After hearing one of the news reports about the divorce between the owners of the Dodgers baseball team, my husband said that he didn't know a couple could have a post-nuptial agreement. He said he had heard of a pre-nuptial agreement – one that is signed by married couples before the marriage. He said he didn't know that a couple could sign an agreement to divide their property after they are married. I told him that post-nuptial agreements are common among rich people but any couple can create one.
California is a community property state and a post-nuptial agreement created in California is sometimes referred to as a community property agreement. The purpose of the agreement is to change the normal rules regarding the classification of property as community or separate and to specify the disposition of the property upon divorce or death. The agreement can cover property currently owned by the spouses or property they expect to receive in the future. For example, during the marriage one spouse writes a book. Under the classification rules, the profits from the book would normally be considered community property. In this case the couple decides that all proceeds from the sale will be considered the separate property of that spouse and executes a post-nuptial agreement to that effect. As another example, a wife might have received a large inheritance from her family. Under the classification rules, the inheritance is the wife's separate property; however, it is possible for it to be converted to community property if it is "commingled" with the community property. The wife wants to make sure the inheritance remains her separate property and a post-nuptial agreement can accomplish that. In the case of the Dodger owners, apparently they made a simple (in theory) agreement -- one spouse would own the Dodgers and the other spouse would own all of the real estate.
Post-nuptial agreements can be prepared as part of an estate plan and work in conjunction with either a couple's joint or individual trusts. The formalities of preparing and executing the post-nuptial agreement are similar to those for preparing and executing the pre-nuptial agreement. Ideally, both the husband and the wife should be represented by separate attorneys. When one attorney represents both parties, certain disclosures must be made and any potential conflict of interest must be expressly waived by both spouses. When done correctly, the agreement is a wonderful tool to accomplish estate planning goals. © 2012 by Marlene S. Cooper. All rights reserved.