Postnuptial agreements are becoming increasingly popular as a means of creating financial harmony in marriages. They help solidify the relationship by providing both parties with a solid understanding of each other's assets, debts, and future financial wishes. The following information discusses key considerations when completing this agreement.
Defining what property is considered "separate property" and what property is considered "shared property" is one of the central features of any postnuptial agreement. Shared property is any property in which the spouses have signed documentation reflecting their clear intention to share ownership or any property purchased using joint funds. Each party will receive an interest in property purchased using joint funds (funds from both spouses) in proportion to their contribution.
Note that the parties may always change the amount of their ownership interests in shared property or reclassify separate property as shared property (and vice versa) through a written agreement. In the event of a divorce, shared property will be divided, typically by either selling the property and dividing the proceeds or by one spouse keeping the property and paying the other spouse half of the value.
It is important to realize that courts are not required to follow every term in a postnuptial agreement. For instance, courts in some states are not necessarily required to follow provisions related to spousal support. Divorce and family courts must first determine which provisions of the spouses' postnuptial agreement will in fact be upheld. However, by using a postnuptial agreement, the spouses greatly improve their odds of having their original wishes carried out in the event the marriage ends by divorce, annulment, death of a spouse, or otherwise.
It is recommended that each spouse consult his or her own independent counsel to review the rights and obligations under this agreement, especially if one party has more bargaining power or higher education. However, in the event that the parties opt to waive (give up their legal right) to independent counsel, the parties need to sign the waiver attached to the agreement titled "Advisement and Waiver of Independent Counsel." Please note that Minnesota and South Carolina always require each party to be represented by independent counsel. We do not provide the waiver of independent counsel if you are signing the agreement in one of these states. Furthermore, independent counsel is strongly advised in Alabama and Massachusetts but not required.
It is also very important that both spouses be completely thorough in disclosing all assets, debts, and income sources in the document. Failing to do this can result in the agreement being invalidated if it is ever litigated in court.
It is recommended that you include a mediation and/or arbitration provision when prompted. This will require disputes to be settled through mediation or binding arbitration and avoid the time and expense of going through the formal court system.
A postnuptial agreement is not a replacement for having a last will and testament. Furthermore, nothing in this agreement prevents the parties from naming each other as beneficiaries in their wills, trusts, or retirement plans.
State law normally requires both spouses to have at least a reasonable amount of time from the time they first receive the postnuptial agreement to review it and seek any legal or financial counsel before signing. It is highly recommended that the spouses wait at least one week from the time of first receiving the agreement before signing to ensure that the agreement will be enforceable.
In order to make sure your agreement is legally valid, you need to ensure that it is properly executed. When the parties are ready to sign, they should be sure to initial at the bottom of every page of the agreement in order to show that each page was read. You should then sign where indicated in the presence of a notary and two witnesses (three witnesses are needed in New Hampshire and Vermont).
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