Published in NH Bar News (11/18/2020)
The drafting and execution of prenuptial agreements can be nerve wracking. It may be even more so for postnuptial agreements. Postnuptial agreements require a close look at the issues of duress, undue influence, coercion and fairness. Many such agreements are a foreshadowing of what will follow: a divorce.
In evaluating the likelihood of a postnuptial agreement being enforced, the starting point is to review the rules of prenuptial agreements. In the seminal prenuptial agreement case of MacFarlane v. Rich, 132 NH 608 (1989), Chief Justice David Brock frankly recounted the parties’ marital breakup as follows: “In December of 1985, the parties travelled to the Cayman Islands for the purpose of spending Christmas with the defendant’s son. The defendant prepared a Christmas dinner for the family and guests, but on Christmas evening, midway through the meal, the plaintiff left the table, stating that he was going to change his clothes. To the defendant’s astonishment, the plaintiff did not return that night, or ever after . . . and she did not see him again until the date of the trial in this matter.” MacFarlane, 132 NH at 610. For Mr. MacFarlane, the handwriting was on the wall.
The MacFarlane Court noted that “the State has a special interest in the subject matter of antenuptial agreements, and as a result, courts tend to scrutinize these agreements more closely than ordinary commercial contracts. [citations omitted].” Id at 613. The same rule applies to postnuptial agreements. See, Estate of Wilber, 165 NH 246, 252 (2013).
Despite the lack of financial disclosures or involvement of attorneys, the Supreme Court found the postnuptial agreement in Wilber to be valid. The Wilbers were married for approximately 50 years. Richard owned property in New Hampshire and Josephine owned property in Maryland. They entered into a “Property Agreement” providing that Richard would make no claim on the Maryland property during his life or after his death and Josephine would make no claim against Richard’s New Hampshire property during her life or after her death. Nevertheless, upon Richard’s death, Josephine filed a waiver of surviving spouse, and sought her statutory share of the New Hampshire property. The Probate Court ruled the Property Agreement unenforceable. Estate of Wilber, 165 NH 246, 248 (2013). The New Hampshire Supreme Court, however, agreed with Richard’s Executor that the Property Agreement was an enforceable postnuptial agreement under the principles of New Hampshire law, noting: “The modern view is that spouses may freely enter contractual relationships, and courts will uphold them if they satisfy the criteria of contract formation and they are otherwise fair.” Id. at 249. The Court cited with approval the case of Bedrick v. Bedrick, 17 A.3d 17 (Conn. 2011), “[a] case in which the Connecticut Supreme Court opined that ‘[p]ostnuptial agreements are consistent with public policy’ because they ‘realistically acknowledge the high incidence of divorce’ and ‘allow two mature adults to handle their own financial affairs.’ Bedrick, 17 A.3d at 24 (quotation omitted) . . .”. Id at 250.
The Court declared: “We find no compelling reason to depart from this trend. Postnuptial agreements give married persons the flexibility to dispose of their property and establish their rights and obligations upon death or marital dissolution, given their particular life circumstances. . . . We hold, therefore, that postnuptial agreements may be enforced in New Hampshire.” Id at 250.
The Court noted that state courts take different approaches to reviewing postnuptial agreements. “Some require greater indicia of fairness than that which applies to antenuptial agreements, while others analyze both antenuptial and postnuptial contracts under the same standard.” Id at 251. “Here, we need not decide whether postnuptial contracts must be subject to scrutiny beyond that which applies to antenuptial contracts” as Josephine’s estate “failed to meet its burden to demonstrate that the Agreement was unfair to Josephine under either standard.” (Emphasis added). Id at 252.
The Court stated that it would “look, however, to principles governing antenuptial agreements for guidance.” Id at 251. The Court stated that “an antenuptial contract ‘carries with it a presumption of validity’” referencing the Yannalfo and MacFarlane cases. The Court then stated: “As a result, the parties seeking invalidation of the agreement must prove that: (1) the agreement was obtained through fraud, duress or mistake, or through misrepresentation or nondisclosure of a material fact; (2) the agreement is unconscionable; or (3) the facts and circumstances have so changed since the agreement was executed as to make the agreement unenforceable’.” (citing Yannalfo and MacFarlane). “Because of the fiduciary nature of the marital relationship, ‘the parties must exercise the highest degree of good faith, candor and sincerity in all matters bearing on the terms and execution of the proposed agreement, with fairness being the ultimate measure.’ In Re Estate of Hollett, 150 NH at 42-43 [citation omitted, emphasis in original].” Estate of Wilber at 251-252.
Parties seeking postnuptial agreements often fall into one of three categories: (1) Elderly couples who have suffered the loss of a spouse and have remarried late in life with children they wish to benefit upon their death. (2) Couples whose marriage is on the rocks and one spouse has raised the issue of divorce and the other wishes to remain married. The unhappy spouse has the leverage. (3) Situations where events may have occurred such as an inheritance, the change in the structure of a business, the success of one of the parties enterprises or a desire by one of the parties to ensure that assets pass to their children.
Likely, those cases most susceptible to invalidity are those where the marriage is shaky and a subservient spouse “gives in” to the other spouse’s demands with the hope of saving the marriage. Counsel representing the submissive spouse should warn the client that the agreement may very likely become a divorce decree. Counsel representing the controlling spouse should warn that the agreement may be set aside for duress, undue influence or coercion.
Food for thought: In New Hampshire there is a statute authorizing prenuptial agreements and a presumption they are valid. No such statute exists for postnuptial agreements.
Part of the consideration for prenuptial agreements is the marriage itself; not so for postnuptial agreements.
For prenuptial agreements the motivation often is marriage. For postnuptial agreements the motivation often is divorce or its avoidance.
Postnuptial agreements may require a “greater indicia of fairness” than prenuptial agreements.
One thing is clear: predicting the enforceability of postnuptial agreements is no sure thing.
Dave DePuy is a director in McLane Middleton’s Litigation Department. He can be reached at (603) 625-1345 or [email protected]. Chris Paul is a director in McLane Middleton’s Trusts & Estates Department. He can be reached at (603) 628-1335 or [email protected].