No Prenup? Maybe You Should Consider a Postnuptial Agreement
A recent high-profile divorce involving Anna Cristina Niceta, social secretary to former first lady Melania Trump, and Thomas L. Lloyd, the grandson of well-known socialite and philanthropist Rachel "Bunny" Mellon, has the internet buzzing. The legal proceedings also featured a $7 million penalty payment stemming from a postnuptial agreement.
Lloyd received a $10.7 million inheritance from Mellon, who died in 2014. Niceta and Lloyd married in 2006 and have two children, but Lloyd was found to have had an affair not long after Mellon died, according to news reports.
The couple then decided to sign a postnuptial agreement that required Lloyd to pay Niceta $7 million tax-free if he was ever unfaithful again. Afterward, he was discovered to have committed adultery again, which prompted Niceta to file for divorce.
However, Lloyd attempted to invalidate the postnup, claiming the penalty would leave him with no assets. Although the Maryland Court of Special Appeals ruled against Lloyd and upheld the postnuptial agreement, he is now seeking a review of the decision in front of the Maryland Supreme Court, according to news reports.
You're probably thinking contracts like prenuptial and postnuptial agreements between a couple take all the romance out of a relationship. Or maybe you're supposing that these agreements are strictly for the very wealthy to protect their assets.
You'd be wrong on both counts. Prenups and postnups are no longer reserved for the wealthy and, despite any romantic stigma, are increasingly being considered by all parties in a relationship.
Indeed, a 2022 poll by Harris Interactive indicated that 40 percent of people ages 18 to 34 who are married or engaged have signed a prenuptial agreement, suggesting millennials and Gen Zers today may take a more pragmatic approach to marriage. And that may be smart considering 50 percent of marriages in the United States end in divorce,
And now, postnuptial agreements are also increasing in popularity.
"[The interest could be] directly related to the divorce rate and, perhaps, couples who are in stable marriages may nevertheless try to map out what would happen if things change dramatically," said Thomas C. Ries, a family law attorney with Kaufman, Ries & Elgin, P.A., in Towson, Maryland, and a fellow of the American Academy of Matrimonial Lawyers.
What are postnuptial agreements?
A postnuptial agreement is a written contract between a married couple that states their rights and ownership of financial assets in the event of divorce. The contract can include the division of responsibilities regarding children and other obligations. A prenup is signed before marriage, while a postnup is signed after the couple is married.
While most postnups typically involve the protection and distribution of wealth, Ries noted that there are some instances where a postnup involves a marital home for an "everyday couple."
"I had a matter years ago where the parties did not have considerable wealth but they did own a home together," Ries recalled. "After the husband's infidelity was discovered, both spouses decided not to divorce and, instead, to go into counseling and work on staying together. But in consideration for the wife's agreement to forgive her husband and stay in the committed relationship, she insisted—and husband agreed—that the title to the home be transferred to her sole name.
"It was important to her to know that she could not be displaced if her husband's behavior repeated itself," he added.
However, constructing a postnup is usually not straightforward and can cause various challenges and complications.
The challenge of consideration
"The greatest challenge with respect to postnuptial agreements is finding the requisite 'consideration' that is necessary to support the validity of the contract; something of value that one contracting party promises to give to the other in exchange, [such as] money, property, the performance of services or refraining from doing something," Ries said.
He explained the general triggers that motivate couples to do postnups.
"In my experience, the negotiation and execution of a postnuptial agreement typically arise where there has been some 'marital fault,' i.e., infidelity, by one spouse but the parties wish to remain married and work on maintaining their relationship," he explained. "The spouse who was not at fault sometimes desires some level of financial security, asset protection, etcetera, if he or she is willing to forgive the at fault spouse and remain in the marriage."
Jennifer Meyer, M.A., a licensed professional counselor in Fort Collins, Colorado, who runs her own counseling practice and provides divorce recovery counseling, said some other reasons for drafting a postnup could include these circumstances:
- One or both parties have children from a past relationship who they want to ensure receive part or all of their assets in case of divorce.
- A partner's previous spouse or other family member died, and the living partner wants to protect the deceased person's estate or inheritance in case of divorce.
- One or both partners may want to protect important assets (e.g., a business, inheritance, retirement, properties) in case of divorce.
Ries explained that in a separation agreement setting, both parties typically do not intend to live together or maintain their marital relationship, thus, each party receives various benefits or "consideration" for entering into the contract.
In a reconciliation agreement setting (which also happens in postnups), both parties typically seek to reestablish the marriage, which can be the consideration.
What we can learn from Lloyd and Niceta's case is that "forgiving marital misconduct, particularly the forbearance of the right to sue for divorce as a result of that misconduct, coupled with a good-faith attempt to reconcile the marriage, is adequate consideration to lawfully support the contract," Ries said.
"But what about the parties who are not separated, do not have any grounds for divorce and do not presently intend to become separated or divorced? What is the consideration for these parties to enter into an agreement that attempts to resolve support and/or property and/or inheritance/estate rights if they separate or become divorced in the future?" he added. "This is very troublesome."
Confidential relationships can complicate matters
The next challenge arises, in some states, if both parties are in a "confidential relationship," in which one party relies on the other party due to older age, family connection and/or superior training and knowledge, to an extent whereby the party who is relied upon dominates the situation.
"In Maryland, if there is a confidential relationship, the party who wants to uphold the contract's validity has the burden of proving that it was not the product of undue influence or duress," Ries said. "Alternatively, if no confidential relationship exists, then the party who wishes to set aside the contract has the burden of proof."
Bringing up a postnup with your partner
Even approaching the idea of a postnuptial agreement with your spouse might cause anxiety if there's no specific trigger, such as infidelity or debt.
Meyer suggested healthy couples who are generally in a positive state but seeking a postnup based on finances can start their conversation like this:
"Let your partner know that you'd like to schedule a time to sit down and discuss logistics of your financial picture as a couple," Meyer said. "Approach the conversation calmly and lovingly, stating that you'd like to discuss the idea of a contractual agreement to protect the assets you're bringing into the relationship separately."
For couples who have children from previous marriages, she suggested something along the lines of, "I'd like to discuss some ideas I've had about how to protect my children and, potentially, your children in the off-chance that something goes wrong between us. I love you and want you to know I'm 100 percent dedicated to you and our relationship. And, as you and I have both experienced, divorce can happen even with two well-meaning partners. It would help me feel less worried if I had an insurance policy of sorts to ensure that my kids are taken care of regardless of what happens between us. Chances are we'll never have to use this type of agreement, but I'd feel better having something in place for my kids."
Make sure you validate your partner's fears and concerns—these are normal—and share how having this type of agreement could potentially benefit your relationship, she added.
"Try to empathize with each other; knowing your partner's history, why does he/she want this contractual agreement?" Meyer said. "Is it personally offensive to you that your partner wants this or is it something not personal to you that would help your partner feel more comfortable in general? A lot of circumstances unrelated to the relationship can cause a person to want a prenup or postnup."
Before you approach a lawyer
Ries said you generally need to keep in mind these five points before approaching a lawyer to draft a postnup:
- Understand the "consideration." "In order to have a legally valid and binding contract, the parties need to exchange something of value," Ries said. "There must be a benefit to each party. This is often the greatest challenge and was the primary focus of Mr. Lloyd's [unsuccessful] argument to rescind the postnuptial agreement."
- Both you and your spouse should have separate, independent legal counsel.
- Both you and your spouse need to make a full and honest disclosure of all finances.
- Both of you should have ample opportunity to engage in the negotiation of the contract.
- Do your best to show that the contract was entered into voluntarily and each party understood its meaning and effect. This is to ensure the contract can be enforced when needed. This is also why it's important for both parties to have independent legal counsel.
However, understand that laws vary from state to state.
"I can opine only with respect to Maryland," Ries said. "If there is valid consideration to support the contract, independent counsel, full and frank disclosure, and an opportunity to engage in negotiations, parties can arrive at a legally enforceable postnuptial agreement."
Sense of security
Ultimately, you need to weigh the pros and cons of doing a postnup.
"Practically speaking, with such a high percentage of marriages ending in divorce, having a prenup or postnup can provide a feeling of security—similar to an insurance policy—because both partners will know what to expect financially should their marriage end," Meyer said.
"It can also increase trust, perhaps counterintuitively: If you're the higher earner in a marriage and worry about a partner being drawn to you for your wealth, having a contractual agreement in place could ease your mind," she added. "Also, if your partner is the higher earner and has already gone through a financially devastating divorce, agreeing to a fair financial proposal can be a way to show that you aren't in it for the money."
Meyer explained that communication is the key for both parties to come to an agreement. Also, the familiarity of both agreements in our society today has made it much easier for couples to introduce the concepts.
"Because prenuptial and postnuptial agreements are more common these days, couples can learn about them and talk through any concerns they have instead of assuming it means their relationship is in trouble," Meyer said.