Postnuptial agreements in Iowa
Posted on 06/20/2014 at 10:31 AM by Mary Zambreno
Co-authored with Jesse R. Johnston
Tiger Woods and Elin Nordegren did it. Heidi Klum and Seal did it too. What is it? Both couples as do plenty of celebrity spouses reportedly executed a contract called a postnuptial agreement, which was intended to prevent any hairy disputes over how these couples would divide their assets in the event of a divorce. Postnuptial agreements are written contracts between spouses that are executed after the couple has married. Most commonly, these types of contracts are meant to protect financial situations that have changed since the marriage: perhaps one spouse comes into an inheritance or receives a large increase in salary. But postnuptial agreements aren't just for the Elin Nordegrens or Seals of the world. Postnuptial agreements can also be a vehicle for fostering discussion about what isn't working in a marriage, and consider means for improvement. Because states vary in terms of whether they recognize the validity of a postnuptial agreement, if Heidi Klum and Seal lived in and executed their postnuptial agreement in Iowa, then their contract would likely not have been recognized by the court at the time of their divorce. That's because Iowa courts have frowned upon postnuptial agreements for nearly a century, since 1912 when the Iowa Supreme Court first found postnuptial agreements to be of no validity.
In re Kennedy's Estate, 135 N.W. 53 (Iowa 1912). But what if Heidi Klum and Seal lived in and executed their postnuptial agreement in another state that does recognize postnuptial agreements and then subsequently moved to Iowa where postnuptial agreements are not recognized? What happens to the vast wealth that they accumulated over the years? In May 2014, the Iowa Supreme Court decided such an issue in Hussemann v. Hussemann. In Hussemann, Herbert Husseemann Sr. and Velma Hussemann were married in Florida in 1991. Both Herbert Sr. and Velma had prior marriages and children from those marriages Velma had one daughter and Herbert had two sons. Shortly after their marriage, Velma and Herbert entered into a postnuptial agreement whereby Velma waived all claims against the estate of Herbert on his death, including the elective share, dower, family allowance, inheritance, or any other spousal support or claims given by law. A choice-of-law provision in the agreement stated that any questions as to the validity and construction of the agreement shall be determined under the laws of Florida. Both parties signed the agreement. After the signing of the postnuptial agreement, Herbert created an inter vivos trust, which left all residual assets to Herbert's sons. The terms of the trust directed that the trust be governed by Florida law. In 2005, Velma and Herbert moved to Belle Plaine, Iowa, from Florida and they remained there until Herbert's death in 2012. Velma filed a petition seeking her one-third spousal elective share of the Trust pursuant to Iowa Code Section 633.238. Herbert's sons resisted based upon the terms of the postnuptial agreement.
Velma argued that the postnuptial agreement was void because it violated Iowa's public policy against postnuptial agreements. The Iowa Supreme Court applied Iowa's choice-of-law rules, which allow contracting parties to choose the governing law, unless there is no "substantial relationship" between the parties and the chosen state, or application of the chosen law (Florida in this case) would be contrary to a fundamental policy of Iowa. In his unanimous opinion, Justice Mansfield concluded that there was a substantial relationship between the choice-of-law provision and the parties, noting that the coupled lived in Florida at the time of the creation of the agreement and continued to live there for fourteen years. The Court then tackled the slightly more complex issue of whether Iowa has a materially greater interest than Florida in the present case, but concluded that Florida has a significant interest in assuring that a Florida marriage, including any accompanying agreements, is recognized and carried out in a manner consistent with its own law.
Also, Florida has an interest in ensuring that the Trust and the Trust assets that were formed under Florida law are protected. Even if Iowa frowns upon postnuptial agreements, it appears that Iowa will enforce those created in another state provided that the postnuptial agreement includes a choice-of-law provision in favor of a state that does recognize postnuptial agreements, as long as there is a substantial relationship between the parties and the chosen state and so long as Iowa does not have a materially greater interest than the parties' chosen state. As of today, there are approximately thirty states, including Florida, that allow married couples to enter into such contracts.
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- Mary Zambreno
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