What is a Prenuptial Agreement and a Postnuptial Agreement? How do they differ? Why do them?
Investopedia recently published an article, “Prenup vs. Postnup: How Are They Different?” It explains that if you or your spouse is wealthy, anticipating a big inheritance, or getting married for the second, third, or fourth time, divorce or death could result in serious financial trouble. In death, these issues can be greater if the spouse leaves children from a previous marriage. That’s why more couples are choosing to sign a prenuptial or postnuptial agreement.
A prenuptial agreement is made prior to the marriage and is where the couple determines how they’ll divide their assets should the marriage end.
A postnuptial agreement serves the same purpose but is entered into after marriage.
The prenuptial agreement is harder to challenge later due to any unfairness in financial division, as part of the consideration for the agreement is agreeing to marry, which by definition has already occurred in the postnuptial situation.
Although negotiating a prenuptial agreement before your wedding may seem unromantic, these agreements can save a lot of heartache and money in the event of divorce, especially if it’s not the first marriage. When a couple decides to divorce, prenuptial agreements can prevent nasty, drawn-out, excessively expensive litigation. A prenup details everything, so everyone knows exactly who gets what, and there’s no room for argument. These agreements also can dictate financial distributions in case of a spouse’s death, which is especially important for couples with children from previous marriages.
Prenups are useful if one spouse has substantial assets, a large estate, or anticipates getting a large inheritance or distribution from a family trust. A prenup can protect each spouse’s premarital assets, as property and income in a marriage would otherwise be deemed marital or community property.
An attorney should only represent one party to the agreement, and the other party should either get separate counsel or waive that right. The parties should disclose their financial circumstances to each other and document it.
A prenup can have terms that state how much of your estate your spouse will receive when you die. This is critical if you have a significant estate and children from a previous marriage to whom you want to leave some of your estate. If you don’t sign a prenuptial agreement that states this, most states will automatically give your surviving spouse a share of your estate at your death. This has just recently expanded greatly with the new Maryland Augmented Estate Law, which includes many assets passing outside the court system. With a prenup, you can predetermine a specific alimony amount or even eliminate this.
Postnuptial agreements are almost identical to prenups. The big difference is that postnuptial agreements are made after the wedding. You will decide how to divide marital assets, as well as any future earnings, in your postnuptial agreement.
Reference: Investopedia (April 25, 2019) “Prenup vs. Postnup: How Are They Different?”