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4 months ago

What Every Woman Should Know About Prenuptial and Postnuptial Agreements

ADVICE
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Many have heard of a prenuptial (“prenup”) agreement, but few have heard of the postnuptial (“postnup”) agreement.

Though different in both name and practice—a prenup occurs prior to the signature of the marriage certificate, while a postnup occurs after the signature of the marriage certificate—the two are identical in principle:

They are legally binding tools used to draw specific and clear demarcations around shared (versus independently held) assets and liabilities.

More importantly, in the event of divorce—something more than 40% of couples go through—both a prenup and postnup can (potentially) be used to expedite any necessary legal proceedings, or division of assets.

But there’s more to it than that.

So, with that in mind, here’s What Every Woman Should Know About Prenuptial and Postnuptial Agreements

The Prenup

Stated in the simplest of ways, a prenuptial agreement is a private, legal contract a couple enters prior to entering a separate and different legal contract…

…marriage.

Yes, as unromantic as it sounds, marriage is fundamentally a legal agreement between two consenting adults. And, like all legal agreements, it’s a contract that can be breached (divorce) or terminated (death).  The prenup is a hedge-bet, designed to protect the material interests of both spouses equally by outlining the “who gets what” in the event of a death or divorce.

Couples can also use their prenup to outline certain responsibilities before the marriage officially begins. Responsibilities like bills, bank account usage, tax filings, and much, much more.

With this in mind, it seems appropriate to say that whatever prenuptial agreements lack in romance, they make up for in practicality.

The Postnup

Practically identical to a prenuptial agreement, the postnuptial agreement is a private contract a couple enters after they have legally started their marriage.

(That’s right, the only main difference between the two documents is timing—one is drafted, signed, and enacted prior to the start of the marriage, and the other is drafted, signed, and enacted after the marriage has already begun.)

Like a prenup, a postnup can be used to outline specific responsibilities and obligations, from something as important as who holds title to the house in event of a divorce, to something as inconsequential as which spouse is required to take the garbage out (seriously).

Why use a Prenup?

If one or both spouses are entering a marriage with a significant quantity of assets to their name—be it through inheritance, professional success, investment appreciation, or something else—a prenup can be used to ensure those assets don’t fall on the chopping block in the event of a future divorce.

But, again, the prenuptial agreement can be applied far more liberally than that.

Spouses can use their prenup to define the allocation of yet-to-be-earned assets—like income from career advancement—or clearly outline what monthly alimony payments will be if a divorce happens.

It can even set ground rules for non-financial matters most couples never even consider, like geography of main residence, lifestyle (number of children, exercise, diet, etc.), recreation (gambling, entertainment, etc.), personal grooming (hair-length, weight, etc.), and more.

The prenup is the only place where a soon-to-be married couple can meticulously (and legally) outline their expectations for each other.

Why use a Postnup?

With all the excitement and buzz surrounding a pending marriage, many couples can simply forget to make time to discuss a prenup.

Or they do make time to discuss the possibility of a prenup, but ultimately decide that signing one is simply going to jinx the marriage before it even gets started.

It is even possible for a couple to successfully sign a prenup, only to realize—post-wedding day—that the terms of the prenup do not address certain key assets or contingencies.

In any of these (and other) scenarios, the postnuptial agreement can be used to fill in the gaps.

But the postnup isn’t a tool exclusively reserved for those recently married.

Happy, healthy couples married for long periods of time—sometimes decades—can also decide to engage in a postnuptial agreement as their marriage evolves.

The unexpected award of a large prize (like the lottery) or inheritance can also trigger the need for a postnuptial agreement.

Postnuptial agreements can also be employed as a means of saving or improving a marriage.

For instance, if one spouse develops an unhealthy or self-destructive habit—gambling, overeating, overdrinking, etc.—a postnuptial agreement can be used as a first-pass alternative to divorce.

How to secure a prenup or postnup

To be legally binding and therefore enforceable, all pre/postnuptial agreements must be entered into with free-will. Like any legal agreement, if the court finds that duress or coercion played a role in facilitating acceptance on behalf of either spouse, the contract can be voided.

Similarly, the court will look to see if assets and liabilities were clearly disclosed, and whether an attorney or other fiduciary was used to construct the terms of the arrangement.

With those realities in mind, it generally makes sense to start the prenuptial/postnuptial agreement process by contacting an attorney who specializes in such matters (or family law).

This is by no means a mandatory first-step, but it’s the most-common one, because an attorney can offer accurate and important advice on the appropriate measures to take for both spouses. The attorney can also outline a step-by-step plan of what the couple should do in order to create an effective (and enforceable) nuptial agreement.

The closing remarks

Divorce—in and of itself—is a painful process, and the pain is only amplified during the division of assets.

Having a well thought-out prenuptial or postnuptial agreement in place can help a couple sidestep a lot of the unnecessary emotional anguish and frustration. It can also help a couple avoid an expensive, drawn out divorce battle, because both parties in the marriage already know what’s off the negotiating table.

So, while they may not be the most “romantic” of legal instruments, the prenuptial and postnuptial agreement serve a very real purpose that—in the event of a divorce—can simplify and streamline an otherwise contentious process.

*As with all the content on this website, this article isn’t intended to be legal advice. Instead, this is simply information I hope you’ll find educational. Please contact an attorney to get legal advice about your situation.

*Originally published here.

Russ Thornton  is a financial advisor and the founder of Wealthcare For Women located in Atlanta, Georgia. He helps women shrewdly and powerfully manage their money with confidence. He has 23+ years experience managing wealth, and has helped countless people create financial plans for retirement, caring for aging parents, supporting adult children, savings, investments, and most importantly, living a great life.

Contact him directly: rthornton@wealthcarecapital.com   404.254.6993 (direct line)

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4 months ago
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