Postnuptial Agreements
I’m guessing you’ve heard of a prenuptial agreement and all the obvious reasons why someone might need one. But, what is a postnuptial and why?
Postnuptial agreements operate the same exact way as prenuptial agreements. Loosely, they define a married couple’s rights to assets, income, allocation of debt and rights to inherit from one another. The key difference is that the couple enters into a postnuptial agreement after getting married.
Why would someone want a postnuptial agreement? There are a few common reasons:
You did not execute a prenuptial agreement in time.
One party is leaving the workforce to provide childcare at home.
One or both parties is starting a business venture.
One party receives a large, unexpected inheritance that could be used toward the purchase of a marital home (or other marital property).
Either party wants to contribute premarital property toward a marital purchase but wants to preserve the value of that contribution as separate.
An issue has occurred in the marriage, and one (or both) party wants to secure their rights while the couple tries to reconcile.
An often overlooked use of a postnuptial agreement is when businesses are established after the wedding day. Shareholder and operating agreements are not marital agreements, and while they may govern how a business is divided between owners, they do not govern how business interests are divided in a divorce.
Remember that, in a divorce context, title of an asset does not control. Rather, in the absence of a validly executed marital agreement (i.e. prenuptial or postnuptial), the date the asset was acquired is the controlling factor. All assets owned or acquired after the marriage, regardless of how title is held, are presumed to be a marital assets.
Consider, now, if you were to inherit a half-million dollars after marriage, and you’d like to use those funds toward the purchase of a larger home for your spouse and children. What do you expect would happen to that $500K in the event you experience a separation down the road? If you expect that you would be entitled to have it back, you better get that in writing. You better get a postnup.
A postnuptial agreement should specifically identify which property will remain your separate property, no matter how you use it during the marriage. It should also declare what, if anything, the non-titled spouse should be entitled to in the event of separation, especially if that non-titled spouse has made contributions of money or effort toward supporting the titled’s spouse’s ability to grow the value of that asset.
What’s not included?
Clauses related to custody of children and child support obligations are not enforceable in a prenuptial nor a postnuptial agreement. These issues are dealt with separately at the time of divorce and are determined according to the best interests of the children, not the preference or negotiating power of either party.
At Artese Zandri, we help couples prepare for marriage and navigate divorce. If you or someone you know has questions about family law, reach out to us for a complimentary consultation at consultation@artesezandri.com.