Prenups and Postnups
Prenups and Postnups: What are they, and do I want one?
Agreements between two people that relate to their marital relationship – their “nuptials” – are referred to as prenuptial and postnuptial agreements. We hear about them all the time in relation to celebrities and the very wealthy, and it doesn’t seem to have much to do with the average person. However, there are definitely good reasons to consider entering into one of them.
A prenuptial agreement is an agreement between two parties who intend to marry in the very near future. It does not become effective until the couple actually marries. A postnuptial agreement is an agreement between a marital couple, after the wedding. The purpose of both of these agreements is to address the rights and obligations of the parties in the event that things go wrong, or the marriage ends.
In order to be enforceable, there are certain requirements for prenuptials and postnuptials. First, a prenuptial has to be signed by both parties before the wedding. Second, the prenuptial must be in writing, and it must be signed.
Prenuptials should be considered by any couple who come into the relationship with valuable assets (like a business), significant debt (like student loans) or the potential for either one of these. It is highly recommended for a couple entering into a second marriage, particularly when there are children from the prior marriage. A prenuptial can iron out issues like how to handle retirement assets, allocate debt that would otherwise be split and other issues pertaining to assets and finances.
Postnuptials should be considered by couples for the same reasons that they might have considered a prenuptial, but they didn’t actually enter into one prior to the marriage. Sometimes, postnuptials are established because things are not going well in the marriage, but the parties are not interested in divorce. Similarly, sometimes parties enter them because of prior bad behavior, such as adultery or alcoholism, where one party has agreed to forgive the other’s transgressions but wants their respective rights to be clearly established in the event the bad behavior recurs. Other times, if there is a significant change in financial circumstances, like starting a business or coming into a highly valuable asset, then a postnuptial is a good idea.
What about romance? The movies often make pre- and postnuptials seem like a cold move by the party with more assets. In truth, the legal rights and obligations of married couples are defined by the laws of the jurisdiction where the parties reside. These laws make determinations about assets and liabilities that may not make sense or seem fair to either or both parties when a divorce happens. Instead of relying on state law to decide these issues, an explicit agreement between the parties, made when times are good and everyone is getting along, makes a lot more sense than letting a judge decide.
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