Post-Nuptial Agreements Explained
A post-nuptial agreement is a written document entered into by married persons that allocates their assets, debts and/or income, and can also determine how support is decided on if they were to divorce. This is the same as a pre-nuptial agreement in many ways, but the difference is primarily timing. A prenup is done before the marriage, whereas a post-nup is entered into during the marriage.
So why would someone want to enter into a post-nup? In addition to the above reason, another very common reason that people in Oregon enter into a post-nup is to protect assets obtained during the marriage, in the event of a future divorce.
A post-nuptial agreement may be useful once a person has been married for a time and acquires a substantial amount of marital assets and/or income that he or she would like to protect if the marriage were to end in a divorce later on. For example, a couple may be married for many years, and over those years he or she may build up a business or two or a significant investment portfolio. The majority of states consider these assets to be marital property which should be divided at the time of a divorce. So , even though he or she may have started the business prior to the marriage, and may have propelled it to great heights simmering the marriage, the assets accumulated during the marriage would likely be divided with a spouse who did not contribute anything to the business. Wouldn’t it be nice if the couple could simply sign an agreement to ensure that whatever assets were being built during the marriage were theirs alone? Of course, that is the point – to protect what you own.
Of course, basically anyone with assets or income is likely to want to protect themselves, so the potential audience for this type of agreement is very large. However, to be fair, a person with little income, assets or debt may not be worried about allocating property in the event of a divorce. But the vast majority of individuals, even if their net worth is quite low, are still very much interested in protecting their income and any small savings they’ve accumulated.
Requirements of an Oregon Post-Nuptial Agreement
To ensure an enforceable agreement in Oregon, a post-nuptial agreement must comply with specified legal requirements. The terms must be agreed to by both spouses willingly and voluntarily. Neither spouse can be pressured to sign the agreement. Both spouses must disclose all assets, obligations, and debts fully and fairly to the other spouse and must enter into the agreement based upon both that disclosure and the advice of independent counsel.
Common Terms in Oregon Post-Nuptial Agreements
When advising clients about post-nuptial divorce agreements, it is also important to discuss what is included in most post-nuptial agreements. Common elements include asset division, alimony, liability for debt, and children’s issues. Any issue that can come up during divorce can be part of a post-nuptial agreement in Oregon. But Oregon’s law provides a baseline for the contents of the post-nuptial agreement, and most couples’ agreements will include these items. For example, in a post-nuptial agreement, you can agree on any matter pertaining to property of either or both parties. You may specify whether: Anything you can think of will probably be allowed, unless it would violate public policy. In almost every case in a post nuptial agreement, the parties will address the payment of debt. For many people, debt is the largest asset that they have at the divorce. Regardless of who is ordered to pay what during the divorce, if there is a dissolution order, either spouse can harass or "go after" the other regarding the debt. In a post nuptial agreement, you can identify who owed what before the marriage and the responsibility for the payment after the marriage. In short, you can contract away any issues pertaining to the debt. Child Custody and Parenting Plans are very difficult to change in Oregon. Post-nuptial custody agreements are not immediately enforceable. The parent must petition the Court for the enforcement of the agreement. Even then, the Court will be extremely reluctant to enforce an agreement that is not in the best interest of the child. See, e.g., Cooper v. Emerson, 253 Or 292 (1969), (refusing to enforce a custody agreement contrary to statutes, even in a post divorce agreement). If you have children and are contemplating a post-nuptial agreement, the law may require the agreement to go through the Court for approval. Involving the Court in a post-nuptial agreement that involves children does not "let the cat out of the bag" on what is going on in the relationship. You have to give the Court information prior to your divorce anyway regarding the living arrangements, work schedules and so forth that are the same as those supposedly in place in the post-nuptial agreement.
Pros and Cons of Post-Nuptial Agreements
One primary benefit of a post-nuptial agreement in Oregon is that it can provide each spouse with financial clarity. The side that works at home may be entitled to a larger settlement if the marriage dissolves. Another benefit might be that the working spouse is able to keep a more significant portion of his or her income if the marriage ends. The reason for these provisions is that the parties understand the potential contribution of each party. If a house was purchased prior to the parties marriage and is considered separate property, the spouse who did not contribute to the purchase may not be able to receive half the proceeds of the house if it were sold during the marriage. Many such agreements are modified over the years to account for substantial changes. The most recent example of this is often one where one party receives an inheritance. This scenario is most typically seen when the house is one that was to go into the family if the couple split, or some other gift or inheritance was received.
Things that may seem relatively unimportant at the time may become very important going forward. For example, one party may start a business while married. A couple who did not expect to ever split up may want to include how much of the business each party would own in the event of a divorce.
Many couples who choose to sign a post-nuptial agreement also find that it can reduce disputes if they do separate in the future. Legal fees can be expensive. When a couple agrees on most of the terms of their divorce before it occurs, some legal fees can be avoided.
Drawbacks of Post-Nuptial Agreements
Though post-nuptial agreements can offer significant benefits to couples, there are limitations to these clauses and the following considerations should be kept in mind:
• No Child Support Provisions: Under Oregon law, a post-nuptial agreement cannot include terms related to child support. Any clauses that attempt to alter child support obligations will not be enforced.
• Subject to Enforcement Challenges: Post-nuptial agreements can be challenged on the grounds of fraud and duress as well as ambiguous language and unconscionability. Therefore , the parties may have a difficult time enforcing their agreements.
• Difficulties in Detecting Fairness: A couple contemplating a post-nuptial agreement does not need to fully disclose their financial accounts or explicitly demonstrate that the terms of their agreement are "fair." In this vein, a court would only be in the position of nullifying an agreement if it broke state laws on spousal support amounts or transfers of property.
• Divorce Proceedings: Similarly, the terms of a post-nuptial agreement would not necessarily be subject to disclosure in divorce proceedings, which might make it difficult for a spouse to ascertain whether the provisions are truly equitable.
How to Draft an Oregon Post-Nuptial Agreement
The process of creating a post-nuptial agreement involves several stages for both parties. First, both spouses need to agree that they want to create an agreement and that they will fully disclose their assets and income to one another. Second, each spouse should select an attorney who specializes in preparing post-nups and consult with the lawyer regarding the purpose of the post-nup and the process involved in creating it. Third, the objectives of each spouse should be listed, with the goal being that each spouse will receive what they want from the agreement. Fourth, with the help of their lawyers, each spouse should draft an initial set of terms. Fifth, each draft should be reviewed and revised based upon feedback from the other spouse and their lawyer. Sixth, the post-nup can either be signed or revisions can continue following up until the time it is executed. Finally, the post-nup becomes valid when it is signed by both spouses.
Times to Revisit Your Oregon Post-Nuptial Agreement
When You Should Consider Reconsidering/Updating Your Oregon Post-Nuptial Agreement Regardless of the Name
Like all legal documents, Oregon Post-Nuptial Agreements are a "snapshot" in time. They should be reviewed when certain important changes take place. These events may involve the couple or their family, or they may not even involve the couple. It is a good idea to review your post-nuptial agreement when there is a significant change in your or your spouse’s financial status. However, a lot of legal couples do not have substantial finances that need to be separated into individual property, and some couples like to keep their money in a shared joint bank account.
If you’ve experienced changes in income or debts, it may be a good time to see whether your post-nuptial agreement, which involved an exchange of assets and financial circumstances, remains appropriate . A thoroughly-explored issue with such an agreement is that the agreement was entered into under conditions of disparity of power, and litigation is frequently used to exploit such an imbalance. Careful consideration by both parties in the signing of the agreement should be made to ensure that both people have had adequate time to consider the terms and obtain independent legal advice as to the viability, or reasons that the agreement should be set aside.
There are many changes in the law that affect your rights that may not apply to your former post-nuptial agreement, or which may no longer be applicable in your particular state. Of course, changes will be made in Oregon law, especially pertaining to taxes, in the event that the couple’s state of residence changes.