Divorce Attorney Carmela M. Miraglia compares the review of postnuptial agreements to separation agreements and prenuptial agreements in Massachusetts.
A postnuptial agreement is similar to separation agreements and prenuptial agreements insofar that postnuptial agreements function like a contract that dictates the division of assets and other financial issues in a divorce. The difference between these marital agreements is timing: A prenuptial agreement is executed before the marriage, a postnuptial agreement is executed midway through a marriage, and a separation agreement is executed at the time of a divorce. All three types of marital agreements are enforceable in Massachusetts, but Massachusetts courts have adopted slightly different legal standards for the enforcement of each.
This blog examines the rarest of the three forms of marital agreements – the postnuptial agreement – which is signed midway through the marriage. In the blog, I compare how Massachusetts courts review and enforce postnuptial agreements versus prenuptial agreements and traditional separation agreements. In addition, I review some of the special considerations that courts have recognized in connection with the postnuptial agreements, which can result in additional scrutiny compared to their more common cousins.
Spouses Entering Postnuptial Agreements Are Often More Vulnerable
In most cases, postnuptial agreements that are signed midway through a marriage arise after there have been problems in the marriage, such as infidelity or financial difficulties like a failed business or bankruptcy, which have brought the spouses to the brink of divorce. (To be clear, there are many other reasons spouses might execute a postnuptial agreement, such as one spouse receiving a large inheritance, or the desire to modify a previously existing prenuptial agreement.)
A significant percentage of the postnuptial agreements that divorce courts in Massachusetts review arise out of an attempt by one spouse to “save the marriage” by voluntarily waiving his or her rights to marital assets – or making other financial sacrifices favoring the other spouse. To prevent this emotional leverage from being abused, Massachusetts courts tend to scrutinize post-nuptial agreements more than they would a typical separation agreement or prenuptial agreement.
Another important factor distinguishing postnuptial agreements from simple separation agreements is this: Years may pass after the postnuptial agreement is signed, making terms that seemed fair and reasonable at the time seem far less fair at the time of the divorce. In contrast, a separation agreement is executed at the time of the divorce based on current financial information.
A recent unpublished opinion from the Massachusetts Appeals Court helps highlight some of the differences between prenuptial, postnuptial and separation agreements.
Husband Claims He Signed a Postnuptial to Save Marriage at Vulnerable Time
According to the Appeals Court’s factual summary, Connors v. Connors(2018) involved a high net worth couple that began having marital difficulties after the “wife began to suspect that the husband was having an affair with a [work] colleague and requested that the colleague be fired.” Additionally, after the parties were married, the wife learned that she was likely to receive an inheritance from her uncle in excess of $8 million. Marriage counseling led to talks about a postnuptial agreement, which was negotiated over the next couple of years. Towards the end of the negotiation, the parties each hired a lawyer to help.
When the postnuptial agreement was signed in April of 2011, it included a provision that shielded the wife’s $8 million inheritance from being allocated as a part of the marital estate in the event of divorce. The postnuptial agreement also called for the “equal division of all remaining property and the husband's income,” presumably as alimony. The provision calling for the equal division of the Husband’s “income” was particularly notable, given that Massachusetts law ordinarily caps alimony at 35% of the difference between the parties’ respective earnings. The husband was earning $500,000 per year in 2015, at the time of the divorce.
Four years later, in 2015, the wife filed a Complaint for Divorce and asked the court to enforce the postnuptial agreement. The husband claimed that the agreement was invalid because he had signed the instrument under duress, testifying as follows:
At trial, however, the husband testified he would sign whatever his wife put in front of him in order to save his marriage and show her how much he loved her. As a result, he claims, he did not push for any changes and accepted the fifty-fifty division of his income even though his attorney advised him not to.
The husband also cited Massachusetts caselaw, indicating that postnuptial agreement is not enforceable if it is not “fair and reasonable” at the time of the divorce.
Norfolk Probate & Family Court Judge Enforces Postnuptial Agreement
The trial took place in 2016 at the Norfolk Probate & Family Court before Hon. Elaine M. Moriarty. Prior to trial, Judge Moriarty found for the wife and enforced the postnuptial agreement, noting that segregating one party’s inheritance was common in prenuptial agreements, and observing that the husband was seeking a disproportionate (80/20) share of the remaining assets to compensate for his inability to pursue the hefty inheritance at the time of trial.
The judge entered the following order finding that the postnuptial agreement was enforceable:
As to the distribution of property, the judge ruled: "The provision in the post nuptial agreement that wife's inherited property be excluded from the marital estate and parties divide equally the assets they have accumulated through their partnership is not unreasonable per se and is indeed often seen in pre nuptial agreements involving inherited property. If this [a]greement is upheld then at the divorce trial [h]usband intends to seek a disproportionate share of the non inherited marital property (80/20 in his favor) given wife's inheritance. That is a matter for the divorce."
With respect to the alimony provision, the judge stated, "While the alimony provisions for equal sharing of [husband's] income, as defined in the [postnuptial] agreement, (after excluding income from her inheritance), may not be what the Court itself would enter, I do not find it unconscionable or unreasonable at the time it was signed or at [the] time of enforcement." In reaching this conclusion, the judge "evaluated the entire context in which the agreement was reached, . . . considered husband's extensive business acumen, . . . allowed greater latitude here where each had independent counsel of their choosing and . . . considered the magnitude of disparity between the outcome under the agreement and outcome under otherwise prevailing legal principles."
After informing the parties that she planned to enforce the postnuptial agreement, the parties conducted a trial on the remaining issues. After judgment entered, the husband appealed the enforcement of the postnuptial agreement.
How Massachusetts Courts Review Separation Agreements
In Massachusetts, courts typically scrutinize post-nuptial agreements more closely than both prenuptial agreements and separation agreements, even though the legal standards – all turning on whether an agreement is “fair and reasonable” – look similar on the surface. The analysis for a separation agreement is the easiest to understand: A court will approve a separation agreement if is “fair and reasonable” at the time of the divorce.
In Dominick v. Dominick (1984), the Appeals Court listed eight factors for assessing whether a separation agreement is fair and reasonable:
(1) the nature and substance of the objecting party's complaint; (2) the financial and property division provisions of the agreement as a whole; (3) the context in which the negotiations took place; (4) the complexity of the issues involved; (5) the background and knowledge of the parties; (6) the experience and ability of counsel; (7) the need for and availability of experts to assist the parties and counsel; and (8) the mandatory and, if the judge deems it appropriate, the discretionary factors set forth in G. L. c. 208, § 34.
The reference to G. L. c. 208, § 34 is important here, as it allows a judge to evaluate the agreement based on factors such as the length of the marriage, station, amount and source of income, employability, estate, and the needs of each party and the opportunity of each for future acquisition of assets and income.
Of course, at the end of the day, most judges evaluating separation agreements rely on their expertise – earned as a result of reviewing thousands of such agreements every year – to pick out serious problems that might make an agreement unfair or unreasonable. Indeed, when both parties are represented by attorneys, it is quite rare for judges to deny the entry of a separation agreement as unfair or unreasonable.
What makes separation agreements easier for courts to assess than prenuptial or postnuptial agreements comes down to timing. A separation agreement is based on the immediate financial circumstances of the parties at the time of a divorce. In contrast, both prenuptial and postnuptial agreements are often executed years in advance of a divorce. As financial circumstances change over time, the terms of prenuptial and postnuptial can grow increasingly one-sided.
How Massachusetts Courts Review Prenuptial Agreements
Over the years, we have blogged about how Massachusetts courts treat prenuptial agreements on numerous occasions. Attorney Lynch articulated the legal standard in this blog:
Massachusetts law enforces prenuptial agreements if they are valid when executed and are conscionable at the time of divorce. However, sometimes the court takes a “second look” at an agreement during a divorce proceeding to make sure that it “has the same vitality at the time of the divorce that the parties intended at the time of execution.” The agreement would not be enforced if one party would be left, “without sufficient property, maintenance, or appropriate employment to support [oneself],” due to circumstances that occurred while the parties were married.
Because courts will scrutinize prenuptial agreements on two grounds – i.e. whether the agreement was fair at the time it was signed and at the time of the divorce – one could argue that prenuptial agreements are subject to greater scrutiny than separation agreements. Certainly, to the extent that courts pay close attention to whether a spouse failed to make adequate disclosure or exerted inappropriate pressure before the marriage, at the time the prenup was signed, there is an added element to the review of prenuptial agreements in Massachusetts.
However, a court’s “second look” at a prenuptial agreement – i.e. whether the agreement is fair and reasonable at the time of the divorce – actually involves significantly less scrutiny than a court’s evaluation of a separation agreement. In DeMatteo v. DeMatteo (2002), the SJC explained why a lower level of scrutiny is applied to the review of the fairness and reasonableness of prenuptial agreements at the time of the divorce, compared to separation agreements:
The considerations that permit a judge to conclude that a separation agreement is "fair and reasonable" are different from those that permit a judge to conclude that an [prenuptial} agreement is "fair and reasonable." Parties to a separation agreement are joined in marriage. On termination of their marriage, it is entirely appropriate that the statutory factors that govern the award of property and support should inform, in part, the fairness and reasonableness of a separation agreement. The separation agreement is, after all, a substitute for the independent application by a judge of those same statutory factors. [A prenuptial] agreement, in contrast, permits the parties to define the material aspects of their relationship before they enter into the status of marriage. If the terms of a proposed [prenuptial] agreement are unsatisfactory, a party is free not to marry.
In short, prenuptial agreements are enforceable in Massachusetts if they are fair and reasonable at the time of execution and are fair and reasonable at the time of divorce. The need to demonstrate that the prenuptial agreement was fair and reasonable at the time it was signed presents an extra hurdle for parties, but once they have crossed this hurdle, the sledding gets easier. Massachusetts courts will enforce a prenuptial agreement that is significantly less “fair and reasonable” at the time of the divorce compared to a separation agreement. (Editor’s note: Given the different standards of review, it would be nice if the courts stopped using “fair and reasonable” to describe the analysis of both separation agreements and prenuptial agreements.)
Other important factors in prenuptial agreements are whether the parties made full financial disclosures to one another before the agreement, and the timing of the agreement, where courts disfavor prenuptial agreements that are executed at the last minute before a wedding.
At the end of the day, Massachusetts courts tend to enforce prenuptial agreements based on one overriding factor: A future spouse who is presented with a prenuptial agreement can always decline to get married, and a spouse who enters a prenuptial agreement before getting married knew what he or she was getting into before saying “I do.” In essence, a person who signs a prenuptial agreement has agreed to waive divorce-related rights in advance.
How Massachusetts Courts Review Postnuptial Agreements
Postnuptial agreements are more complicated than either separation agreements or preputial agreements, and the legal standard employed by courts when reviewing postnuptial agreements draws on the standards applied to both separation agreements and prenuptial agreements.
To be enforceable, a postnuptial agreement must be consistent with the standard laid out in Ansin v. Craven-Ansin (2010) in order to be valid and enforceable:
- Each party had the opportunity to choose separate legal counsel;
- There was no fraud or coercion in the creation of the agreement;
- All assets were fully disclosed by both parties before the agreement was signed;
- Each spouse knowingly agreed to waive their marital rights in a divorce, including the right to an equitable division of assets;
- The terms of the postnuptial agreement are both fair and reasonable, both at the time of the execution and at the time of the divorce.
On first blush, the legal standard in Ansin looks rather similar to the standard applied to prenuptial agreements. However, elsewhere in Ansin, we find yet another definition of “fair and reasonable,” this time as applied to postnuptial agreements, as highlighted in bold below:
Fair and reasonable terms. We turn finally to the requirement that a [postnuptial] agreement contain terms that are "fair and reasonable" at the time of execution and at the time of divorce. We do not accept the husband's suggestion that the standard applicable to [postnuptial] agreements should be the same as the one applicable to premarital agreements. … As the wife points out, a [postnuptial] agreement more closely resembles a separation agreement. The statutory rights and obligations conferred by marriage are not potential benefits for a divorcing spouse but an integral aspect of the marriage itself. The Legislature has required that the relinquishment of marital rights be assessed in light of the factors set forth in G. L. c. 208, § 34. In DeMatteo v. DeMatteo, supra at 33, we noted that "it is entirely appropriate" that the judge consider the factors set forth in G. L. c. 208, § 34, in evaluating a separation agreement; the "separation agreement is, after all, a substitute for the independent application by a judge" of the equitable division of parties' property as mandated by the Legislature. Similar considerations inform our view of the enforceability of [postnuptial] agreements, with this additional observation: parties to a [postnuptial] agreement do not bargain as freely as separating spouses may do. … Because a [postnuptial] agreement is executed when the parties do not contemplate divorce and when they owe absolute fidelity to each other, the heightened scrutiny to which we made reference earlier applies in this context as well.
In evaluating whether a [postnuptial] agreement is fair and reasonable at the time of execution, a judge should accordingly consider the entire context in which the agreement was reached, allowing greater latitude for agreements reached where each party is represented by separate counsel of their own choosing. … A judge may consider "the magnitude of the disparity between the outcome under the agreement and the outcome under otherwise prevailing legal principles," whether "the purpose of the agreement was to benefit or protect the interests of third parties (such as the children from a prior relationship)," and "the impact of the agreement's enforcement upon the children of the parties." ALI Principles of Family Dissolution, supra at § 7.05(3)(a), (c), (d). Other factors may include the length of the marriage, the motives of the contracting spouses, their respective bargaining positions, the circumstances giving rise to the [postnuptial] agreement, the degree of the pressure, if any, experienced by the contesting spouse, and other circumstances the judge finds relevant. (Emphasis added.)
Let’s unpack this a little. Here is what Ansin is really telling us:
1. “First Look”: Careful Scrutiny Like Prenuptial Agreements. Like prenuptial agreements, courts must engage in a “two-look” process, first scrutinizing whether the agreement was fair and reasonable at the time if was executed. As with prenups, this stage includes considerable scrutiny, with a focus on whether each party made full disclosure of his or her assets, whether the parties each had an attorney, and whether each party made a full and knowing waiver of his or her rights in a divorce. In other words, Ansin tells us that courts should apply the same high level of scrutiny to the circumstances surrounding the signing of a postnuptial agreement as we see in the “first look” of the prenup test.
2. “Second Look”: Even Heavier Scrutiny than Separation Agreements. As noted above, a court’s determination of whether a prenuptial agreement is “fair and reasonable” at the time of the divorce involves significantly less scrutiny than when a court is reviewing a separation agreement. In short, a prenuptial agreement may be enforceable even though it is significantly less “fair and reasonable” than a separation agreement would need to be at the time of a divorce. However, Ansin tells us that the same is not true for postnuptial agreements. Instead, Ansin tells us that courts must scrutinize a postnuptial agreement even more carefully than a separation agreement when determining if the agreement is “fair and reasonable” at the time of the divorce, because “parties to a [postnuptial] agreement do not bargain as freely as separating spouses may do.”
In short, Massachusetts courts scrutinize postnuptial agreements more carefully than either prenuptial agreements or separation agreements, albeit all using the same vaguely worded standard of “fair and reasonable.”
How the Closer Review for Postnups Worked in Connors
On appeal, the Massachusetts Appeals Court looked for a clear error or an abuse of discretion by the trial judge in the Connors case.
First, the Appeals Court agreed with the lower court that there was no coercion or duress, meaning the postnuptial agreement was “fair and reasonable” at the time it was executed. The Appeals Court noted that the husband was a sophisticated and experienced career negotiator and was represented by legal counsel both during the negotiation and at the execution of the agreement. (The Court noted that the husband entered the agreement against the advice of his attorney.) The Court found that a change of heart over the agreement after divorce papers were filed does not constitute duress.
The Appeals Court, however, did find a discrepancy in the trial court’s ruling that necessitated a reversal and remand of the lower court ruling for further hearing. The trial judge had “expressly noted that the husband intended to request a greater share of marital assets” during trial in light of the post-nuptial agreement. This suggested to the Appeals Court that the trial judge “had some misgivings with respect to the fairness of the postnuptial agreement at the time of the divorce,” but that “any unfairness could be mitigated at the subsequent” trial. That trial, however, was drastically shortened, as previously noted, leaving any unfairness unresolved.
Accordingly, the Appeals Court remanded the case to the lower court to reconsider whether the postnuptial agreement was fair and reasonable in the context of the overall division of assets:
In considering the postnuptial agreement on remand, the judge should address only whether the agreement's provisions for alimony and the division of noninherited assets were fair and reasonable at the time of the divorce. Among the factors the judge should consider are "the financial and property division provisions of the agreement as a whole" and "the mandatory and, if the judge deems it appropriate, the discretionary factors set forth in G. L. c. 208, § 34." Ansin, 457 Mass. at 298, quoting from Dominick v. Dominick, 18 Mass. App. Ct. 85, 92 (1984).
As noted above, the Ansin decision suggests that the lower court should scrutinize the impact of the postnuptial agreement more carefully than it would an ordinary separation agreement, and significantly more carefully than it would a prenuptial agreement.
What Does “Fair and Reasonable” Really Mean?
As noted above, Massachusetts appellate courts have complicated the jobs of Probate & Family Court judges, attorneys and litigants by using different versions of the “fair and reasonable” standard for the review of separation agreements, prenuptial agreements and postnuptial agreements. What constitutes a “fair and reasonable” agreement changes depends on the type of marital agreement under evaluation. That said, it is important to always keep one key difference in mind when comparing a typical divorce or separation agreement with either a prenuptial or postnuptial agreement.
One should never forget that when judges are evaluating the fairness and reasonableness of a typical divorce or separation agreement, they are doing so in the context of a hearing in which both parties are in current agreement, with each party separately affirming to the judge that he or she desires the entry of the agreement, while confirming on the record and under oath that he or she or believes the agreement to be fair and reasonable. In stark contrast, judges who are evaluating the fairness and reasonableness of prenuptial and/or postnuptial agreement often face at least one party who is adamantly opposed to the enforcement of the agreement before the court.
In rare cases, Massachusetts appellate courts have addressed the question of whether a judge should enforce a separation agreement that was signed and/or agreed to by both parties, only to have one party change his or her mind prior to the final entry of judgment. For example, in Dominick v. Dominick (1984), the Appeals Court found that an oral marital separation agreement, read into the record at a preliminary court hearing, was binding on the parties even though wife subsequently repudiated the agreement before the final hearing. In a recent unpublished opinion, London v. London (2017), the Appeals Court noted that once an agreement is signed, a party can be bound to its terms, even if he or she changes his mind before the case is finalized: “The general rule is that, in the absence of fraud, one who signs a written agreement is bound by its terms whether he reads and understands it or not or whether he can read or not.”
The caselaw suggests that a party might be bound by a signed separation agreement, even if he or she changes his or her mind before the judge performs a final review of the agreement. However, many judges would feel uncomfortable with approving a separation agreement that one party asserts is not fair and reasonable at the time of the hearing.
Even when both parties agree to enter a separation agreement, this does not guarantee that a judge will find the agreement fair and reasonable. If a judge determines that a separation agreement appears to heavily favor one party, the judge will often probe the parties and their attorneys with questions before approving the agreement. If the disadvantaged party does not have an attorney, judges can become especially uncomfortable with a one-sided agreement, and it is not unheard of for judges to order a disadvantaged party to review the terms of the agreement with that county’s “lawyer of the day” before proceeding forward. If both parties have counsel, the judge will often inform the attorneys about his or her concerns with the agreement and question the parties about their understanding of the rights they are waiving. The vast majority of separation agreements are eventually approved by judges as “fair and reasonable”, but the simple fact remains that judges periodically decline to approve agreements that appear too one-sided.
When it comes to prenuptial and postnuptial agreements, the simple reality is that judges frequently must decide whether to enforce the agreement even if one spouse objects. Unlike separation agreement, in which both parties are asking the judge to approve the agreement, prenups and postnups were generally executed years prior to the divorce, and it is quite common for spouses to ask a judge to set the agreement aside. Of course, a fundamental feature of prenuptial and postnuptial agreements involves one or both party’s waiver of future rights, and few such agreements would ever be enforced if one party’s objection at the time of the divorce was grounds for invalidating the instrument.
What’s clear from the caselaw is that a “fair and reasonable” separation agreement is rather different from a “fair and reasonable” prenuptial agreement or postnuptial agreement at the time of the divorce. The cases tell us that even very one-sided prenuptial agreements will frequently be approved as “fair and reasonable”, while post-nuptial agreements are subject to even greater scrutiny than a traditional separation agreement, and much greater scrutiny than a prenuptial agreement.
About the Author: Carmela M. Miraglia is a Massachusetts divorce lawyer and Cape Cod family law attorney for Lynch & Owens, located in Hingham, Massachusetts and East Sandwich, Massachusetts. She is also a mediator for South Shore Divorce Mediation.
Schedule a consultation with Carmela M. Miraglia today at (781) 253-2049 or send her an email.