In Part 1 of our series on postnuptial agreements, we discussed six reasons why postnuptial agreements are gaining popularity; in Part 2, we will identify the most important factors in ensuring your postnuptial agreement is legally enforceable in New York.
Postnuptial agreements are, first and foremost, contracts between married parties. However, they differ from standard contracts in one fundamental way: Unlike traditional business contracts, the parties entering into postnuptial agreements owe a higher duty toward each other - what the New York courts have called "a fiduciary relationship requiring the utmost of good faith" (Petracca v. Petracca). For the court to uphold a postnuptial agreement, there must be a heightened level of fairness to each party. Accordingly, in the event that you decide to draft a postnuptial agreement, or you are presented with one by your spouse, you should make sure the following features are present:
• Consideration - This legal term essentially just means that each party is giving something up (it can be tangible, like real estate or money, or intangible, like a legal right or the value of a graduate degree) in exchange for what that party is receiving. Courts will not uphold an agreement in which one party is required to give up all of his or her expectations in a potential divorce, but the other party makes no concessions.
• Fairness - This is a vague concept, but courts will not uphold an agreement that puts one spouse in a significantly more advantaged position than the other in the event of divorce. If an agreement promotes an unfair outcome, it will not be enforced. It is not necessary for the disparity to be fraudulent or even intentional - even unintentional unevenness may cause the courts to invalidate an agreement.
• At Least Two Attorneys - Each party should consult with an independent attorney of his or her own choosing. If, as a result of an agreement, one party winds up in a financial position that is substantially more secure than the other, and that party's attorney drafted the agreement, courts will find this suspicious and be less likely to enforce the agreement.
• Signatures and Acknowledgments - There are very specific rules regarding signatures on postnuptial agreements; the slightest error will invalidate the whole agreement. It is a good idea to consult an attorney and make sure the document is executed with the required formalities.
• Full Disclosure - Each party must inform the other of each and every asset he or she has or expects to have in the future (business interests, inheritances, etc.). The concealment of assets of one spouse from the other will invalidate a postnuptial agreement.
By consulting with an attorney in the event that you and your spouse decide to separate or divorce, you will be able to ensure that your postnuptial agreement will be enforceable.