What Is a Postnuptial Agreement?
A postnuptial agreement is essentially a prenuptial agreement that is negotiated and executed after the parties are already married. It does not matter how long after marriage one or both parties decides to sign the postnuptial agreement. Although postnuptial agreements were historically disfavored, courts of record in North Carolina are now statutorily authorized to enforce these agreements, provided they satisfy certain criteria.
At the time of the writing of this blog, there is no reported case law in North Carolina regarding the enforcement of postnuptial agreements. In fact, the statute governing separation agreements, N.C. Gen. Stat. 52-10 et seq., makes no mention of agreements made after the marriage.
One important distinction regarding the enforceability of postnuptial agreements as compared to prenuptial agreements is that a postnuptial agreement is enforceable without consideration. Under equitable remedies , a postnuptial agreement is valid upon one party’s reliance where the other party to the agreement knew (or had reason to know) that he or she was creating a right and went forward anyway to create that right.
Although the law may still be developing as to postnuptial agreements, the practical reasons for entering into them is not. From a couple’s perspective, after being married for a period of time, a couple may recognize that their original prenuptial agreement is now out of date or fails to address the couple’s current situation. A couple may enter into a postnuptial agreement to modify their original agreement while in the blissful environment of their marriage rather than after having decided to separate and divorce like many prenuptial agreements.
Requirements for Postnuptial Agreements in NC
In North Carolina, a postnuptial agreement is only enforceable if it is in writing and signed by both parties. If you are considering entering into a postnuptial agreement you should hire an experienced family law attorney to draft the agreement and help you through the process of negotiation with your spouse. After the Agreement is signed by both parties, it is enforceable the same as an enforceable contract. A postnuptial agreement that satisfies the general requirements for a valid contract will be enforceable. For example, the agreement must not involve mistake, fraud, undue influence, misuse of confidence, or unconscionability. There are specific provisions that must be included in a postnuptial agreement under North Carolina General Statute §52-10.
North Carolina General Statute §52-12 specifically prohibits retention of alimony and child support pursuant to a postnuptial agreement entered into before July 26, 1981. However, it is unclear whether this statute applies to agreements entered into before July 26, 1981 regardless of whether the agreement is modified after July 26, 1981.
Common Terms of a Postnuptial Agreement
Postnuptial agreements in North Carolina tend to include provisions addressing asset division, alimony, and debt division in the event of a divorce or separation. In fact, North Carolina’s Equitable Distribution laws state that parties can elect to contract away any rights to property division and alimony through a valid, enforceable contract (meaning, a post- or pre-nup). 40-3.1(a).
Frequently, a postnuptial agreement may provide for the division and ownership of real and personal property and how assets, liabilities, and/or debts should be divided among the parties in the event of a divorce. When negotiating a postnuptial agreement, spouses often consider what they would likely receive or pay in an equitable distribution proceeding.
Additional components of a postnuptial agreement may include spousal support provisions, which are often comparable to equitable distribution and alimony statutes addressing the duration and amount of support to be paid by one spouse to the other.
Much of the time, a postnuptial agreement will also stipulate how marital and non-marital property are defined.
Finally, some postnuptial agreements address expectations between spouses regarding parenting responsibilities if the couple has children, feasibility of bankruptcy or estate planning, and provisions addressing the choice of forum for divorce or separation proceedings.
Advantages and Disadvantages of Postnuptial Agreements
Although there are many benefits to postnuptial agreements, they also have their drawbacks. Some of the benefits and drawbacks are as follows:
Benefits:
• Amicable means of addressing issues (allocation or income, property ownership, etc.)
• Safeguards against economic consequences of divorce or separation
• A way to try to reconcile those issues that are already troublesome, before they are litigated (spousal support/ alimony is one example).
• If you are going to do a separation agreement anyway, you might as well make it a postnuptial agreement.
Drawbacks:
• Can be perceived as a lack of commitment to the marriage.
• There may be an assumption that doing a postnuptial agreement means one is planning to divorce.
• Doing a postnuptial agreement means that a spouse is learning things about the other spouse’s finances that they did not know before (this can be good or bad, depending on the circumstances).
How to Form a Postnuptial Agreement in NC
Although agreeing in principle on the terms of a postnuptial agreement can be relatively easy, getting the fine print right can be challenging. I strongly recommend that anyone contemplating a postnuptial agreement or someone being asked to sign one hire a family law attorney to advise them in the drafting of the contract and/or review the contract before signing it.
In North Carolina, we don’t have standard forms for postnuptial agreements like we do in some other states. Every contract must be drafted to meet the unique desires and expectations of the parties. Having an attorney involved from the beginning of the process can assist with drafting issues as they arise. A postnuptial agreement that is signed without any input from an attorney who is looking out for your individual best interests can easily become much less favorable for you-even if you intend to be fair. There is no guarantee that you and your spouse will agree in writing on all of the provisions in the postnuptial agreement. That is where negotiations and compromises may come into play.
North Carolina law does require that for a postnuptial agreement to be valid , both spouses must actually sign it. Further, prior to signing the agreement, each person needs to confirm that they had the opportunity to seek independent legal counsel. This is not the same as saying you can’t be represented by the same attorney in negotiating the contract; it simply requires that each person be given an opportunity to seek legal advice from a different lawyer.
If you are being asked to sign a postnuptial agreement, seek legal advice immediately. It is a binding contract that may significantly impact your financial rights and obligations in many ways. Don’t delay. I have seen contracts undone at the last minute because the contract contained unanticipated provisions that adversely impacted one of the spouses. Finding a good, qualified family law attorney can prevent that last-minute disappointment. We have a comprehensive list of resources that can help you in your search for an attorney.
Disputing a Postnuptial Agreement in Court
Challenging a Postnuptial Agreement in North Carolina
Postnuptial agreements can be contested in court on several grounds. For example, the process is similar to that of a marriage contract (prenuptial agreement) in that it must be valid. If the postnuptial agreement is deemed invalid then it may be overturned. The agreement may have been obtained when one party to the agreement was under duress or undue influence in making the agreement. This means that one party to the agreement exercised unfair or improper pressure on the other party to the agreement so that the other person compromised their own free will to make the agreement. The party bringing the action contests the agreement’s validity based upon having been forced to enter into the agreement. In other words, the party forced into the agreement had no choice in the formation of the agreement. Sometimes this claim may be brought in a divorce action by a spouse who signed the postnuptial agreement but now wishes to divorce his/her spouse. The other claim likely to be brought is that the agreement is voidable. A voidable agreement is one where the spouse who was forced to sign the agreement had no time to read the agreement or did not understand its contents. The person who signed the contract did not understand what the agreement contained and therefore "bought a cat in a sack". Not taking enough time to read and understand the agreement is usually strong evidence of duress or undue influence. As with the case of duress or undue influence, the issue of time would arise as would the issue of the party signing the agreement not having a fair chance to study the agreement. Sometimes provisions in the agreement pertaining to alimony or property divisions may be grossly unequal so that a judge may infer duress or undue influence. To invalidate a postnuptial agreement, the party contesting the agreement must file an action in the district court, whose family law judges are familiar with such cases. Usually the action will be heard shortly before the trial of the divorce case. The action contests the validity of the agreement if the agreement was entered into under duress or undue influence. The family law judge may invalidate the agreement which will permit the case to proceed to trial without the terms of the agreement having any effect. The action is not heard on appeal in the case of a divorce action but is a separate civil action.
Postnuptial vs Separation Agreements
The Postnuptial Agreement is often confused with the Separation Agreement, despite the fact that these two documents are used in entirely different circumstances and for different purposes during parties’ marriages:
Postnuptial Agreement
The Postnuptial Agreement is utilized where a husband and wife have been married for some time but desire to change their property rights while married. The Postnuptial Agreement remains valid until the end of the marriage. The date of marriage will not be changed by the Postnuptial Agreement, nor will the parties be labeled as "living separate and apart." A Postnuptial Agreement has become an increasingly common tool for married people who wish to set contract terms for what will happen if they later file for divorce.
Separation Agreement
The Separation Agreement is utilized where a spouse wants to separate from another human being. In that circumstance , you must satisfy North Carolina’s one year separation period prior to filing for divorce before the terms of the Separation Agreement can be enforceable in a court of law. A Separation Agreement sets out the parties’ intent to live separate and apart, as well as the parties’ agreements as to alimony, child custody, child support, equitable distribution of the marital property, and any additional agreement between the parties. Following a separation, the parties may agree to alter the terms of their Separation Agreement and enter into a Postnuptial Agreement which will take effect during the marriage.