Have you heard of post-nuptial agreements? These lesser known cousins of the prenuptial are growing in popularity and use. Learn more about how they work (and why people get them), so that you can determine if one is right for your situation.
What A Post-nuptial Agreement Does
Like a prenuptial agreement, post-nuptial agreements are designed to protect your bank account, property, collections, and other assets in the event of a divorce or death. The chief difference between the two is that a post-nuptial agreement is a contract that spouses enter into after the wedding - sometimes many years later.
Who Benefits From A Post Nuptial Agreement
There are a number of reasons that a couple might choose to get a post-nuptial agreement:
1.) There is a business to protect. Sometimes a couple that owns a business will get a post-nuptial in order to carefully separate business assets from other family assets. This might be necessary to attract outside investors or partners in other branches of the family. A divorce or death could otherwise cause serious financial harm to the business.
2.) There are too many fights about money. If you want to stay married, but there's a constant source of financial friction between you, a post-nuptial can force a couple to come to a mutually acceptable agreement. In some cases, it might be a way to insulate one spouse against another's spending habits, by transferring assets (like the house) into one spouse's name. Or, it might provide an automatic "nest egg" in the event of a divorce for a spouse that's giving up a career to take care of the couple's children.
Handled correctly, a good post-nuptial can stop constant fighting over finances, and let a couple focus on the positive aspects of their marriage.
3.) Post-nuptial agreements can be used in estate planning. Where a spouse has children from a previous marriage, a post-nuptial can make sure that family heirlooms or other pieces of property are passed down the correct branch of the family tree. For instance, it can be used to establish your grandmother's diamond rings (or vacation home) in her sole possession, to be passed down in her will without interference by her current spouse.
4.) There have been other problems in the marriage that would lead to divorce if they recur. In some cases, a couple will enter into a post-nuptial agreement as a way to manage a situation where there's real risk the marriage will fail.
While this might or might not be effective in the long run at preventing an eventual divorce, it can provide a financial incentive for both couples to give the marriage one last attempt. In some cases, a spouse could agree to forfeit a sizable amount of money to the other should some previous bad behavior recur, like adultery. This could work to entice the aggrieved spouse to try again, while giving the other spouse a financial motive to not stray.
While exact state laws vary, it's important to note that courts will not honor a post-nuptial agreement that is unfair to one party, nor one that is made without full financial disclosure by both sides. In addition, both parties have to have independent legal representation in order for a post-nuptial to be valid. The important thing to remember is that post-nuptial agreements, like a prenuptial, are simply legal tools that can help keep problems out of your marriage.
To learn more, contact a company like Gearing, Rackner, Engel & McGrath, LLP with any questions you have.
