Postnuptial Agreements

It is not uncommon for a potential divorce client to express the idea that financial concerns, rather than emotional or other marital problems, have led him or her to consult with a matrimonial attorney. These money problems have resulted in feelings of desperation concerning the marriage and future. Common complaints underlying these concerns include dissipation of assets by a spouse to finance gambling addictions; paying for content on Internet sites to which the spouse is apparently addicted; accumulated debt through excessive shopping; or unwarranted amounts spent on dependent adult children from a prior marriage. When questioned about the relationship's other aspects, these clients often say that they do not really want divorce or separation. They feel, however, that there are no other options available to them to protect their financial survival.

In a number of these instances, we have suggested that these clients consider entering into a postnuptial agreement, a seldom used, but very effective, way to deal with issues such as these. A postnuptial agreement may provide a prospective client with an alternative that can save him or her from litigating over the numerous issues presented by a matrimonial action when only certain issues are truly at hand. Ultimately, a postnuptial agreement can save a marriage.

Formulating the Agreement

Domestic Relations Law ' 236(B)(3) codifies the use of post-nuptial agreements, stating as follows:

An agreement by the parties, made before or during the marriage, shall be valid and enforceable in a matrimonial action if such agreement is in writing, subscribed by the parties, and acknowledged or proven in the manner required to entitle a deed to be recorded.

These agreements can be utilized by married couples to alleviate their anxieties about issues between them by defining each party's rights with regard to those issues. An amicable accord can be reduced to a writing, and with protection in place concerning the issues that brought them to a lawyer in the first place, the parties often can continue with an otherwise satisfactory relationship.

An important concept to visualize when sitting down to draft a postnuptial agreement is that the practitioner is looking to address a combination of historical events and future possibilities. In a divorce agreement, we are looking back at events historically. With a pre-nuptial agreement, we are looking at future possibilities rather than historical events.

There is no bright-line rule with regard to what should be included in a postnuptial agreement. Issues that may be resolved in the agreement might include ownership rights to certain pre-marital or marital assets; estate rights and the waiver of either spouse's elective share or intestate share; the division of property; one spouse's decision to sacrifice his/her career to stay home and raise the couple's children and how that will ultimately be dealt with in the event of a separation or divorce; the allocation of marital debt; and maintenance issues and other issues which would normally be addressed in a pre-marital agreement or a divorce agreement. While most matrimonial attorneys are familiar with pre-nuptial agreements, it is clear from the language of the Domestic Relations Law that postnuptial agreements hold the same weight as prenuptial agreements in a matrimonial action. Accordingly, the same protocol should be followed when drafting a postnuptial agreement (to the extent feasible and realistic) as would be required for the preparation and signing of a pre-nuptial agreement. This would include the following: 1) Both parties hiring independent counsel to represent them in the drafting and signing of the agreement; 2) Financial disclosure by both parties, including but not limited to the exchange of Statements of Net Worth and tax returns (preferably one-three years); 3) Notice of each party's present property and assets, with as much specificity as possible, that should be noted on an annexed schedule; 4) Having both parties subscribe and acknowledge the agreement simultaneously to assure its validity; and 5) Sufficient consideration to assure that the agreement will be binding on both parties.

Case Law Illustrates Requirements of Valid Agreements

Consider that final element: In order for a postnuptial agreement to be valid and binding, particularly due to the fact that a fiduciary relationship exists between the husband and wife, there must be adequate consideration. Such consideration may include the exchange of property, assets and/or liabilities. In Whitmore v. Whitmore, 8 AD3d 371 (2d Dept. 2004), the court held that postnuptial agreements are “subject to ordinary principles of contract interpretation and require consideration.” The court further defined consideration as “a benefit to the promisor or a detriment to the promise.” In Whitmore, adequate consideration was held not to have been provided, as the wife renounced her rights to the husband's property but the husband did not renounce his rights to the wife's property.

It is notable that the consideration does not have to involve an equal exchange. In the recently decided case of Schultz v. Schultz, 871 NYS2d 636 (2d Dept. 2009), the court held that a postnuptial agreement was valid and enforceable, stating: “[A]lthough the defendant received less than one half of the value of the marital assets because the agreement permitted the plaintiff to retain the marital residence, he was provided with meaningful bargained-for benefits, including the plaintiff's waiver of a viable lifetime maintenance claim.”

A knowing and considered agreement, free from elements of duress and incapacity, must be at the core of the exchange. In Barchella v. Barchella, 44 AD3d 696 (2d Dept. 2007), the court set aside a postnuptial agreement and stated “the Supreme Court properly set aside the agreement as unfair to the wife because of the husband's overreaching.” The Barchella court noted that the wife signed the agreement “against the advice of her attorney while she was undergoing treatment and suffering from the mental and physical effects of complications arising from a surgery.”

Where proper protocol is followed, there is no reason why the agreement should be set aside. For example, the issue of estate rights and the waiver of a spouse's elective share in a postnuptial agreement was recently addressed in the case of In the Matter of Doman, 58 AD3d 625 (2d Dept. 2009). In Doman, the court affirmed the validity of a postnuptial agreement between the parties that waived each spouse's interest in the other's estate so that they could adequately provide for their children from prior marriages. The court ruled that the petitioner's claims were time barred by the statute of limitations, dismissed the petition and stated: “The decedent's wife, Judith, waived her right to an elective share in a validly executed postnuptial agreement which was acknowledged in substantial compliance with the statutory requirements of EPTL 5-1.1-A(e)(2).”

The recently amended Domestic Relations Law ' 250 provides for a three-year statute of limitations for challenging a pre-nuptial agreement entered into prior to the marriage, or a postnuptial agreement entered into during the marriage but prior to service of process in a matrimonial action. The statute of limitations is tolled until process has been served in a matrimonial case or following the death of the spouse. This holds true in estate and non-marital lawsuits as the statute of limitations is tolled until the death of the decedent in regard to a claim made to the waiver of estate rights if a matrimonial action was never commenced (Domestic Relations Law ' 250, Subdivision 2). One final noteworthy caveat is that DRL ' 250 does not apply to a separation agreement made during the matrimonial action or in settlement of the matrimonial action (DRL ' 250, Subdivision 3).

Other notable cases regarding postnuptial agreements include the following: Hosseiniyar v. Alimerhri, 48 AD3d 635 (2nd Dept. 2008) (plaintiff's claim for rescission of the parties' postnuptial agreement was not untimely since there was continuing duress exerted upon the plaintiff by the defendant throughout the duration of the marriage); Hinck v. Hinck, 44 AD3d 619 (2nd Dept. 2007) (motion for summary judgment seeking to set aside a postnuptial agreement was denied); Tarone v. Tarone, 25 AD3d 779, (2d Dept. 2006) (Stipulation of Settlement, which was vacated, could not be considered a valid postnuptial or opting-out agreement); and Chalos v. Chalos, 128 AD2d 498, (2d Dept. 1987) (husband's failure to inform wife of the value of his assets did not constitute fraud because the wife knew about the husband's holdings in certain property, and the mere fact that husband did not apprise wife of their value is not sufficient to indicate that a fraud was perpetrated upon her).

Conclusion

In light of the amount of time and money a matrimonial action may potentially entail, and even more importantly, since a relationship may be preserved, attorneys should consider counseling potential clients about postnuptial agreements as an option, rather than immediately initiating a discussion concerning a separation agreement or divorce action. This is a viable alternative which enables a married couple to remain together. Especially in these economic times, remaining together may be a much more practical approach than separation or divorce.

Jerome A. Wisselman, a member of this newsletter's Board of Editors, is a partner in the Great Neck firm of Wisselman, Harounian & Associates, P.C. Eyal Talassazan is an associate with the firm.

It is not uncommon for a potential divorce client to express the idea that financial concerns, rather than emotional or other marital problems, have led him or her to consult with a matrimonial attorney. These money problems have resulted in feelings of desperation concerning the marriage and future. Common complaints underlying these concerns include dissipation of assets by a spouse to finance gambling addictions; paying for content on Internet sites to which the spouse is apparently addicted; accumulated debt through excessive shopping; or unwarranted amounts spent on dependent adult children from a prior marriage. When questioned about the relationship's other aspects, these clients often say that they do not really want divorce or separation. They feel, however, that there are no other options available to them to protect their financial survival.

In a number of these instances, we have suggested that these clients consider entering into a postnuptial agreement, a seldom used, but very effective, way to deal with issues such as these. A postnuptial agreement may provide a prospective client with an alternative that can save him or her from litigating over the numerous issues presented by a matrimonial action when only certain issues are truly at hand. Ultimately, a postnuptial agreement can save a marriage.

Formulating the Agreement

Domestic Relations Law ' 236(B)(3) codifies the use of post-nuptial agreements, stating as follows:

An agreement by the parties, made before or during the marriage, shall be valid and enforceable in a matrimonial action if such agreement is in writing, subscribed by the parties, and acknowledged or proven in the manner required to entitle a deed to be recorded.

These agreements can be utilized by married couples to alleviate their anxieties about issues between them by defining each party's rights with regard to those issues. An amicable accord can be reduced to a writing, and with protection in place concerning the issues that brought them to a lawyer in the first place, the parties often can continue with an otherwise satisfactory relationship.

An important concept to visualize when sitting down to draft a postnuptial agreement is that the practitioner is looking to address a combination of historical events and future possibilities. In a divorce agreement, we are looking back at events historically. With a pre-nuptial agreement, we are looking at future possibilities rather than historical events.

There is no bright-line rule with regard to what should be included in a postnuptial agreement. Issues that may be resolved in the agreement might include ownership rights to certain pre-marital or marital assets; estate rights and the waiver of either spouse's elective share or intestate share; the division of property; one spouse's decision to sacrifice his/her career to stay home and raise the couple's children and how that will ultimately be dealt with in the event of a separation or divorce; the allocation of marital debt; and maintenance issues and other issues which would normally be addressed in a pre-marital agreement or a divorce agreement. While most matrimonial attorneys are familiar with pre-nuptial agreements, it is clear from the language of the Domestic Relations Law that postnuptial agreements hold the same weight as prenuptial agreements in a matrimonial action. Accordingly, the same protocol should be followed when drafting a postnuptial agreement (to the extent feasible and realistic) as would be required for the preparation and signing of a pre-nuptial agreement. This would include the following: 1) Both parties hiring independent counsel to represent them in the drafting and signing of the agreement; 2) Financial disclosure by both parties, including but not limited to the exchange of Statements of Net Worth and tax returns (preferably one-three years); 3) Notice of each party's present property and assets, with as much specificity as possible, that should be noted on an annexed schedule; 4) Having both parties subscribe and acknowledge the agreement simultaneously to assure its validity; and 5) Sufficient consideration to assure that the agreement will be binding on both parties.

Case Law Illustrates Requirements of Valid Agreements

Consider that final element: In order for a postnuptial agreement to be valid and binding, particularly due to the fact that a fiduciary relationship exists between the husband and wife, there must be adequate consideration. Such consideration may include the exchange of property, assets and/or liabilities. In Whitmore v. Whitmore , 8 AD3d 371 (2d Dept. 2004), the court held that postnuptial agreements are “subject to ordinary principles of contract interpretation and require consideration.” The court further defined consideration as “a benefit to the promisor or a detriment to the promise.” In Whitmore , adequate consideration was held not to have been provided, as the wife renounced her rights to the husband's property but the husband did not renounce his rights to the wife's property.

It is notable that the consideration does not have to involve an equal exchange. In the recently decided case of Schultz v. Schultz , 871 NYS2d 636 (2d Dept. 2009), the court held that a postnuptial agreement was valid and enforceable, stating: “[A]lthough the defendant received less than one half of the value of the marital assets because the agreement permitted the plaintiff to retain the marital residence, he was provided with meaningful bargained-for benefits, including the plaintiff's waiver of a viable lifetime maintenance claim.”

A knowing and considered agreement, free from elements of duress and incapacity, must be at the core of the exchange. In Barchella v. Barchella , 44 AD3d 696 (2d Dept. 2007), the court set aside a postnuptial agreement and stated “the Supreme Court properly set aside the agreement as unfair to the wife because of the husband's overreaching.” The Barchella court noted that the wife signed the agreement “against the advice of her attorney while she was undergoing treatment and suffering from the mental and physical effects of complications arising from a surgery.”

Where proper protocol is followed, there is no reason why the agreement should be set aside. For example, the issue of estate rights and the waiver of a spouse's elective share in a postnuptial agreement was recently addressed in the case of In the Matter of Doman, 58 AD3d 625 (2d Dept. 2009). In Doman, the court affirmed the validity of a postnuptial agreement between the parties that waived each spouse's interest in the other's estate so that they could adequately provide for their children from prior marriages. The court ruled that the petitioner's claims were time barred by the statute of limitations, dismissed the petition and stated: “The decedent's wife, Judith, waived her right to an elective share in a validly executed postnuptial agreement which was acknowledged in substantial compliance with the statutory requirements of EPTL 5-1.1-A(e)(2).”

The recently amended Domestic Relations Law ' 250 provides for a three-year statute of limitations for challenging a pre-nuptial agreement entered into prior to the marriage, or a postnuptial agreement entered into during the marriage but prior to service of process in a matrimonial action. The statute of limitations is tolled until process has been served in a matrimonial case or following the death of the spouse. This holds true in estate and non-marital lawsuits as the statute of limitations is tolled until the death of the decedent in regard to a claim made to the waiver of estate rights if a matrimonial action was never commenced (Domestic Relations Law ' 250, Subdivision 2). One final noteworthy caveat is that DRL ' 250 does not apply to a separation agreement made during the matrimonial action or in settlement of the matrimonial action (DRL ' 250, Subdivision 3).

Other notable cases regarding postnuptial agreements include the following: Hosseiniyar v. Alimerhri , 48 AD3d 635 (2nd Dept. 2008) (plaintiff's claim for rescission of the parties' postnuptial agreement was not untimely since there was continuing duress exerted upon the plaintiff by the defendant throughout the duration of the marriage); Hinck v. Hinck , 44 AD3d 619 (2nd Dept. 2007) (motion for summary judgment seeking to set aside a postnuptial agreement was denied); Tarone v. Tarone , 25 AD3d 779, (2d Dept. 2006) (Stipulation of Settlement, which was vacated, could not be considered a valid postnuptial or opting-out agreement); and Chalos v. Chalos , 128 AD2d 498, (2d Dept. 1987) (husband's failure to inform wife of the value of his assets did not constitute fraud because the wife knew about the husband's holdings in certain property, and the mere fact that husband did not apprise wife of their value is not sufficient to indicate that a fraud was perpetrated upon her).

Conclusion

In light of the amount of time and money a matrimonial action may potentially entail, and even more importantly, since a relationship may be preserved, attorneys should consider counseling potential clients about postnuptial agreements as an option, rather than immediately initiating a discussion concerning a separation agreement or divorce action. This is a viable alternative which enables a married couple to remain together. Especially in these economic times, remaining together may be a much more practical approach than separation or divorce.

Jerome A. Wisselman, a member of this newsletter's Board of Editors, is a partner in the Great Neck firm of Wisselman, Harounian & Associates, P.C. Eyal Talassazan is an associate with the firm.