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What Is A Postnuptial Agreement and Do I Need One?
When spouses separate and wish to divorce, there are many issues they must address before receiving a divorce decree. If spouses have acquired property during their marriage, that property must be divided between them before a divorce decree can be entered. If not, the property becomes the sole possession of the titled spouse post-divorce and any jointly titled property must be divided pursuant to a separate legal action called “Partition.”
So how do spouses divide their property (equitable distribution)? Quite simply, they either agree how it will be divided, or they don’t. If they don’t, the Court will hold a hearing to determine what property or portions of property each spouse will retain. If they do agree, a written contract between the parties is required to memorialize their agreement and ensure the enforcement of that agreement in the future if one of the parties does not comply with the terms of their agreement. That contract is often referred to as a Postnuptial Agreement and can also be called such things as a Marital Settlement Agreement, a Property Agreement, a Divorce Agreement, etc. Regardless of the name of the document, it is a legally binding contract enforceable under contract laws in the state of Pennsylvania.
Clients often ask, “Do I really need a Postnuptial Agreement?”. When spouses are amicably dividing their marital estate, both want to proceed with the divorce and are agreeable with regard to the division of their assets and liabilities, sometimes they want to skip this step. However, the answer is always yes. Why? A written agreement solidifies the agreement, clarifies any details related to division of or transfer of certain assets and allows for enforceability through the Court system if one of the parties fails to comply with the terms. If a written agreement is not executed, and one of the parties fails to comply with the terms of his or her verbal agreement, enforcement of that agreement is extremely difficult and often impossible. The preparation of a simple Postnuptial Agreement encompassing the parties’ agreement with regard to the division of their assets and liabilities, as well as other issues such as support payments, child custody schedules and the like, can be prepared relatively quickly and inexpensively, particularly when the parties have already agreed upon the provisions.
The execution of a Postnuptial Agreement also allows parties to divide their marital estate without Court intervention. Parties are not required to attend a Court proceeding if they have agreed upon the division of their marital estate and other economic issues such as alimony and counsel fees. A Postnuptial Agreement allows them to secure a Divorce Decree without the liability of forgoing assets they are entitled to, or having to engage in a Partition Action to divide jointly titled assets. Partition actions are far more expensive than the preparation and execution of a Postnuptial Agreement and require, in most cases, a Court proceeding which can be lengthy, expensive, and result in an equal division of a jointly titled asset. Parties are relegated to receiving only 50% in a Partition action, while negotiation of the division of marital assets is based on factors prescribed by the Pennsylvania Divorce Code, which does not presume an equal division of marital assets. Instead, it prescribes many factors the Court must consider in dividing a marital estate. Some of the factors considered are each party’s age, education, and earning capacity, their ability to acquire future assets, their reasonable needs, the length of their marriage and their contribution to the marriage. Often, the more dependent spouse receives a larger share of the marital estate. However, if the parties reach an agreement regarding the division of their marital estate, which includes one of the parties receiving a larger portion of a marital asset or the total marital estate, and that agreement is not placed in writing, you may not be able to rely on the agreement. If the other party refuses to comply with a larger portion being provided to the other spouse, that spouse has no legal recourse but a Partition Action, which limits him or her to only 50% of that asset. In addition, the expense of a Partition Action is almost always higher than the cost of the preparation of a Postnuptial Agreement.
Whether your marital estate is large or small, or you are able to divide your marital assets by agreement relatively quickly or after some time with the assistance of counsel, the execution of a Postnuptial Agreement is essential. Relying upon a verbal agreement with your soon to be ex-spouse can be costly and result in receipt of less than you are entitled to in the division of your marital estate.