Everything You Need To Know About Postnuptial Agreements
While many couples sign prenuptial agreements before their wedding date, we also are often asked about implementing similar agreements for couples already married. These couples usually are considering divorce and want to resolve issues surrounding the division of their marital assets before a possible divorce. In some cases, couples are rebuilding a marriage that has lost trust and want to resolve the financial implications of a possible divorce in order to focus on their relationship. Regardless of the situation, we always start by considering whether or not a postnuptial agreement is necessary or helpful.
Who needs a postnuptial agreement?
In Georgia, we usually recommend a postnuptial agreement for couples who have significant assets and /or complicated financial issues such as trusts or owning a business together. Georgia law requires an equitable distribution of assets in a divorce, which means a court will divide the marital estate approximately 50-50, absent a postnuptial or prenuptial agreement that sets out different terms. However, courts also may deviate to less equal divisions for cases involving sizeable marital estates.
For most couples, a 50-50 division of assets becomes the starting point for negotiations since the spouse in the weaker bargaining position knows this is the least that he or she would expect to be awarded by a court. We often see cases where we tell our client to reject the first postnuptial agreement proposal because it tends to be far away from the 50-50 starting point. However, there are situations where a smaller share is a good option. A spouse may choose to settle for less than 50% of the marital estate if it comes with no strings attached, such as contingencies associated with the profitability of a family business.
Is the postnuptial agreement legally binding?
Georgia law establishes clear guidelines for prenuptial and postnuptial agreements and there are three basic grounds the courts look at to determine whether a postnuptial agreement will be enforced, which include:
- Coercion, fraud or misrepresentation. We would never accept an agreement that was rushed and did not provide time for extensive due diligence.
- An unconscionable agreement. Is the agreement so one-sided that no reasonable person would be expected to sign it?
- Have the circumstances that existed at the time the agreement was entered into changed so as to make it unenforceable?
Given the high cost of litigation, couples often will negotiate a resolution to a disputed prenuptial or postnuptial agreement. Those who elect to go to court find that it is not easy to overturn a postnuptial agreement in Georgia, and successful challenges most often are the result of a lack of full financial disclosure. Our firm spends a great deal of time on financial due diligence, and we usually will bring in an outside financial expert. We expect the other side to bring in the same type of expert, and if there is a business involved, we often will ask for an outside appraisal. The postnuptial agreement also can overlap with trusts and estate planning, which requires additional legal counsel.
What a postnup agreement does not cover
A postnuptial agreement cannot provide enforceable terms for child support or custody. However, it can include provisions for alimony since that is considered separately from a spouse’s duties as a parent. (We have seen agreements that have a provision for child support, but it is not enforceable. Georgia has extensive laws that dictate how children are to be treated in a divorce, and those arrangements must be approved by a court as being in the best interest of the child.)
Any high-asset couple contemplating a divorce should consider a postnuptial agreement as a way to simplify the process, especially if they are not ready to move forward immediately with the marriage dissolution. On average, putting together a postnuptial agreement for a high-asset couple will take two to four months. As with any contract, proceed deliberately, and never sign any agreement in a hurry and without legal and financial advice.