Bar News - November 15, 2013
Family Law: Ten Tips for Your Postnup Practice
By: Nadine M. Catalfimo and Charles A. DeGrandpre
The landmark Wilber decision handed down by the New Hampshire Supreme Court in August 2013 creates a new practice area for Granite State attorneys. Family law and trust and estate attorneys can now recommend postnuptial agreements to their clients, without hesitation, and join the majority of states that have been using this tool for decades.
Practitioners may wonder what provisions to include in a postnuptial. Here are ten tips for practitioners to consider in developing their postnuptial practice and forms:
1 Full Disclosure. Parties to the agreement should include a complete list of all assets, with fair market values, including interests in other trusts and anticipated inheritances. Liabilities of the parties should also be included. Although not required, it would be good practice to give each spouse the opportunity to consult with the other spouse’s financial advisor/consultant to address questions.
2 Legal Counsel. Advise the other party to obtain independent legal counsel and give them sufficient time to do so. Be careful not to represent both parties, which would be a conflict of interest. As the Wilber decision points out, it is “paternalistic” and “unwarranted interference” to require the other party to obtain separate legal counsel. However, in the absence of legal counsel for one spouse, you may include a provision that acknowledgesthe right to counsel and/or that separate counsel was recommended but waived. An “attorney certification” is often used in other jurisdictions and can also be used in conjunction with your agreement, attached as an exhibit, reciting that your client understands his rights and that you are a New Hampshire licensed attorney and that you explained the legal affects of the agreement to your client, etc. Although an attorney certification is not required, it is recommended.
3 Comingling of Assets. Clients should keep their property separate, except for joint property. Like a prenuptial, a postnuptial may provide certain assets are joint and pass as such, and that the parties may benefit from each other’s estate plan. If they comingle assets defined as separate property, it may be difficult to distinguish their property and could potentially create issues. Keeping assets separate may mean the parties need to re-title any joint or tenants in common designations or ownership rights. Consider adding a provision regarding how jointly owned assets should be handled and how gifts made during the marriage to one another are handled between the parties.
4 Converting a Prenuptial Form. A postnuptial is not the same as a prenuptial, so if you are converting your New Hampshire prenuptial to a postnuptial, remember to delete references to the marriage occurring at some time in the future, or the marriage being the consideration for the contract, and change the recital of facts in the beginning of the agreement. The contract is based on contract law principles pursuant to the Wilber decision. Unlike the prenuptial, the consideration of the contract is not in contemplation of the marriage or effective upon the marriage, because the postnuptial occurs after marriage. You should also reword the consideration provision accordingly.
5 Retirement Benefits. If applicable, consider a provision waiving a spouse’s election regarding any qualified joint and survivor annuity or pre-retirement survivor annuity for purposes under Section 417 of the Internal Revenue Code, making one party/spouse consent the requisite written permission regarding beneficiary designations made by the other spouse, without the need for further consent or approval by the other spouse, and waiving any rights to a portion of any such benefits.
6 Transfers to Third Parties. Consider inserting a provision addressing and or waiving rights to property passing by way of beneficiary designation in policies of life insurance, annuities, individual retirement accounts, pensions, etc. so that each party has no right to a claim in the conversion of these types of assets, except as provided in the agreement.
7 Waiver of Estate Rights. Consider adding a waiver and relinquishment of all statutory rights, title and interest to the surviving spouse’s estate, if appropriate, and make the provision general and all inclusive so ifthe parties move to another jurisdiction that recognizes and enforces a postnuptial, all dower andcurtesy rights, elective share rights, homestead rights, exempt property rights, and rights to renounce and or take against any will or transfer of the decedent, etc.are included.
8 Marital Home. What happens to the marital home? Consider adding a separate provision addressing the parties’ interest in the home, whether they will continue to reside in it upon the death of one spouse or divorce, the costs and expenses relating to the marital home upon the death of one spouse or divorce, and related issues if the home is held in trust.
9 Representing the Non-Wealthy Spouse. When negotiating the agreement, take into consideration what the non-wealthy spouse is giving up and use it to negotiate the agreement for your client. For example, is he giving up the statutory elective share of the wealthy spouse? The value of thewaiver can be significant to the spouse relinquishing therights, so be careful not to overlook that fact.
10 Debts. Part of the full disclosure should include information regarding the debts of the individuals at the time of the agreement, and address debts of the parties upon death, divorce or both. You should also address future debts of the parties and consider adding a separate provision even if you include all liabilities on the lists of assets of the parties.
Like prenuptials, there are many variations of postnuptial agreements and numerous considerations and provisions you can add to your agreement.Remember, a postnuptial can be upon death or divorce of the parties, or both - which covers both family law and trust and estate concepts. These are only some suggestions to consider.
In 2008, the authors conducted an in-depth analysisregarding the possibility of postnuptial law in New Hampshire and were hopeful that one day there would be a test case and favorable New Hampshire Supreme Court decision
In addition to the recent Wilber decision, more information regarding postnuptial agreements and trends in other jurisdictions can be found in Chapter 53 of Volume 11 of the New Hampshire Practice, including an analysis of the recent Wilber decision.
For more information, Nadine can be reached at email@example.com and Charlie can be reached at Charlie.DeGrandpre@mclane.com.