Recently in Postnuptial Agreements Category

July 2, 2013

Supreme Court Strikes Down DOMA

Vacca - DOMA.jpgOn June 26, 2013, the United States Supreme Court declared parts of the Defense of Marriage Act (DOMA) unconstitutional. The decision, a huge civil rights victory for the gay community, will require federal law to recognize same-sex marriages the same way they recognize heterosexual marriages. This will grant same-sex spouses (at least in states that recognize same-sex marriage, such as New York) countless benefits that had previously been denied them under the statute. Now, same sex couples will be able to file joint income tax returns, enjoy spousal and survival status under Social Security, inheritance and estate laws, and be entitled to COBRA and other health insurance benefits. Effects on immigration have been among the most dramatic and immediate, as American citizens can now apply for permanent resident visas, or green cards, for their foreign-born same-sex spouses. Couples began receiving notification of approval for green cards as early as June 28.

As matrimonial attorneys, we are excited about this decision, not only because of the impact it will have on the same-sex couples that are married or contemplating getting married in New York, but also because of the ways in which it will affect the practice of matrimonial law. Previously, any agreement between same-sex couples, whether prenuptial or separation, required drafting around the federal benefits to which married heterosexual couples are automatically entitled with no way to compensate for the omission. Granting same-sex spouses the same federal rights as their heterosexual counterparts allows not just for more equality but also more uniformity under the law.

We applaud the Supreme Court for recognizing this and look forward to further advancements in same-sex rights.

Vacca - image - headshot - skt - apr 18 2013.jpgAndrea Vacca
570 Lexington Avenue
Suite 1600
New York, NY 10022
avacca@vaccalaw.com

February 20, 2013

Preparing to Negotiate a Postnuptial Agreement

In previous blog posts we discussed the reasons why postnuptial agreements are becoming more popular and how to ensure that your postnuptial agreement is enforceable under New York law. If you've decided that a postnuptial agreement is something that you want to pursue, it is important to be adequately prepared for the negotiation process. These are some suggested steps that you should take before you begin:

• Write Down Your Own Goals And Concerns - It is easy to become overwhelmed by all of the questions you will have and to get distracted by all the issues that you may want to resolve. Likewise, it is easy to lose sight of the big picture and, due to the nature of the agreement, become overwhelmed by emotion. Taking time before negotiations begin to write down your long-term goals and concerns will help you maintain your focus on ensuring the best possible outcome for you and your spouse. It will also aid the negotiation process. By articulating a defined goal rather than becoming attached to a specific formula or percentage, both spouses are more likely to use creativity in finding a solution.

• Become Familiar With Your Assets And Liabilities - You cannot enter an agreement concerning your financial future without understanding your current financial circumstances. Familiarize yourself not just with your current property, debts, salary, and investments, but also what you and your spouse's potential earning capacity may be, any anticipated increase in asset values or liabilities, and any expected inheritance or trust payouts. You may find it helpful to consult with a financial advisor who has experience working with clients who are negotiating postnuptial agreements.

• Get Educated About The Law - Speak with an attorney who can educate you about the relevant laws related to spousal and child support, how assets are defined, valued and distributed, and what laws govern custody and parenting issues. Understanding your legal rights and obligations will give you a better idea of what a postnuptial can or cannot do for you and which issues may be easier to resolve than others.

• Get Educated About the Negotiating Processes Available - An attorney will also be able to help you decide what negotiating process will best serve you and your spouse. Do you and your spouse each feel comfortable advocating for your own needs and concerns? If so, mediation might be a good option. If one or both of you feels more comfortable having your attorney by your side during the negotiations, working in a collaborative manner might make the most sense. Or perhaps it would be too uncomfortable being in the same room as your spouse while you are negotiating such an agreement because emotions are running high. In that case, the best option for you may be to leave the communication to the lawyers. Speaking with an attorney who has negotiated postnuptial agreements via these different processes will help you determine what makes the most sense for you and your spouse.

• Hire Independent Legal Counsel - Even if you are proceeding by mediation, it is imperative that each spouse have his or her own attorney to consult with and review the agreement. An attorney can help clarify (and ensure compliance with) the laws of the state governing the postnuptial agreement, advise on the best way to divide the assets and liabilities at issue, and provide advice about how to negotiate for the outcome you desire. It becomes even more important to have your own lawyer if your spouse has one. This will help ensure equal bargaining power between the two of you. An even playing field is necessary not only to help both spouses feel confident during the negotiation process, but also in the event that the agreement winds up in court with one spouse claiming it was not entered into fairly.

These steps should assist you in coming to a fair and equitable agreement. Approached correctly, postnuptial agreements can be useful tools in preserving and strengthening a marriage and giving each party the peace of mind they need to feel secure about their futures.

January 17, 2013

Ensuring a Postnuptial Agreement is Enforceable in New York

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.

January 7, 2013

6 Reasons Postnuptial Agreements Are Gaining Popularity

Requests for postnuptial agreements are on the rise in New York and across the country. According to a recent survey by the American Academy of Matrimonial Lawyers (AAML), more than half of its members have seen an increase in the number of clients requesting postnuptial agreements.

A postnuptial agreement is a contract entered into by married couples that provides terms that will govern in the event of death or divorce, including how to divide assets, the relinquishment of certain property rights that spouses would otherwise be entitled to and the terms of spousal support and child support.

Why Might A Couple Want A Postnuptial Agreement?

Postnuptial agreements are useful in a variety of circumstances and for a variety of couples, regardless of age or wealth. These reasons include:

1. Financial Concerns - A party may learn that his or her spouse has secretly incurred debt that threatens the family's financial stability. Or one spouse may learn that the other has been hiding a gambling addiction. These types of revelations can lead to issues of trust so serious that they can damage the marriage. For couples that wish to stay together despite these circumstances, a postnuptial agreement can lay out the terms of who will be responsible for paying the debt, both during the marriage and in the event that the marriage should end, and can provide terms that require the indebted spouse to indemnify the other spouse against any financial harm resulting from the debt or gambling. The non-indebted spouse thus has the benefit of knowing that he or she will remain financially secure or, at the very least, will not be worse off if he or she agrees to give the marriage more time to repair itself.

2. Unequal Assets - A spouse who has made significantly more money than the other spouse may want to secure a higher proportion of the parties' assets in the event of divorce. Similarly, a spouse who has stepped out of the workforce to raise children, may feel financially insecure due to a lack of retirement savings or reduced earning capacity. In either of these situations, a spouse may need an agreement that provides him or her with an unequal distribution of property in order to feel secure in the marriage.

3. Second (or Third) Marriages - Oftentimes, spouses who have been married before bring to a new marriage assets that they wish to preserve for children, grandchildren or even parents to whom they feel financially obligated. A postnuptial agreement can make clear which resources during the marriage can be used to help support a spouse's other family members and which are off limits. In the event of death, a postnuptial agreement can provide the surviving spouse with financial security by allowing him or her to remain living in the deceased spouse's home and/or using financial resources that may eventually be inherited by the deceased spouse's children or grandchildren.

4. New Inheritance - If one spouse inherits assets during the marriage, those assets will be seen as separate property if they are kept apart from marital funds and remain in the inheriting spouse's own name. But what if the inheriting spouse wishes to use those assets to help buy a new family home or make another investment that will benefit the family? A postnuptial agreement can be used to state exactly what will happen to the funds in the event of death or divorce, thereby helping the spouse who inherited the assets to feel secure and helping the other spouse and the family to benefit from use of the assets during the marriage.

5. Purchases of Property - Similar to deciding what to do with inherited funds, if a couple uses one party's funds earned prior to the marriage to purchase or renovate a home, there may be concerns about who gets credit for providing the funds used to purchase the home, whose name will be on the deed, and what may happen to the home should the marriage fail. If the marriage is already somewhat troubled, these concerns can be even more prominent. A postnuptial agreement can take this particular stress out of purchasing property by laying out terms for what will happen to the property and the assets that went into its purchase or renovation in the event that the marriage fails.

6. Never Signed a Prenuptial Agreement - Some couples plan to enter into a prenuptial agreement, but either run out of time in which to execute the document before the marriage, or back off of the concept because one or both of the parties is uneasy about it or feeling too much pressure. A postnuptial agreement can lay out whatever terms the parties would have included in a prenuptial agreement, and can be entered into at any point after the marriage, when emotions are not as high.

These are just some of the reasons why it might make sense for a couple to enter into a postnuptial agreement. Just as all marriages are different, so are the issues that arise that can be resolved with a prenuptial agreement.

In our upcoming blog posts, we will discuss what terms need to be in a postnuptial agreement to make it enforceable in New York and how to prepare yourself for the negotiation process and choose the right attorney for you.

May 14, 2012

Prenuptial Agreements: Top Ten Reasons for Signing

The summer months have traditionally been the most popular for weddings, which could be why calls to my office from couples seeking prenuptial agreements tend to increase each spring. Following is an "encore presentation" of an article regarding such agreements that was published on this site last July.

A prenuptial agreement is a written agreement that both members of a couple enter into before their marriage. This agreement spells out how assets are distributed in the event of divorce or death. Though they are commonly associated with wealthy couples, in reality, couples from any socio economic background can seek a prenuptial agreement. In order for the agreement to be valid, both parties must enter into it knowingly and voluntarily. If any coercion is involved, the agreement is invalid.

Many couples avoid prenuptial agreements because they don't want to believe that their marriage could end in divorce. Yet a "prenup" does not have to mean that you are hostile toward your future spouse. In fact, it can actually be a way to make sure you and your spouse are on the same page during the marriage and avoid hostility during a divorce. Here are some of the top reasons for getting a prenuptial agreement:

1. You don't want your spouse to own a piece of your business. In New York, if a business appreciates in value during the marriage, that appreciation can be considered a marital asset. That means without a prenuptial agreement, your spouse could receive a piece of your business, which could cause further tensions between the two of you and with your business partners.

2. You don't want your spouse to have an interest in your professional practice. Likewise, without a prenuptial agreement, the increased value of a professional practice that you started before the marriage can end up being partially distributed to your spouse.

3. You expect to be a stay-at-home parent. A spouse who chooses to stay home with the child is not building retirement assets in their own name and could be seen as not actively contributing to the acquisition of other marital assets. With a prenuptial agreement, the stay-at-home spouse can be guaranteed an equitable share of the assets and a certain level and duration of spousal support.

4. You are wealthier. While prenuptial agreements are not strictly for the wealthy, many wealthy people find them worthwhile to guarantee that their partner is not marrying them for their money.

5. You own assets that you want to protect from being used to pay off your spouse's debts. Many people own homes, businesses, and have savings prior to their marriages. In the event of a divorce, one spouse can file for bankruptcy, and without a prenuptial agreement in place, creditors might go after the other spouse's premarital assets to help pay off that debt.

6. You have children by a previous marriage whom you want to make sure receive a proper inheritance. Without a prenuptial agreement, property that was yours can end up partially in the hands of the other spouse, who could then pass it on to his or her children instead of yours.

7. You want to keep certain heirlooms in the family. Similarly, if you have valued possessions that you wish to pass down to your children, you can specify it in a prenuptial agreement.

8. You want to avoid an expensive divorce. One of the biggest benefits of a prenuptial agreement is that it prevents drawn out, expensive legal battles over custody and property. You save money that might otherwise have been spent on attorney fees.

9. You want to protect your children from a nasty divorce. Since a prenuptial agreement can prevent a court battle, it also prevents relations between the spouses from deteriorating even further. Spouses are able to maintain a civil tone, which is better for all involved, especially the children.

10. You want peace of mind. You know that if your marriage fails, you have a "back-up plan" that provides you and your spouse with more control, so that neither of you will suffer unnecessarily.

It is important to note that if circumstances change, it is never too late to amend an existing prenuptial agreement - even after the wedding - or to craft a postnuptial agreement.

September 25, 2011

Same-Sex Divorce: It's Complicated

New York is now the seventh (and largest) jurisdiction to recognize same-sex marriage. This is an important and wonderful right for many couples and their families, which was evident in the media as we saw the first of these smiling and ecstatic couples marrying on July 24, 2011 and the days that followed.

While it may not seem romantic to think about these happy couples facing divorce and separation after they have waited so long for the right to marry, same-sex couples need to be extra vigilant to protect themselves and their families in the event that they decide to end their marriage. Some of the issues about which they need to be concerned include:

Lack of Federal Rights
The Defense of Marriage Act (DOMA), defines marriage as a legal union between persons of the opposite sex and permits states to refuse to legally acknowledge same-sex marriages performed in other states. The result is that a multitude of federal rights and obligations given to heterosexual spouses are unavailable to same-sex spouses. The Obama administration has refused to defend DOMA, claiming it is unconstitutional, but its existence makes divorces for same-sex couples even more complicated. For example, same-sex couples are not entitled to tax-free distribution of their spouse's pension and retirement funds, they cannot deduct spousal support payments from their income, they do not have the option of collecting social security based upon their spouse's income if they've been married for at least 10 years, and they are not entitled to COBRA benefits which would allow them keep their medical insurance offered through their spouse's employer for 36 months following divorce. Same-sex couples who divorce must consider this lack of federal rights when dividing their property and determining issues of spousal support.

Jurisdiction Issues
If a same-sex couple marries in New York, moves to one of the 44 states that do not recognize same-sex marriage, and then decides to divorce after being away from New York for one year, they will neither be able to divorce in that new state nor in New York. This is because the new state does not recognize their marriage and New York no longer has jurisdiction over it. It is therefore imperative that same-sex spouses think very carefully before moving to a state that does not recognize their marriage and that they draft a postnuptial agreement to define and protect their rights and obligations.

Child-Related Issues
In New York, there is a presumption that a child born during a marriage is the child of both spouses. The complication for same-sex divorcing couples in determining custody and child support arises when the non-biological parent has not adopted the child and they are living in a state that does not recognize their marriage. To protect both parents' rights and avoid the complications that may arise if the parents move away from New York, it is imperative that the non-biological parent adopt the child as soon as it is born.

The Importance of Prenuptial and Postnuptial Agreements
While prenuptial and postnuptial agreements cannot change the fact that a state may not have jurisdiction over the marriage of same-sex partners, it can make it clear that New York law will govern the issues of a marital dissolution. Additionally, these agreements offer many other protections that same-sex spouses and their children need in the event of divorce. For example, prenuptial and postnuptial agreements can outline:
- How child custody and child support will be handled (as long as children are already born at the time the agreement is written).
- How to handle the division of property between spouses given the fact that while these transfers are not taxed by states recognizing same-sex marriage, they are still taxed by the IRS.
- How to handle spousal support, which is also given preferential tax treatment by New York, but not by the IRS.

Same-sex couples need to make sure they have all the legal and tax information they need before they marry. By having honest conversations with their future spouses (and themselves) and speaking with lawyers and accountants who can advise them on divorce, trusts and estates and tax issues, they will be able to deal with many issues that if left unaddressed, could have long lasting negative repercussions for them and their children.

April 20, 2011

How To Divorce Proof Your Business In The Event of Divorce

Jeffrey Landers has an informative blog post on Forbes.com about divorce-proofing your business in the event of divorce. Landers covers the basics of the importance of prenuptial agreements, postnuptial agreements and placing the business in a trust. And it smartly points out that these are options to consider not only if contemplating divorce in the future but also if you're happily married or even single.