Why is a postnuptial agreement a good idea?
Signing a postnuptial agreement can be a smart move for a couple under a broad range of circumstances. Postnuptial agreements are sometimes viewed as a consequence of some sort of misstep or conflict within the marriage. But it is more accurate to think of a postnup as nothing more than a contract.
Once a couple is married, they essentially run their household together like a business — as anyone who files joint taxes every year might clearly understand. Sometimes, it makes the most sense from a financial and life decision perspective to lay certain matters out in the open.
Yes, a postnuptial arrangement commonly pertains to how property will be divided after a divorce, but it can also apply if one or both spouses unexpectedly die. Postnups can also have effects on certain business, investment, or transactional activities. For example, a postnup can simplify a business continuity plan for a partnership when a married partner decides to retire.
Any couple that has a desire to designate property as separate or add predictability to a possible divorce or death should be interested in a postnup. Postnups are especially appropriate when one or both spouses own a business or when someone might inherit a significant amount of property.
Review how postnuptial agreements typically work in New Mexico and the 5 biggest reasons you might get one below. You can also reach out to a New Mexico postnuptial agreement lawyer for answers to your questions and assistance with drafting an enforceable postnuptial agreement.
Postnuptial Agreements Are Recognized and Enforced in New Mexico When Written With Care
Nearly all states recognize prenuptial agreements now, but postnuptial agreements can be a legal grey area in some states. New Mexico is not one of those states, however.
Postnuptial agreements are honored and enforced throughout the state so long as they can meet the standards for a valid contract. Individuals who reside in or hold property/businesses in multiple states should apply some forethought when drafting a postnuptial agreement, but for the most part, all states will be willing to at least consider a contract that has been acknowledged and voluntarily signed by both parties.
New Mexico Postnuptial Agreement Requirements and Limitations
In New Mexico, the requirements and limitations for a postnuptial agreement are as follows:
- Must be signed and acknowledged by both parties, while they have capacity
- Must be a valid contract with clear, specific language and without broadly vague, open-ended clauses
- Cannot preemptively determine spousal support, child support, or child custody arrangements
- Must be in both parties’ best interests, so it cannot be excessively one-sided, unfair, or inequitable
- Both parties must make open disclosures prior to the agreement, so a spouse cannot hide assets or manipulate the other spouse through selective sharing of information
- Cannot be written in such a way as to force someone to get a divorce, nor intentionally encourage it
- Cannot involve a requirement for one or both spouses to do illegal or unethical acts
- Likely will not be able to enforce provisions involving property or activities wholly outside of the state’s jurisdiction
Other than these provisions, a postnuptial agreement in New Mexico can be fairly broad. It will commonly spell out how the property would be divided after marriage, but it can also represent a contractual agreement for other aspects. For example, a couple can agree that one spouse will not work while attending a Master’s program but will then return to the workforce once they graduate or if they drop out. Some postnuptial agreements even cover household matters, like who is responsible for keeping the garage clean.
In a sense, anything reasonable is on the table when crafting a contract between you and your spouse. Speak with an attorney to discuss your goals, and have open conversations with one another about what you feel is most important to get in writing.
5 Biggest Reasons to Get a Postnuptial Agreement in New Mexico
There are many reasons a couple might decide a postnuptial agreement is in their mutual interest.
In fact, because of the versatility of these agreements, they are becoming more commonplace with each passing year. That’s according to a 2017 article in Harper’s Bazaar, which also noted that a postnuptial arrangement “can clarify the issues that lead to conflict, and help each spouse retain ownership of key assets, like a family-owned business. Sometimes they can even help keep a troubled marriage together, or — if it comes to it — simplify and shorten divorce proceedings.”
Some of the most frequently seen reasons for a postnup include:
New Developments or Understandings After a Marriage
Prenuptial agreements essentially ask couples to predict the future, which we all know can never be done with perfect accuracy. New factors may become more important than we had initially thought, or new life developments can have occurred. A couple may also have been shy about going through the prenuptial negotiation process but now feel comfortable treating marriage as a partnership involving serious considerations.
Whatever the reason, couples can use a postnuptial agreement to layout new ground rules or to modify an existing prenuptial arrangement.
A Spouse (Or Both) Owns a Business
Any equity in a business started after marriage is considered marital property. Further, the growth or expansion of a business can also be grounds for a spouse to claim the difference in the business’s value from before the marriage to the current point in time.
Dealing with business equity is always complicated, especially so when there is a divorce or the death of a business owner. A postnuptial agreement can allow the business owner to keep the business as separate property, potentially offsetting some of the value with a cash payout or other assets in the event of a divorce.
Know, too, that any business or investment holdings kept separate should have their own separate accounting and be maintained with income not sourced from the joint household funds. Any time the separate property is intermingled with household finances, or if a spouse indirectly supports the property with their own contributions, questions of equity may arise again during the division of marital assets.
A Spouse Obtains a Large Inheritance
Inheritances are supposed to be kept as separate property under New Mexico law (and according to the laws of most other states). However, questions of joint ownership for a couple can still get complicated. This is especially true when the inherited asset or its maintenance costs become intermingled within household finances. If a couple equally uses the property, that may also introduce grey areas, as well.
A postnuptial agreement drafted after an inheritance can resolve these matters with clarity, giving the couple confidence that there won’t be any hazy questions in the event of a divorce or death.
One or Both Spouses Have Large Debts
Debt is a marital asset, just like any cash or property. In New Mexico, only gambling debts are automatically kept separate from the marriage’s community property.
If a couple wishes to keep debts separate in the event of a divorce, a postnuptial agreement can make this happen. However, the couple should be careful that their arrangement passes tests of fairness, ethicality, and one-sidedness so that the arrangement can be enforceable later down the road.
A Spouse Has Children From a Prior Marriage They Want to Provide For
Spouses can take priority over adult children (and, sometimes, minors) when it comes to certain benefits or the management of an estate as a whole. When a spouse has children from a previous relationship, they may want to be sure those children are fully provided for before the remaining assets get divided or bequeathed to the other spouse. A postnuptial agreement can arrange to keep assets separate for this purpose, and it can also provide a compliment to estate planning by having the other spouse’s consent to the arrangement in writing.
A Spouse Is Estate Planning, Potentially While Their Health Is Failing
Estate planning is often seen as one-sided from the perspective of the person drafting their will and arranging their affairs. However, a spouse has a certain level of rights to property in the event of the other spouse’s death. Posthumous arrangements that do not seem to provide for the surviving spouse or honor their contributions to wealth creation may be invalidated in some cases. But if the agreement is put in writing and signed by both spouses while they still have the capacity, the estate plan is more likely to be enforced without any surprises.
A postnuptial agreement can also begin setting certain transactions in motion prior to the death of the other spouse or immediately after their death. Even while avoiding probate entirely, the process of executing wills and trusts can sometimes be slow-moving. A Postnuptial agreement can establish all of the moving parts and ensure that the surviving spouse will have everything in order for them in the event of the other spouse’s passing.
Talk to a New Mexico Family Law Attorney About Your Postnuptial Agreement
New Mexico Financial & Family Law is available to discuss your goals for a postnuptial agreement and help you put those goals into writing. Our experience with not just marital contracts but also divorce law and probate can allow you to anticipate the conditions in which a postnuptial contract is activated and how it might be executed at a future date. We can also help you avoid common mistakes that could make a postnup difficult to enforce — or have unintended consequences.
We are here and ready to help you during a no-risk consultation, so call (505) 503-1637 or contact us online to schedule your appointment today.