An Overview of Postnuptial Agreements
When most people think of marital agreements, prenuptial agreements come to mind. However, postnuptial agreements have become increasingly more common in Utah and other states. A postnuptial agreement is simply a written contract between a husband and a wife that must be signed by both parties, and is enforceable by the court. It is an agreement that is designed to settle, resolve and be binding on the parties regarding all relevant facts about themselves and their marriage, including property, finances and future rights. A postnuptial agreement is distinct from a prenuptial agreement because a prenuptial agreement is entered into before marriage while a postnuptial agreement is entered into after marriage . There are typically two types of situations where a postnuptial agreement might be appropriate.
First, if there has been a change in financial circumstances (good or bad), such as an increase in income and assets or a loss of a job, it may be wise to establish a postnuptial agreement clarifying certain details.
Second, there may still be some mistrust in the marriage that is affecting the marriage negatively. There may even be prior valid legal grounds for a divorce. In these cases, a postnuptial agreement may help point a broken marriage back on the right track by addressing the concerns in a transparent manner and may help prevent or discourage a divorce.
The Legal Necessities for Postnuptial Agreements in Utah
A postnuptial agreement in Utah is a legally enforceable contract entered into by the spouses during the course of their marriage. The legal requirements for postnuptial agreements in Utah are relatively simple. In Utah, the Marriage & Divorce Act (the "Act") sets forth the legal requirements for postnuptial agreements in Utah.
Only spouses who are legally competent can enter into a valid postnuptial agreement. A spouse is competent if he or she understands the agreement and its legal implications. To be sure that your spouse is competent to sign a valid postnuptial agreement, verbal or written proof of the spouse’s legal competency may be obtained from the spouse’s physician.
To ensure the validity your postnuptial agreement, both spouses must also voluntarily agree to enter into the agreement. Even though your spouse may be competent to sign a postnuptial agreement, he or she may not do so voluntarily. Voluntariness simply means that neither spouse is being forced to enter into the postnuptial agreement. To ensure the voluntariness of the postnuptial agreement, the parties should engage in open and honest discussion of the issues to be addressed. Additionally, if the parties do not have similar levels of financial knowledge or do not have the financial resources to address all of the issues to be addressed in the postnuptial agreement, the parties should consult with legal counsel to ensure the agreement is fair and equitable to both parties.
The Act also requires any postnuptial agreement to be in writing and signed by both parties. Even if you are certain that your postnuptial agreement is legally enforceable, signing the agreement and storing it away at home may not be adequate. A postnuptial agreement should be filed with the appropriate court to ensure its enforceability. If a postnuptial agreement is not filed with the court, either party may use the lack of a filed agreement to refute the validity of the agreement.
Contrary to the statutory requirements for a valid postnuptial agreement, all agreements related to alimony are subject to the approval of the court. Simply stated, although the parties can agree to an order or judgment for alimony, the court must still approve the order or judgment. Even if the court approves the postnuptial agreement and enters the contract into the court’s record, the court may later modify or terminate the agreement if it finds that the terms of the agreement were inequitable. Therefore, the courts have the discretion to alter the terms of the postnuptial agreement to ensure equity and fairness between the parties at trial.
Once the court finds that the postnuptial agreement is valid, the court will proceed to entry of judgment according to the terms of the agreement. If the court finds that the postnuptial agreement is invalid, the court will proceed with trial and will usually divide the property according to the statutory requirements for dividing property during divorce.
The Benefits of Postnuptial Agreements
The advantages of a postnuptial agreement are many. Among the most significant are the ability to clarify expectations in the event of a divorce or separation, protect the assets of a party, or reserve alimony determinations for later. Where a prenuptial agreement can often be ignored if one party feels that he or she was bullied into signing it, however, a postnuptial agreement – as something that is signed after the marriage has begun – may not be subject to the same sort of scrutiny or second guessing. This can often be an important consideration when one or both of the spouses have children from prior relationships, and may also be important to a couple where there are concerns about significant disparate income at different points in the marriage.
A postnuptial agreement is similar to a prenuptial agreement, except that it is drafted after the parties are already married. It can help define how property will be divided in the event of a divorce. The agreement can also set alimony obligations and how property is to be divided in the event of a spouse’s death.
In recognition of the fact that one party may be at an advantage in negotiating the terms of a postnuptial agreement, Utah provides specific requirements for enforceability. For a postnuptial agreement to be enforceable, it must be in writing. The parties must both fully disclose their financial situations to each other before signing. Further, the agreement must state its purpose in plain language.
Where there is a pending divorce proceeding, parties may also sign a marital settlement agreement to help resolve the issues of alimony and property division.
Debunking Common Postnuptial Agreement Myths
Myth 1: Postnuptial agreements are unfair to one party. Although it may seem that one person is receiving all of the benefit in a postnuptial agreement, the fact is that both people usually receive some sort of benefit. For example, you may agree to the sale of a business at a mutually beneficial price when the time is right. Each spouse may walk away from the transaction equally. In other situations, parties may agree to different levels and types of spousal support during the marriage to support a spouse going back to school with the intention of better supporting the family in the future.
Myth 2: One postnuptial agreement can be drafted to cover all of the situations you can experience in your marriage. The future is full of uncertainties and possibilities. You may be negotiating the sale of a business, and then the deal falls through during the divorce. You can never truly draft an enforceable contract which covers every possible scenario in the future.
Myth 3: A postnuptial agreement will have no impact on your marriage, because the agreement only comes into effect if you later divorce. While it may feel uncomfortable and it may seem forced, the very process of discussing a postnuptial agreement can help you open up the lines of communication with your spouse. It can help you to address concerns which may be contributing to marital discord. It can help you to figure out how to keep debts low, how to be responsible with your finances, and how to make financially responsible choices. It can also help to organize your affairs so that should you ever later separate or divorce, you will already be organized, and it will be much easier to divide up property and debts.
Myth 4: A postnuptial agreement will ensure financial protection if you divorce, no matter the circumstances of the divorce. Postnuptial agreements do not guarantee a specific outcome in divorce litigation if you do not draft your postnuptial agreement correctly. A postnuptial agreement cannot guarantee the outcome you would get from a divorce judge. If you fail to properly adhere to the requirements for validity, your postnuptial agreement may be unenforceable.
Myth 5: For a postnuptial agreement to be enforceable, each spouse should have his or her own independent legal counsel to review the contract, separate from counsel to the marriage. While it is not strictly necessary to have your own attorney, it is a good idea. Having legal counsel allows you to ask questions about the language of the contract and it allows each spouse to feel more confident that risks are minimized.
Creating a Postnuptial Agreement in Utah: The Steps Involved
Drafting a postnuptial agreement involves several steps, starting with identifying both you and your spouse’s needs and goals, as well as the relevant Utah and federal laws that might apply to your case. Then, you will need to decide on an effective strategy to reach applicable goals. Engaging the services of qualified legal professionals who are familiar with the terms and processes involved in a Utah postnuptial agreement will likely result in the best possible outcome.
Once you have both worked with your attorney or other legal advisor to finalize the terms of your postnuptial agreement, you should each review the relevant details in depth. If either spouse questions the details, he or she should discuss those questions with the other party to determine if there are any issues to address or modifications to be made . Once both parties agree to the provisions of the agreement, they will sign and date two copies (one for him, one for her). Each party will keep a copy of the postnuptial agreement after it is signed for his or her future records. It is never a good idea to put off actually signing a document once you have reached an agreement – especially in a divorce. Concerning a postnuptial agreement, however, both spouses must be able to take as much time as necessary to consider the agreement in its entirety, revise it as needed, and not sign it until they are both ready to do so. Each spouse should even consider the help of his or her Utah divorce attorney at the time of signing to ensure that no last-minute changes or alterations have a major impact on the terms set forth by the agreement.
How Postnuptial Agreements Operate Under Utah Law
In adjudicating the enforceability of a postnuptial agreement, Utah courts will likely consider multiple factors, such as whether there was full and fair disclosure of the parties’ financial conditions and whether the party seeking to enforce the agreement had legal representation when signing the agreement.
Additional factors that may be considered, although not technically required, include whether there was consideration for the agreement and whether the terms of the agreement—and the negotiations surrounding it—were fair. Some argue that the agreement terms themselves and whether the agreement was negotiated at arm’s length are also factors that should be considered. Ultimately, the analysis of Utah courts in these cases will likely consider the "totality of the circumstances" when determining whether an agreement is valid and enforceable. That being said, the analysis may differ to some extent in cases involving separation agreements and divorce settlements given that under Utah Code Section 30-3-2, those types of agreements are allowed to be valid and enforceable even if they are not fair. A couple of examples of separation agreements addressed in Utah case law, where the whole essence of the agreement was premised on being fair and supported by consideration, are:
It is not yet clear whether the factors discussed above would be considered in the same way as the factors considered in adjudicating prenuptial agreements. There has been little Utah case law on the topic of postnuptial agreement. In fact, to date, there are only two Utah cases that have been discussed in other states as case law concerning postnuptial agreements. Both of these cases involved the validity and enforceability of separation agreements that were the result of mediation during a divorce proceeding in Utah family court. The first case did not find some of the provisions of the agreement to be for mutual consideration and therefore unenforceable by the parties. The second case upheld the validity and enforceability of a settlement agreement reached in mediation without any indication that it was not a fair or just agreement.
Revoking and Amending Postnuptial Agreements
Although a postnuptial agreement is enforceable in Utah, certain circumstances may make it necessary to revoke or amend the agreement. To be effective, any modification should be made in writing and signed by both parties.
Among the most common reasons for amending a postnuptial agreement include:
The parties do not want the agreement to apply to any future child and instead desire to return to the default rules of the Utah Child Support Guidelines and the Utah Divorce Act.
A spouse wants to waive the parties’ obligation to pay a specified amount to a third party, such as a credit card company, under a marital debt.
A spouse wants to waive his or her right to make a claim against the other spouse’s estate.
To address new debts of either party or modified assets.
Obligations under a postnuptial agreement , including payments for the support and maintenance of a child, are enforceable only through contempt proceedings, not through the enforcement of a judgment.
Utah law provides that either spouse can move to set aside or modify the postnuptial agreement. Generally, the postnuptial agreement will only be set aside upon a showing that a spouse entered into the agreement involuntarily, unreasonably understood its consequences or that the agreement was the product of fraud. Likewise, an amendment to the postnuptial agreement will only be set aside upon the showing that the other spouse did not sign the agreement or that the agreement was the product of fraud.