8 Post-marriage Issues

• Library: Premarital Agreements: Drafting and Negotiation (ABA) (2017 Ed.)

8 Post-Marriage Issues

§8.01 Overview

This chapter addresses a number of issues that may arise after a marriage or after execution of a postmarital agreement. The parties may want to amend or revoke their agreement. Parties without a premarital agreement may wish to enter into a postmarital agreement. Conduct of the parties after execution of the agreement may give rise to a claim that the contract has been amended, abandoned, or modified.¹ Common circumstances that may give rise to a claim of abandonment or rescission are discussed in this chapter. Most claims of abandonment or rescission fail. A party can protect his or her interest in maintaining the viability of a premarital or postmarital agreement by conducting his or her financial affairs in accordance with its terms.

Parties to a premarital agreement may effectively modify or vitiate the terms of a premarital or postmarital agreement, without formally amending it or abrogating the agreement as a whole, by commingling, retitling, or gifting property during the marriage that the agreement otherwise permits them to keep separate. This may occur as a natural evolution during the marriage. An agreement does not preclude a party from being more generous than required.² Indeed, a standard provision of such agreements acknowledges the parties' rights to make and receive gifts from each other. It is important for parties to understand that such transfers may not constitute fulfillment of a contractual obligation to make other transfers upon death or dissolution unless the agreement specifically so provides.³ Parties must also understand that they will have no right to take back a transferred asset if the marriage fails, unless the agreement creates such a right. For example, a party may elect to pay nonmarital debt of the other spouse. Doing so creates a gift. Unless the agreement expressly provides for reimbursement, the payor will have no right to recoup.⁴

In a variety of ways, a party's contractual property rights at death or divorce may be adversely affected by unilateral actions of the other spouse. Whether disposition of funds or assets is for a proper purpose, such as to pay premarital debt, or for an improper purpose, such as to support a paramour, the result for the other spouse is the same. Parties may wish to preserve their rights to make gifts to children and other third parties, to spend their own money as they please, including on luxury items, and to otherwise deal freely with their property. Indeed, premarital and postmarital agreements commonly provide that parties are free to dispose of their separate property during marriage as they wish.

When the agreement provides for the less wealthy spouse to receive a percentage share of property at divorce or death, counsel for that party should consider the effect of post-execution activities on the pool of assets from which that spouse's share will be determined. Similarly, when the agreement will provide that the less wealthy spouse will receive a share of a specified asset, such as an interest in real estate titled solely in the name of the other spouse, counsel will need to consider including in the agreement limitations on the other spouse's ability to reduce the value of that asset so as to defeat the rights of the disadvantaged party. "The duty of good faith is an implied condition in every contract. . . ."⁵ However, reliance on implied obligations will generally offer less protection to the disadvantaged party than will an express provision designed to limit the other spouse's opportunity to defeat the parties' intent.

The issues in this part are of particular concern when the parties opt for an agreement that provides for sharing the fruits of their labor and for each to have exclusive rights to premarital, inherited, and gifted assets. If the agreement predetermines disposition of marital property, there will be little or no opportunity for a court to adjust the division to take account of post-marriage conduct.

§8.02 Formal Amendments, Postmarital Agreements, and other Formal acts

(a) Formal Amendment to Premarital Agreement

Every premarital agreement should include a provision requiring any amendment to be in writing and signed by the parties. Counsel for the weaker party should give some thought to the subject of future amendments, especially when there is a large wealth disparity and the terms are inadequate to provide him or her with future financial security. It will usually be better for the weaker party if the agreement does not create an obstacle to amendments that improve his or her position. Even a requirement that an amendment be notarized can be disadvantageous as it can leave that spouse vulnerable to a claim of other family members seeking to undo an unnotarized amendment making more generous provisions for a widow or widower.

An amendment can also be useful for the economically stronger party. He or she may feel the need to insist on a premarital agreement that provides little or nothing for the other party with a view to renegotiating after several years, or may need to renegotiate to maintain domestic harmony. An amendment that favors the weaker party should be coupled with ratification of the original agreement. A postmarital ratification strengthens validity.⁶

Amendment Under the UPAA

The Uniform Premarital Agreement Act (UPAA) provides that a premarital agreement may be amended or revoked after marriage. The amendment or revocation is effective only if it is in writing and signed by both parties. The amendment or revocation is enforceable without new consideration.⁷ The UPAA is consistent with preexisting case law permitting parties to freely amend their premarital agreement.⁸

Amendment Under the UPMAA

The Uniform Premarital and Marital Agreements Act (UPMAA), for the first time, creates proposed uniform standards for recognition and validity of marital agreements.⁹ The UPMAA defines a marital agreement as an agreement executed by spouses who intend to stay married and that "affirms, modifies, or waives a marital right or obligation during the marriage or at separation, marital dissolution, [or] death of one of the spouses. . . ."¹⁰ A marital agreement includes an amendment to a premarital agreement as well as an agreement revoking a premarital agreement or a marital agreement;¹¹ thus, parties to such must comply with the heightened process requirements of UPMAA § 9, including financial disclosure and access to counsel. Such an agreement is enforceable without consideration.¹²

Other States

Parties should be able to amend or modify a premarital agreement in those states that have not adopted the UPMAA, the UPAA, or another specific statute governing amendments. General principles of contract law, which permit parties to freely amend their own contracts, are applicable to a postmarital amendment to a premarital contract, except as a statute or case expressly limits amendments.¹³ Some authority suggests that because a postmarital amendment is a new contract,¹⁴ its validity is governed by the same criteria as a postmarital agreement.¹⁵ In those states that impose heightened scrutiny to the determination of validity of postmarital agreements, an amendment may therefore receive the same treatment.

(b) Revocation of Premarital or Postmarital Agreement

Parties to a premarital or postmarital agreement may revoke the agreement by an express superseding agreement, thus restoring each to the spousal rights they would have accrued but for the existence of the agreement. The UPAA provides that parties may revoke a premarital agreement without consideration.¹⁶ Courts in other states have come to the same conclusion.¹⁷

(c) Postmarital Agreements

A postmarital agreement "is an agreement entered into during marriage to define each spouse's property rights in the event of death or divorce."¹⁸ Many states' laws also permit parties to fix or waive spousal support in such an agreement. As used herein, the term refers to an agreement made at a time when separation or divorce is not imminent. These agreements have gained widespread, though not universal, acceptance in state courts and legislatures.¹⁹

§8.03 Conduct Giving Rise to Claim Agreement Has become unenforceable

(a) Termination of Engagement Followed by Reconciliation

When a party calls off the wedding after execution of a premarital agreement, that may give rise to a claim that the parties repudiated the agreement. Some courts have treated the question whether the parties intended to repudiate the agreement, so that it was not revived when the marriage plans were revived, as a question of fact to be determined from all the surrounding circumstances.²⁰ The UPAA is silent about amendment or revocation before marriage. A North Carolina case posits that general contract law principles therefore apply, leaving room for a case-by-case evaluation of the parties' intent.²¹ By contrast, Virginia courts treat the question as a matter of law under the UPAA, holding that only a signed writing will do.²² In non-UPAA states, courts may interpret a local Statute of Frauds to preclude any but a signed writing to effect a revocation.²³

When the particular circumstances call for it—for example, when parties terminate an engagement and then reschedule the wedding, especially after an extended hiatus—they should execute a new agreement, a ratification of the previous agreement, or a document stating expressly that they cancel the previously executed agreement.

(b) Purported Oral Amendment to Premarital Agreement

Every premarital and postmarital agreement should provide that it may only be amended in a writing that is signed by the parties. The UPAA precludes enforcement of a purported oral amendment,²⁴ as does the UPMAA.²⁵ Although general contract law principles permit parties to orally modify or rescind a contract, including that provision of the contract that precludes oral modification,²⁶ courts have generally rejected claims of oral amendment of a...