Postnup Blues: Make Sure Your Postnuptial Agreement Is Enforceable

A postnuptial agreement (“postnup”) is an agreement entered into by a couple after marriage. The agreement can cover a range of topics from lifestyle issues to the couple’s wishes if they choose to divorce. A postnup, like a prenup, is designed to protect the marriage and provide the couple with security. Because it is a legally binding agreement, a postnup must conform to certain requirements based on the state in which it is enforced. While couples often choose to work with an attorney to execute a postnup, some couples try to do it on their own. This was the case in the recent Ballesteros decision. 

The Case:

In Ballesteros, the couple entered into a prenuptial agreement in which they opted out of New York’s statutory scheme concerning maintenance and distribution.  About one year into the marriage, the husband told the wife he wanted a divorce and she needed to leave the marital home. While the wife looked for a new home, the husband changed his mind and the parties agreed to work on the marriage. However, the wife informed husband that in order to work on the marriage, she would need financial security. The parties then entered into an agreement drafted by the wife and named it a “promissory note.”  The parties each signed the note and had it notarized. However, when the husband obtained the notary signature, a certificate of acknowledgement was not attached. Although the parties worked on their marriage, a divorce action was eventually instituted and the promissory note came into issue.

Court’s Holding:

The Supreme Court held a hearing to determine if the promissory note was enforceable and held that it was, and directed the husband to pay the wife $250,000 pursuant to the agreement. However, on appeal, this decision was overturned and the agreement was held to be unenforceable, stemming from the lack of proper acknowledgement.

Although the parties named the agreement as a promissory note, the subject matter falls within the purview of New York’s Domestic Relations Law because it was an agreement between spouses. Under DRL §236(B)(3), “[a]n agreement by the parties, made before or during the marriage, shall be valid and enforceable in a matrimonial action if such agreement is in writing, subscribed by the parties, and acknowledged or proven in the manner required to entitle a deed to be recorded.” In Ballesteros, the promissory note was in writing and was signed by the parties, but it was not properly acknowledged by the notary. Although the notary signed the agreement, it did not include the certificate of acknowledgement, which rendered the promissory invalid and unenforceable.

Implications:

As mentioned earlier, although many couples work with an attorney to execute agreements like postnups, working with an attorney is not required. However, should parties choose to draft and execute agreements independently of legal counsel, they must be sure that the agreement conforms to the relevant controlling law or statute. It is unclear from the Ballesteros case what, if anything, the parties knew in regards to New York’s Domestic Relations Law and how the law impacts the enforceability of their contract with each other. There are many cases in which parties choose to contract independently. However, in matters such as Ballesteros, where there is a significant financial stake, it is better to err on the side of caution and have an experienced attorney ensure that the agreement will be durable if there is a challenge.