and responsibilities during the course of the parties’ marriage. In some cases, a postnuptial agreement will serve as an interim agreement between the parties in anticipation of an impending divorce and will obviate the need for extensive litigation over financial issues in the event of a divorce.
Postnuptial agreements are often underutilized. In some cases , married couples choose not to enter into them out of concern for being perceived negatively by family and friends because postnuptial agreements are often associated with discussions of financial dissolution and the likelihood that the marriage will end up in divorce. The perception may be that a postnuptial agreement is unromantic. The perception may also be that the parties suspect that one or the other of them has been unfaithful and the postnuptial agreement is an opportunity to work things out if the marriage survives. Another, more practical, impediment to postnuptial agreements is that in Maryland they can be difficult to enforce. The courts in Maryland have not always recognized them as valid, enforceable contracts.
The Maryland Court of Appeals devotes significant time in its opinion of Ferry v. Ferry, 119 Md. App. 188 (1998), discussing the status of postnuptial agreements in Maryland. In a case that ultimately permitted the enforcement of the parties’ postnuptial agreement, the Ferry court noted that while the law governing prenuptial agreements is "well settled," the status of postnuptial agreements is not. The issue of the validity of postnuptial agreements received little attention in the Maryland courts until the issue was presented to the Maryland courts’ attention in 1980 in Gillespie v. Gillespie. In Gillespie, "the only limitation on the enforceability" of postnuptial agreements will be res judicata, abuse of process, fraud, mistake, coercion, undue influence, or unconscionable provisions (meaning that the terms are so unfair that they shock the conscience). Simply put, a postnuptial agreement is an agreement between two parties who are married to one another that resolves the parties’ financial issues and that is likely to be enforceable unless the court finds that it was obtained by some form of fraud or duress, or the terms are so unconscionable that they will not be enforced.
Requirements for Postnuptial Agreements in the State of Maryland
In Maryland, although there are no specific statutory requirements regarding postnuptial agreements, the terms and conditions of a valid prenuptial agreement are similarly applied to a postnuptial agreement. Whether a postnuptial agreement is in a valid format that meets the requirements for a prenuptial agreement, may be the determinative factor in a postnuptial agreement dispute. In Maryland, at "a minimum, to uphold a prenuptial agreement, there must be 1) full disclosure of the property owned by each party, 2) knowledge of the practical effect of the transaction, and 3) the voluntary execution of the instrument by both parties." Peters v. Peters, 113 Md. App. 693, 688 A.2d 44 (1997). However, the Court of Appeals of Maryland has established that a postnuptial agreement may still be valid and enforceable even if it does not meet the written requirements of a prenuptial agreement because "the formalities required for upholding a prenuptial agreement should be honored whenever possible, but we cannot say that all the same technical requirements must be satisfied before a postnuptial agreement can be recognized." Peters v. Peters, 344 Md. 333, 687 A.2d 10 (1996).
Advantages of Using a Postnuptial Agreement
There are many benefits to entering into a postnuptial agreement, some of which may not be so obvious. They are not only useful tools for people of higher net worth, but can also benefit high earners without significant amounts of property.
A significant benefit of entering into a postnuptial agreement is the protection of assets. For instance, if a couple already has pre-nuptial agreements, and either spouse comes into the marriage with debt, a post-nuptial agreement can prevent that debt from becoming the debt of both spouses.
If one spouse has children from a prior relationship, without a pre-nuptial agreement or post-nuptial agreement the assets and property of one spouse will be equally divided between him/her and his/her new spouse, should they divorce. Should the marital assets be kept separate via a post-nuptial agreement, those assets cannot be used for the benefit of that spouse’s children.
Both spouses, especially if they are high earners, will benefit from entering into a post-nuptial agreement. Without a post-nuptial agreement, a spouse’s income can be used to pay down and reduce the other spouse’s debt. After divorce, the liability for that debt may be imposed upon both spouses.
The main benefit of a post-nuptial agreement is that it can create a greater degree of certain expectations of each party in a marriage. Parties can have a more precise understanding of their roles and responsibilities. A marriage is often easier if its contracts are clear.
Situations that May Lead to the Creation of a Postnuptial Agreement
While pre-marital agreements are most common, many couples opt to consider a postnuptial agreement as their relationship evolves. For instance, if during the marriage one or both spouses develop money interests such as owning a business or accumulating wealth through other means, they may benefit from an agreement that specifies how those assets are to be divided in the event of a divorce. There are other circumstances that may lend themselves to postnuptial consideration, including when one spouse receives substantial gifts or inheritance or when marital assets reach a certain level and a buy-out amount is negotiated.
The following are examples most likely to produce a postnuptial agreement:
Drawbacks and Possible Weaknesses
While pre- and post-nuptial agreements are becoming increasingly common – with one recent survey finding that 29 percent of people get a prenuptial agreement before they marry – post-nuptial agreements have not seen such a corresponding rise in popularity.
Among the reasons pre- and post-nuptial agreements have been on the upswing are the increasing number of couples who remarry (and need to address potential spousal support issues), and the growing complexity of many families (where considerations like children from previous marriages come into play). Over the years, there have been notable household names—Ben and Jennifer, J.Lo and Marc Anthony, Britney and Kevin Sampson—who’ve taken advantage of prenuptial agreements.
Despite these examples, however, such post-nuptial contracts remain relatively rare, with Maryland among the states that discourage their use. In fact, the Crackerjack attorney’s 2023 survey again found that just 14 percent of respondents had a post-nuptial agreement. So what’s behind that reticence?
Issues of Enforceability
While the reality is that such agreements can (and do) work for some couples, for others postnuptial agreements are more problematic. What are their biggest deterrents? As with many contract issues, those considerations include enforceability and emotional headwinds. Specific enforceability issues include:
Emotional Headwinds
In addition to those obstacles, describing how postnuptial agreements work requires the parties to enumerate unpleasant, deeper issues that, generally speaking, are evaded as a matter of course in the early days of a marriage. For instance, a request to enumerate possible divisions of assets may require conversations about assets that aren’t on the table at the moment (think inheritance; should the parties opine on hypothetical inheritances?); or focus on divisions of assets that are unlikely to happen (is transferring future assets smart?).
What if one spouse unilaterally decides to invoke the provisions of the post-nuptial? In such a scenario, the unhappy spouse may be compelled to agree to something that he or she might not have agreed to voluntarily . Accordingly, getting a party to sign an agreement that divides a marital estate (along with the related financial issues) while those issues are already current and at play can be a tall order. Yet, oftentimes that’s the challenge the parties encounter when they meet with us to create post-nuptial agreements.
Anyone who’s ever agreed to pay for an event (think: wedding) or an item (think: stock purchase) when the real possibility of not being able to afford it looms has experienced that moment of feeling cornered. Now imagine the negotiation was mishandled, the conditions of the event had changed, and the purchaser no longer wanted to complete the purchase at all. Would you agree to those terms? That’s the feeling many of our clients experience when confronted with the terms of a proposed post-nuptial agreement. And that’s an uncomfortable position to be in. In extreme circumstances, a spouse might even propose a post-nuptial agreement to lock other parties into an agreement that he or she is poised to break. If breaking the agreement were the issue, the marriage is likely over. However, if the marriage remains intact, the post-nuptial agreement doesn’t do much to change the path the parties are on.
But there are notable exceptions. The vast majority of our clientele who seek post-nuptial agreement help come to our team because they work with other firms and are experiencing difficulties they’re concerned about.
Sometimes, these parties want to define the parameters of a difficult relationship, and they’re too invested to walk away. Those parties are in charge of their choices; their clarity creates focus and helps us do the work needed to craft agreements that stand up.
We need to be clear, though: we prefer prenuptial agreements, since they’re based on pre-established understanding of the state of assets, terms, and requirements.
If you want to explore whether a post-nuptial agreement can work for you, begin the process by working with a divorce counsel who explains the pros and cons. That will arm you with all the information you need to decide if a post-nuptial agreement should factor into your future decisions.
Tips for Locating an Experienced Maryland Lawyer
When seeking legal advice for preparing postnuptial agreement in Maryland, it is important to hire a lawyer who practices family law (commonly referred to in other jurisdictions as divorce law), understands your rights, and has relationships with the judges and magistrates in your circuit court.
While not all lawyers who practice family law law have experience with a specific issue or type of legal agreement, your first meeting with a lawyer should provide insight into what that particular lawyer’s familiarity with the issues. An experienced family law attorney will tell you whether they have experience with postnuptial agreements. If they do not, they will let you know if they can refer you to an attorney who does.
Unfortunately, the practice of family law is one of the very few forms of law that requires no minimum amount of experience or supervision. That means that consumers of legal services often need to be vigilant when selecting an attorney. This is especially true when looking for an attorney with experience in drafting postnuptial agreements.
There are many resources for finding an experienced family law attorney to help you draft a postnuptial agreement. In addition to referrals from friends or relatives, you can access The Maryland State Bar Association’s lawyer directory at www.msba.org. Be sure to limit your search to lawyers who practice in Maryland.
How to Formulate a Postnuptial Agreement
Once you and your spouse determine that you want to enter into a postnuptial agreement, the next step is generally to identify all of your assets. Assets include any property that you own, such as: It is important to make sure that you identify any interest you have in property titled in your spouse’s name and vice versa. You may have an equitable or legal interest in property that is not listed as jointly owned. Some examples may include inheritances from parents or grandparents, a special loan from a relative for the down payment on a home that is scheduled to be paid back, a business that your spouse had prior to the marriage, and bank accounts you opened with money your parents provided you before you married. Once you have entered into an agreement that identifies the assets you and your spouse will bring into the marriage and the assets that you plan to maintain as yours , then you will discuss with your spouse a potential list of assets that will be acquired during the marriage and how that property will be distributed if you were to separate and divorce. Either spouse is free to keep their pre-marital assets under this agreement. However, property acquired during the marriage can be split between the spouses as you so choose. The final step in creating a postnuptial agreement is formal execution of the agreement in front of a notary public. Once executed, the postnuptial agreement creates enforceable rights and obligations on each spouse. Postnuptial agreements should be reviewed periodically to ensure that they are reflective of your existing circumstances.
