What Is a Postnuptial Agreement?
What is a Postnuptial Agreement?
The number of postnuptial agreements being entered into in California is on the rise. A postnuptial agreement is a written contract executed by both spouses during their marriage whereby they agree on the disposition of their assets and the payment of spousal support or alimony provisions upon divorce or the dissolution of their marriage. While a prenuptial agreement is entered into prior to marriage, a postnuptial agreement is entered into after the parties have already exchanged vows. However, these two type of contracts offer approximately the same protections and benefits for the parties who enter in to them. A postnuptial agreement sets forth how the couples’ assets will be divided in the event of a divorce, similar to a prenuptial agreement. It can also address spousal support in the same way a post-nuptial agreement will. Because the California Family Code allows a married couple to enter into the contract , the terms and conditions associated with the contract are entirely up to the parties involved. Simply put, the California Family Code gives married couples the autonomy to enter into a legally enforceable contract that will govern their pending divorce, should one occur. In order for a postnuptial agreement to be binding, it must be in writing and signed by both parties. In most cases, the agreement is signed voluntarily by the parties, meaning there can be no coercion from either party to enter into the agreement. Nowhere in the California Family Code does it state that the parties must disclose their assets and liabilities to each other prior to signing the agreement. California courts have uniformly held that the lack of full disclosure does not make a postnuptial agreement unenforceable.
Common Expenses
The cost of a postnuptial agreement may range significantly depending on various factors. First and foremost, the attorney’s fees will vary from location to location and from practitioner to practitioner. In general, if the agreement is relatively simple, meaning that it covers few or no assets beyond the basic community property system, or if the parties’ assets invoke the presumption of community property at the outset of their marriage, then the attorney’s fees will be considerably lower than a more complex situation involving more assets, some of which may retain a status as separate property. Customary fees for less complex drafting or review of postnuptial agreements generally range between $750 to $1,500, while review of a complex agreement may cost between $1,500 to $3,000.
In addition to attorney’s fees, the amount of time a party spends negotiating the terms of the agreement with his/her spouse will also influence the cost. For example, many couples in long-term marriages do not require a lengthy negotiation process and rely on the attorney to craft an agreement that is deemed fair. The evaluation of what constitutes a "fair" agreement, however, can be an arduous task, especially if both parties employed their own counsel for the duration of the marriage and over the course of the negotiations. Moreover, the existence of separate property will undoubtedly influence how much time is necessary for negotiation and revision of the agreement.
In summary, the cost of a postnuptial agreement in California can vary from less than $1,000 to over $3,000 depending on the specific characteristics of the parties’ union.
Why Costs Are Different in California
While varying reasons exist for issues with costs, California’s legal requirements for marital agreements tend to create obstacles, adding to the expense of preparing a postnuptial agreement. While many other states allow for oral and even implied agreements, and often require little more than a single signature, California does not. The Family Code requires that a postnuptial agreement be in writing and signed by both spouses, with increased requirements for a postnuptial agreement that affects any pre-existing premarital rights of a spouse (i.e., property brought to the marriage or support rights arising from property acquired before the marriage). Among other requirements, a postnuptial agreement cannot impair the right of a spouse to receive an amount for the support of the spouse or children that is "not unconscionable." While attorneys understandably will want to allow sufficient time to do the necessary drafting, discussing the agreement, and negotiating the terms without the threat of a layoff, unemployment, or divorce, several hours of attorney attention will be required to prepare what is essentially a legal contract between spouses that will be evaluated by a judge who has a very low threshold of fairness when issuing a ruling on a marital agreement. On top of that, a realistic strategy for most lawyers is to attempt to follow the court rules, including mandatory mediation (usually requiring two separate sessions with the client) and Financial Disclosure (i.e., if the agreement is to remain valid and not be set aside by a judge). This is all before starting the real work of explaining even the most basic terms and conditions of the postnuptial agreement so that California’s policy of contractual freedom is respected and upheld.
Options for Reducing Fees
It most often costs significantly less to negotiate and draft a post-nuptial agreement before a divorce has been filed than afterwards. Post-nuptial agreements drafted before a divorce petition is filed may be more efficient because parties may be more focused on the post-nuptial agreement itself and less affected by the emotions and events associated with a divorce proceeding. Other ways to save money on a post-nuptial agreement include clear and simple communication between the parties, rendering the negotiations as fast and efficient as possible, and forgoing expensive disputes as to the terms of the agreement. With this in mind, it can be helpful for the parties to have already worked together to create a detailed list of all community and separate property assets and debts to facilitate the "disclosure" process that must be done prior to drafting the terms of the agreement. Further , remaining clear, calm, and respectful with each other throughout the negotiation process is likely to minimize the overall costs and fees paid to both attorneys in the post-nuptial agreement.
Negotiating a flat fee service (rather than hourly billing) and seeking flat-fee legal services is another way to minimize costs. Flat fees may be best suited for individuals who are looking to draft more basic or straightforward postnuptial agreements on limited asset and debt children, income, and spousal support issues. Leverage can be used in negotiating flat fees based on the amount of work, documentation, and communication expected of the parties. While hourly billing rates may still be the most common way that family lawyers bill, there are still a number of attorneys, including those at Stowe Family Law Group, that offer flat fees.
Legal Implications and Considerations
In California, postnuptial agreements are generally enforceable so long as they meet certain legal requirements, much like prenuptial agreements. This can directly affect the cost of this type of agreement as, if an agreement fails to meet these legal requirements, you may have to start all over again and pay for a new agreement.
Just as with prenuptial agreements, the legal requirements for a postnuptial agreement are set out in California Family Code section 1615. A postnuptial agreement must be: Entered into voluntarily. The parties must be entering the agreement free from due influence, coercion, deceit, menace, fraud, or duress. Fully informed of each party’s rights. Neither party can be forced to make a disclosure. Such a disclosure can be made by an exchange of tax documents, a copy of each spouse’s estate plan, and/or a summary of each asset entitled to disclosure. Any relinquishment of rights under Family Code sections 1100 and 1101 (such as spousal support) must be explicit and ascertainable to the extent. Either party has seven calendar days to cancel the agreement. If either party has not received independent legal counsel at the time of signing the postnuptial agreement, he or she must be provided the opportunity to do so. This entails having the other partner sign a waiver of independent legal counsel that contains certain statutory language and then waiting at least seven calendar days before signing the agreement. If the potential disadvantage of the agreement is very severe for one party, the court will also require that the agreement be executed at least a year before any action for dissolution, nullity, legal separation, or for spouses’ support is filed. Unconscionable. In the case of Marriage of Burkle, the California Supreme Court found that, in order to be conscionable, there must be a fair and reasonable provision for the spouse’s separate property; and adequate consideration, taking into account the circumstances at the time the postnup is executed. If there is no adequate consideration, the postnuptial agreement will still be conscionable if it is very clear that the spouse’s support is otherwise assured. The review of whether the postnuptial agreement is conscionable is a subjective one. Minimally, the court will ask whether independent counsel was obtained by both parties; whether a disclosure was made of all assets; whether a fair resulting provision was made for the disadvantaged spouse; and whether the disadvantaged spouse had to give up something of substantial value. The negotiated cost of the postnuptial agreement is perhaps the best "consideration" to be had when negotiating the terms of a postnuptial agreement as an alternative to a spousal support waiver. The parties may also use an irrevocable trust as the vehicle of exchange to ensure the disadvantaged spouse has adequate provision.
When to Seek a Family Attorney
As with any important legal matter, consulting a qualified family law attorney is essential. A family law attorney can help you understand the complex issues surrounding a postnuptial agreement and provide guidance on how to navigate the potential cost implications of including a legal review. If you intend to have a postnuptial agreement in California, it is highly recommended that you consult with an experienced California family law attorney. This is important because, as noted above, there may be significant issues if you and your spouse do not disclose all of your assets and debts in the postnuptial agreement. If there is a lack of transparency, the agreement could be deemed invalid or be set aside in the future, resulting in adverse consequences for you. Furthermore , an experienced divorce and family law attorney can provide you with knowledgeable advice as to how to best articulate the details of your relationship to your postnuptial agreement. A skilled attorney may also help you avoid detailed questions from your spouse and allow you to negotiate more effectively. It is important to balance the benefits of possibly reducing costs by having your postnuptial agreement created without the assistance of an attorney with the risks of having an unenforceable postnuptial agreement. An experienced family law attorney may help you to reduce your overall cost even if you choose to charge the negotiation costs to the hour. While it is never possible to completely eliminate the possibility of high costs in negotiating a postnuptial agreement, it may be possible to limit the amount of billable hours you have to use through the assistance of an experienced family law lawyer. In California, if you do not have a lot of assets and debts and your postnuptial agreement does not involve complicated issues, you may reduce costs by choosing to draft the agreement without an attorney. However, if you and your spouse have many assets or debts, do not have a clear understanding of whether your states’ laws will have a big impact on your agreement, or have complicated issues to address, it is highly recommended that you have the postnuptial agreement drafted with an attorney.