To Be or Not to Be: Postnuptial Agreements in New Hampshire

• Jurisdiction: New Hampshire,United States
• Citation: Vol. 49 No. 2 Pg. 0044
• Publication year: 2008
• Pages: 0044
• Year: 2008
• topic: Contracts,Family Law,Civil Procedure,Wills, Trusts and Estates

New Hampshire Bar Journal 2008.

2008 Autumn, Pg. 44. TO BE OR NOT TO BE: Postnuptial Agreements in New Hampshire

New Hampshire Bar Journal
Volume 49, No. 2
Autumn 2008

TO BE OR NOT TO BE: Postnuptial Agreements in New Hampshire

By Nadine M. Catalfimo and Attorney Charles A. DeGrandpre

I. INTRODUCTION

Today, postnuptial agreements are popular in the United States, but they are not commonly used in New Hampshire. This begs the question: Can they be? This article focuses on the status of postnuptial agreements under current New Hampshire law and if it is possible for the postnup to be valid and enforceable. "To be, or not to be: that is the question."(fn1)

According to a recent survey conducted by the American Academy of Matrimonial Lawyers, forty-nine percent (49 percent) of family law attorneys have seen an increase in preparing postnuptial agreements since 2002.(fn2) The majority view across the nation favors postnuptial agreements, as demonstrated by the 35 states that currently validate some form of spousal contract.(fn3) The contributing factor to the rise in the use of postnuptial agreements may be that divorce and second marriages are common today.(fn4) The majority view is that postnuptial agreements are no longer contrary to public policy and do not encourage or facilitate divorce.(fn5) However, some states permit postnuptial agreements only upon the death of a spouse when it relates to the separate property of the parties, and when divorce or separation between the parties is not imminent.

To many, the concept of a postnuptial agreement may not make sense initially or may even sound absurd. The first reaction most often is . . . "Why would someone sign one?" The simplest reason is because both parties want to make the agreement for financial reasons and because under contract law principles, they can. The postnuptial agreement can be an effective tool in certain circumstances.

This article explains the postnuptial agreement, a fairly new trend in the law, and discusses general requisites for a valid postnuptial agreement should New Hampshire join the majority view by a judicial determination or legislation. Importantly, this article closely examines New Hampshire case law regarding postnuptial agreements and argues that they are enforceable and valid contracts under contract law principles. Finally, for informative and illustrative purposes, secondary sources are discussed from jurisdictions where postnups are frequently utilized by wealth advisors, estate planning attorneys and family law practitioners, without hesitation.

A. WHAT IS A POSTNUPTIAL AGREEMENT?

Simply put, a postnuptial agreement is a contract made between a husband and wife after marriage. The contract defines the marital rights and obligations in the event of separation, divorce and or death.(fn6) Some jurisdictions limit the scope of the postnup to a division of assets upon the death of the parties. Other jurisdictions do not limit the scope and allow the alteration of marital rights and obligations upon separation and divorce, and a division of assets upon death.(fn7) A postnuptial agreement is very similar to a prenuptial agreement, except that it is signed after marriage, rather than before. These contracts may also be referred to as marital, interspousal, separation or property settlement agreements. For purposes of this article, a postnuptial agreement may be referred to as a "postnup."

B. WHEN TO USE A POSTNUP

There are various reasons to use a postnup. Because divorce is so common today,(fn8) the most likely scenario involves second marriages where one seeks to preserve their assets for children of previous relations upon death in an amount greater than allowed by statute. For example, in New Hampshire, if a decedent dies leaving a will, under RSA 560:10, the surviving spouse may elect to take one-third of the deceased spouse's real estate and personalty, after waiving his or her interests under the will and homestead rights, if the decedent left any surviving children. The result is different when a decedent dies intestate in New Hampshire, leaving a surviving spouse and children who are not issue of the surviving spouse. In the latter scenario, RSA 561:1, I (d) provides that the surviving spouse receives one-half of the deceased spouse's estate. Through marriage, a surviving spouse is automatically afforded substantial inheritance rights in the other spouse's estate simply by way of the marital relationship. By utilizing a postnup, one who failed to plan properly prior to marriage, can leave their children of previous relations more assets, altering the statutory default amount.

A second marriage is not the only instance when a postnup may be useful. It may also be used to revise the terms of an existing prenuptial agreement, or to determine a course of action when one spouse receives a substantial gift, inheritance or windfall from another source. Postnups may also be appropriate to resolve financial issues in the marriage.(fn9)

C. THE ESSENTIAL CRITERIA

There are no statutory provisions authorizing postnuptial agreements in New Hampshire, nor has the New Hampshire Supreme Court specifically stated that contract law principles apply to postnups. However, the court in Narins v. Narins(fn10) upheld an out-of-state postnup based on contract law principles, thus inferring that contract law principles are, in fact, applicable.

In New Hampshire, it is well-settled common law that "[a] valid, enforceable contract requires offer, acceptance, consideration, and a meeting of the minds."(fn11) Further, "[t]he parties must have the same understanding of the terms of the contract and must manifest an intention, supported by adequate consideration, to be bound by the contract. . ."(fn12) to satisfy the basic `meeting of the minds' requirement. It is imperative that a postnup be supported by adequate consideration at the time the contract is made(fn13) and that particular attention is given to this aspect of the contract. A practitioner must view the circumstances of each case and the rights released by the parties and they should follow New Hampshire case law regarding prenuptial agreements when drafting a postnup or when attempting to enforce one.(fn14) A word of caution -- computing the consideration of the contract may be tricky since the marriage cannot be the consideration.(fn15)

Due to the confidential nature of the marital relationship, spouses contracting with one another "must exercise the highest degree of good faith, candor and sincerity in all matters bearing on the terms and execution of the proposed agreement, with fairness being the ultimate measure."(fn16) The doctrine of fairness mandates that, prior to executing an agreement, both parties have "an opportunity to seek independent advice and a reasonable time to reflect on the proposed terms."(fn17)

In MacFarlane v. Rich,(fn18) the New Hampshire Supreme Court set forth the test to determine the validity of a prenuptial agreement based on contract law principles. The court held that standards of fairness apply and require that the contract is not made under "fraud, duress or mistake, or through misrepresentation or nondisclosure of a material fact."(fn19) Further, the prenuptial agreement cannot be unconscionable and the facts and circumstances must not change since the execution of the agreement making the contract unenforceable.(fn20) The court explained that the party seeking...