Family Law

Will A Postnuptial Contract Really Protect You?

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No matter what you're involved in, planning is often the key to making it work. From vacations, a project at work or retirement, a good plan helps you reach your goal. Some couplestake the same approach totheir marriageand make plans for what happens to property and assets if their marriage ends in divorce or one spouse dies.

It's not a bad idea, but it has to be done right for the plan to work.

Best Laid Plans?

Billionaire Frank McCourt and his wife Jamie signed a postnuptial agreement after they were married. At about that time, Frank bought the Los Angeles Dodgers, as well as the baseball stadium and the land around it. Also, it appears Jamie owned several luxury homes. According to the contract, in certain situations, like a divorce, the parties agreed that Frank would keep ownership of the Dodgers and Jamie the homes. Or did it?

Not Part of the Plan

During the McCourts' divorce trial, Frank's lawyer Larry Silverstein, who wrote the agreement, admitted that he changed the agreement after the McCourts had signed it. In the original agreement, Frank and Jamie are supposed to share ownership of the Dodgers and the land.

The Unavoided Battle

Needless to say, the McCourts were locked in a fierce two-year legal battle and one, strangely enough, the postnuptial agreement was meant to avoid in the first place!

Planning Ahead with Postnuptial Agreements

A postnuptial agreement lets married couples agree on what happens in case the marriage ends in divorce or one spouse dies. For example, it may set out who:

  • Gets what property owned by the couple (called property division)
  • Has to pay alimony, how much and for how long
  • Has to pay the debts, like mortgages, credit card bills, etc.
  • Gets property or assets belonging to a spouse who dies during the marriage

Prenuptial vs. Postnuptial: What's the Difference?

A postnuptial agreement isvery similar to a prenuptial agreement ("prenup"), except a prenup is made before marriage and has more legal requirements than a postnuptial.

Speaking of which, the legal requirements for postnuptial agreements vary from state to state, so be certain to check the laws inthe area where you live for more specifics. In general though:

  • It must be in writing - oral postnuptial agreements usually aren't valid. Also, it must be signed by both spouses and notarized
  • It must be voluntary, meaning one spouse can't threaten, physically force or trick or deceive the other spouse into signing the agreement
  • It can't be unconscionable, meaning completely one-sided and unfair
  • There must be full and accurate disclosure by both spouses about all property and assets they own

See One in Action

The McCourt case shows how some of these requirements work. For example, Mrs. McCourt may have argued the agreement was unfairly lopsided because it gave Mr. McCourt billions of dollars while saddling Mrs. McCourt with millions of dollars of debt on the homes. Also, she may have argued she was tricked into it because she never intended to give up any claim to the Dodgers and the land.

In any event, a judge could throw out a postnuptialif it's not done properly.For instance, in the McCourt case,the postnuptial was thrown out because the different agreementssaid the exact opposite when it came to the Dodgers, and Mrs. McCourt didn't understand that she was giving up all rights to the Dodgers. It led to an all-out legal battle.

All's Not Lost?

Even when a postnuptial is thrown out, the spouses can work out a deal. Again, the McCourt case is instructive. The couple agreed to mediate their dispute over ownership of the Dodgers and other issues that should have been covered by the postnuptial. Unfortunately, it was a long and expensive process, both of which could have been, and should have been, avoided with a proper postnuptial agreement.

What You Can Do

The McCourt case is also good for showing what you should do if you're thinking about a postnuptial agreement:

  • Hire your own lawyer to look at a postnuptial agreement prepared by your spouse or your spouse's attorney.Mrs. McCourt relied on Mr. McCourt and his lawyer, andneither got what they expected out of the agreement
  • Read the contract carefullybefore you sign it. Mrs. McCourt claimed she didn't read the postnuptial. If she had, some of the legal problems could have been avoided
  • Don't sign it unless it sounds fair to you. You and your spouse should be able to discuss the matter and work out a deal that's fair to you both

No one plans on having a divorce, but for some people it's good to have a plan for what happens just in case the marriage hits the rocks. A postnuptial agreement can give you some peace of mind, but only if it's done the right way.

Questions for Your Attorney

  • How much will you charge to write a postnuptial contract? How much to review one written by my spouse's lawyer?
  • Is it legal for my spouse to offer me money in exchange for my agreement to apostnuptial contract?
  • If we sign a postnuptial contract in State A,is it still valid if we later move to State B and never return to State A?
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