Everyone knows what a prenuptial agreement is, but a new, retroactive version of a prenup—known as a postnuptial agreement—has begun to gain steam for already-married couples looking to solidify their financial lives together.
As the name implies, while a prenup happens before the vows are said, “postnups” are drafted after the marriage has taken place, whether it’s days, months, or years later. Both are legal documents that serve essentially the same purpose, though a different set of circumstances will need to be considered for a postnup.
“Postnuptial agreements will often be subject to even greater scrutiny than a prenuptial agreement,” says Edward F. Dombroski, Jr., managing partner of Travers Dombroski PC in Boston. “Unlike a prenuptial agreement where a party can walk away from the relationship if they feel they can’t reach a fair agreement, parties to a postnuptial agreement find themselves in the precarious position of already committing to each other, with a very different relationship dynamic.”
What can be included in a postnuptial agreement?
Just like prenuptial agreements, postnups can cover a range of areas and subjects, or they can be narrowly focused and customized to address a particular situation or asset. “Postnuptials are most commonly seen as vehicles to address issues of property ownership, alimony/spousal support, health insurance coverage, inheritances, or assignment of debts in the event of a divorce,” says Dombroski. “The agreement can include just one or all of these aspects of the marriage.” These same topics are commonly addressed in prenuptial agreements as well.
What cannot be part of a postnup?
There are some limits as to what can be included in a postnup, especially when it comes to children. Child-related issues are always judged according to what circumstances are in the best interest of the children. Consequently, anything that pertains to children is likely unenforceable in either a postnup or in a prenup. “Postnups cannot be used to fix custody rights or control child support,” says Peter M. Walzer, founding partner of Walzer Melcher in Los Angeles.
Reasons for drafting a postnuptial agreement
It’s understandable that, for some, having a spouse propose a postnup agreement could be seen as a red flag. Is he or she planning to leave the marriage? But, just like a prenup, a postnup can be thought of as a smart insurance policy to protect assets—or to protect yourself from a financial downfall. Dombroski names the following as potential reasons for creating a postnup:
- Inheriting a large sum that you want to protect in the event of divorce.
- Having unexpected financial success, such as through growing a business.
- Protecting yourself from being responsible for your spouse’s substantial debt.
- A desire to keep the assets each came into the marriage with (and any appreciation) separate from the rest of the marital estate.
This being said, there may be not so wonderful reasons that prompt a couple to sign a postnup. “If a couple was married without a prenup but something occurred during the marriage – like a breach of trust, infidelity, or lack of transparency around finances – that may have one spouse considering the possibility of divorce,” says Ani Mason, founder of Mason Law & Mediation, in New York City. In order to feel comfortable about staying in the marriage and working on the relationship, the wronged spouse may insist on the safety net of a postnup. In such cases, a postnup makes it possible to “redefine their rights and obligations, rather than get divorced,” notes Ji Y. Park, principal of Park Family Law, in Beverly Hills.
Benefits of having a postnuptial agreement
Postnups are not always about identifying what’s “mine” and what’s “yours.” Any marital agreement, whether prenup or postnup, can create a level of increased certainty and clarity about each spouse’s obligations and entitlements in the relationship. In this vein, some couples use a postnup to enhance their communication about financial issues and to permanently and legally share their assets and holdings. “Postnups can change the character of property from separate to community and vice versa, and can be used to effect binding transfers of property between spouses,” says Walzer.
More specifically, should divorce be your relationship’s ultimate fate, a postnup can save time, energy, stress, and money. “You provide for what will happen in the future so you do not find yourself fighting over or unsatisfied with the ultimate resolution of issues in your divorce,” says Mason. When you already have the financial specifics spelled out in a postnup, uncertainty is not as big a factor. With fewer issues to address, the divorce proceedings should go more smoothly and quickly, likely with lower legal fees and reduced emotional strain.
And, of course, there is the other end to a marriage—death. “Postnups may be used to fix rights on death,” says Walzer. “They can insure that gifts or transfers are legally binding, and that property is held in such a way as to save estate taxes on death.”
So whether your outlook is “all’s fair in love and war” or “the only sure things are death and taxes,” a postnup can’t hurt.