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You may have heard of a prenuptial agreement to protect your assets during a marriage, but what about a postnuptial agreement, or postnup? Both can protect the financial assets of a couple if they get divorced, with the main difference being when the agreement is signed. (There are also other subtle differences between the two documents.)
You should understand these differences before you consider a postnup.
What a postnuptial agreement covers
A postnuptial agreement is similar to a prenup in many ways, though it differs in that it is drafted and signed after the couple is married. Every postnup is different, but the assets involved might include real estate, investments, retirement funds, personal property and debt. Generally, a postnup outlines how assets will be divided in case of divorce and who will be responsible for debts.
A postnup might also include certain other provisions, such as alimony. There could be conditions for that support, though that is generally subject to court approval.
Certain legal requirements may apply before the postnup is valid, including:
- Voluntary participation: Both spouses should participate in the postnup of their own volition.
- Full disclosure: Both parties must fully disclose their assets and debts in the document.
- Fairness: The document should be fair to both parties and not put one at a distinct disadvantage.
- Proper execution: The document must be drafted, signed and executed according to state law.
Every postnup is different and so the document might include certain conditions and stipulations not mentioned here.
How a postnup can protect future investment assets
A postnup can protect future investment assets in several ways.
While a prenup aims to protect future assets by trying to anticipate how the couple’s assets will change after matrimony, a postnup takes into account how income and assets have already changed during the course of the marriage. So a postnup may present a more accurate picture of each spouse’s finances, offering more protection.
A postnup can also offer protection by describing how separate property is classified. For example, it might classify differently assets acquired before and after marriage, an especially important feature in community property states.
Perhaps more important, a postnup can determine how current investments will be handled in the future, creating guidelines that will help keep property separate. These provisions can be explicitly stated to protect each spouse.
How to create a postnuptial agreement
If you want to create a postnup, you should follow specific steps to ensure the document is valid and both parties are fully onboard.
- Discuss your finances: At this stage, you should understand each other’s financial goals and clearly disclose your assets, debts and financial obligations. You should also discuss what each party expects from the postnup.
- Determine what needs protection: Decide specifically which assets or provisions to include in the postnup, such as properties, investments, inheritances or debts. Also be aware of financial risks to those assets and have a contingency plan if the risks are realized.
- Seek legal advice: Seek the appropriate legal advice before moving forward. Specifically, you should hire a lawyer who specializes in family law and who understands your situation. An attorney will help you ensure the document complies with state laws and regulations.
- Draft the document: Now, you can draft the document with all the conditions you agreed upon in the previous steps. Be sure to address every provision, such as investment protection and spousal support. Allow enough time for both parties to review the document and make changes as needed.
- Finalize and sign the document: Once both parties have finished drafting the document, it’s time to sign. If possible, it’s best to do this in front of a witness or a notary who can attest to the signing. If necessary, file the document with legal authorities and make regular updates.
These are general steps, and your situation may differ. So it’s important to meet with an experienced attorney who understands the situation and can provide the appropriate advice.
Legal enforceability of a postnup
The legal enforceability of postnups varies. Some states and jurisdictions may have different standards for enforcing prenups versus postnups. In addition, postnups may be scrutinized more heavily by courts than prenups.
Typically, a prenup is valid as soon as the couple’s marriage is finalized. The court takes it as a given that both parties have adequate legal counsel, whether or not that is actually the case. With a postnup, however, courts may look at the agreement more critically because the couple is already married, and one partner may be in a superior financial position. Therefore, it’s important to ensure the postnup steps are followed closely.
Advantages and disadvantages of a postnup
Before moving forward with a postnup, you should be aware of its advantages and disadvantages. Consider the following before moving forward:
- Minimizes conflict: Having clearly defined terms and a “meeting of the minds” in drafting the agreement reduces the chances of conflict later.
- Asset protection: It protects assets like property and investments from the other spouse, including being able to shield one spouse from the other’s debts.
- Adaptability: Revisions are possible if one or both partner’s finances change.
- Enforceability: If not drafted property, the postnup could be challenged in court by one spouse or the other. In addition, courts may treat postnups with more scrutiny than prenups.
- Legal fees: It can be expensive to hire legal representation in drafting, reviewing and finalizing the document.
- Relationship strain: Discussing these issues can put strain on a relationship, especially since they can make divorce seem more likely or even inevitable.
A postnup can be a useful tool to protect one or both spouse’s assets, particularly if those assets have changed significantly during the couple’s relationship. A postnup can be more difficult to enforce than a prenup, so it’s important to get it right. Be sure you talk to a lawyer specializing in family law before you move forward with a postnup.