Most people are familiar with the idea of prenuptial agreements, which help couples understand each other’s financial position and values before marriage, and if necessary, simplify the process of divorce down the road. But fewer have a solid understanding of postnuptial agreements (also called postmarital agreements). How does a postnuptial agreement differ from a prenup? Why do people choose to agree to enter into an agreement after marriage? And how does Utah law treat postnuptial agreements?
The primary difference between a postnuptial agreement and a prenuptial agreement is when the agreement was executed—before or after the marriage. Both prenups and postnups deal with issues the couple may face in the marriage: asset ownership; rights to income and retirement benefits; how assets will be divided in the event of a divorce (or inherited in the event of a death); and spousal support.
Neither prenuptial nor postnuptial agreements can dictate child custody or support; those issues depend on the needs and best interests of the children, rather than rights that can be negotiated by the parents.
If prenups and postnups are generally similar in their subject matter, why not just negotiate the agreement before marriage so that both spouses are on the same page going in? After all, it is much easier to make agreements about finances while they are still separate. Also, the bargaining power between a married couple is somewhat different: if one spouse decides they want a postnup, the other may feel more pressure to agree to it, since it’s harder to walk away from a marriage that has already happened.
All of that said, there are valid reasons to enter into a postnuptial agreement after marriage. A couple may realize after they have married that they need to establish a clearer mutual understanding of their finances and goals, and want to memorialize that.
Or, once the couple has children, they may agree that one spouse will step away from their career to care for the kids. A postnup can establish that that decision was a mutual one for the family’s benefit, and provide for the stay-at-home parent’s financial security in the event of a divorce, since they sacrificed earning capacity.
A number of changes in a marriage can give rise to a postnuptial agreement. For instance, if one partner is unfaithful, shaking the foundations of the marriage, a postnup can help to shore those foundations up. The spouse who erred can use the agreement to demonstrate their renewed commitment to the marriage by offering favorable terms to the wronged spouse. Another common scenario is to put a postnup in place to deal with wealth acquired after the marriage.
And, of course, any couple that might have benefitted from a prenup, but never got around to creating one, can decide that it’s better to make an agreement later than never. A postnuptial agreement can be costly; both spouses should have their own attorneys so that it is clear they understand the agreement and are not entering into it under duress. But the expense should be viewed in the light of an investment in the marriage, clarifying the couple’s understanding of their rights and obligations. And if, despite this, a divorce ensues, having an agreement in advance about property division can make the divorce less costly.
Much of Utah law on postnuptial agreements comes from court cases that have addressed the issue of whether a particular postnup is enforceable. In the case of Berman v. Berman, 749 P.2d 1271 (Utah Ct.App.1988), the court held that a prenuptial agreement should be interpreted under general contract principles, and that the court must try to interpret what the couple meant in the agreement by what they said.
A later case, D’Aston v. D’Aston, 808 P.2d 111 (1990), extended that principle to postnuptial agreements, and held that postnuptial agreements are enforceable so long as there has not been fraud, coercion, or material nondisclosure. The D’Aston court noted that in interpreting contracts, courts look to the “four corners of the agreement” to understand the parties’ intentions. In that case, the parties disagreed as to whether the postnuptial agreement was intended to apply the event of divorce.
Neither spouse argued that there had been fraud, coercion, or a material misunderstanding in entering into the agreement. The agreement itself clearly indicated it was intended to apply in the event of a divorce. Therefore, the court concluded it was not necessary to look outside the agreement for evidence as to what the parties intended, and enforced the agreement.
What are the lessons for spouses who are considering entering into a postnuptial agreement? First, be clear on what you are agreeing to, and why. Second, recognize that having an attorney when creating a postnup is an investment, not an expense. Your attorney understands the implications of your postnup, and the law that applies to it, and can make sure that you are not agreeing to anything you didn’t intend to. A postnup, like a prenup, allows you to voluntarily alter the rights you would ordinarily have under Utah law. Tread carefully, or you may make a costly sacrifice.
If you have questions about postnuptial agreements under Utah law, we invite you to contact Barton Wood to schedule a consultation.