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Making Sense Out of Dollars

The Postnuptial Agreements

Part 1 of 4

Joel Lerner
Posted 11/26/21

During the past two months, we discussed the Prenuptial agreement, which was fully explained. However, there is an instrument, can be drawn up during a marriage known as the postnuptial …

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Making Sense Out of Dollars

The Postnuptial Agreements

Part 1 of 4

Posted

During the past two months, we discussed the Prenuptial agreement, which was fully explained. However, there is an instrument, can be drawn up during a marriage known as the postnuptial agreement.

A postnuptial agreement is a written contract executed after a couple gets married, or have entered a civil union, to settle the couple’s affairs and assets in the event of a separation or divorce. It is normally “notarized” or acknowledged and is usually the subject of the statute of frauds. Like the contents of a prenuptial agreement, provisions vary widely but commonly includes provisions for division of property and spousal support in the event of divorce, death of one of the spouses or breakup of marriage.

Reasons and Uses of the Postnuptial Agreement

Most people assume that pre- or post-nuptial agreements are put together in case the couple divorce, but many people actually decide to get one in case one half of the couple passes away. Morbid perhaps, but it often becomes essential when one person is bringing in children from a previous marriage. They will want to have certain assurances in place that the children will be properly cared for in such an event, especially if the relationship between the children and the surviving spouse is not as good as it could be. There are few things worse than a spouse passing away and her surviving children not in line for their deserving assets.

Circumstances can change during the course of a marriage, with one person perhaps receiving a large family inheritance or perhaps starting a business that really takes off. Notice the example of Bill/Melinda Gates and their surprise divorce. The financial landscape can change very quickly, and while the couple may be happy at the time it happens, those sorts of windfalls will want to be protected should the relationship start to head south.

People enter into postnuptial agreements more often than you might think. For instance, if one spouse is about to enter a business, their partners may require them to sign a postnuptial agreement. As a precondition to entering the partnership, a person may be required to enter into a postnuptial agreement stating that if they separate or pass away, their spouse will not make a claim on the business. This will allow the partners to be assured that a separation or death does not interfere with the running of their business. This requirement is particularly common in family businesses and in the financial community.

Another situation where postnuptial agreements are used is where separate property is used to purchase community property. A common example of this is when a couple agrees to use separate property to buy a marital residence. A postnuptial agreement may be negotiated so that the spouse who uses their separate property still gets the same benefits as if it had been kept separate.

A postnuptial agreement is also generally useful in many of the cases where a prenuptial agreement is useful, but you don’t have one.

THOUGHT OF THE WEEK

“If you do not want anyone to know, don’t do it.”

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