Things change after you get married. Waistlines often get bigger, hair sometimes gets thinner, and wrinkles grow deeper. But what you may not think about are the changes that affect your finances. If circumstances change significantly after you say ‘I do,’ you might want to consider a postnuptial agreement. Â This is similar to a prenuptial agreement; the only difference is that it’s done after you’re married. How do you know if you need one? We asked Kimberly A. Cook, a divorce attorney at Chicago-based law firm, Schiller DuCanto & Fleck LLP. Here are five circumstances where a postnup might be in your best interest.
1. You want to protect your initial investment in a business. Owning a business with your spouse could pose challenges during a divorce settlement. A postnup may help make the process smoother. “Let’s say, for example, you inherited money after you get married and you decide to use it to pay for the startup costs for a business. A postnuptial agreement could specify that while you agree that the business is marital (including income and sales proceeds), you would be awarded your initial investment, as your sole and separate property, in the event of the divorce.Â While inheritance or premarital property generally remains the property of the individual even after marriage, there are instances where once inherited or premarital funds are comingled with marital assets, they are no longer considered premarital,” says Cook.
2. You’re on your second (or third) marriage. If you’re Â jumping the broom once again and both you and your spouse have children from a previous marriage, a postunp might be a good idea. Cook says this document could help ensure that certain assets go to your children and not necessarily your spouse’s children.
3. You’re legally separated. In some instances, a legal separation is more beneficial financially. A postnup could serve to outline how assets will be handled in light of the separation. “When you’re an older couple, for example, divorce might not be beneficial because there might be a loss of health insurance or other benefits by one spouse. A postnuptial agreement, however, could specify the assets each spouse is entitled to and/or would retain in the event of death.” Cook clarifies thatÂ Â a postnuptial agreement is separate from a will or trust and therefore shouldn’t be used as a replacement for estate planning documents.
4. You want to ensure that you get to keep property that has sentimental value. A postnup could allay your fears about what will happen toÂ items that hold great value to you. “For example, you and your husband purchased your childhood home because of the sentimental value it holds for you. You used marital money to purchase the home and want to make sure that it remains your property in the event of a divorce.Â A postnuptial would allow you to specify that in the event of a divorce, you would retain the home as your sole and separate property.Â Similarly, a postnuptial could specify the wedding gifts each person would receive if you obtain a divorce,” says Cook.
5. You didn’t have time to do a prenup. If you have assets that you wanted to protect before you got married in the event of a divorce, but didn’t get around to drafting a prenup, you’ll still have a chance. “Postnups vary by circumstance. A lot of time, couples don’t have time to enter into a prenuptial agreement or they’re Â interested in changing or updating the terms of their prenuptial agreement.Â A postnuptial agreement can be entered into at any time after a couple gets married. Keep in mind, however, that both a prenuptial agreement and a postnuptial agreement are contractsÂ the court will look to at the time of a divorce,” says Cook.
WhatÂ a postnup isn’t for:
- Hoarding. If you’re super greedy and don’t want to share–good luck getting your postunp approved.Â “All contracts must be conscionable in order to be enforceable. The terms of a postnuptial agreement will not be enforced if its terms are unconscionable.Â For example, if a husband or wife attempts to prevent the other person from receiving a portion of income or assets by failing to disclose the true value of the asset or full terms of income (i.e. bonus structure, deferred compensation, stock options) under a postnuptial agreement to the other spouse’s detriment, then it’s unlikely the court will find the contract enforceable. All contracts, including postnuptial agreements, require certain elements in order for them to be enforced.â€
- Outlining custody and support issues. Cook says that similar to prenuptial agreements, child support or child custody terms cannot be outlined in a postnuptial agreement. “The court always has the final determination regarding these matters.Â However, spousal support (i.e. alimony or maintenance) can be outlined in a postnuptial agreement as long as the terms comply with standard contract elements.â€
Whether or not you choose to enter into a postnup, remember to alwaysÂ consult with a lawyer before entering any contracts.Â “This will ensure that you understand your rights, obligations, and waivers,” Â says Cook. “Don’t enter into any contract without checking with a lawyer first!”