When a couple decides to get married, they inevitably agree to share their assets. These assets (property, bank accounts, debts, etc.) are subject to division in the event of a divorce, either a 50/50 or “equitable” split (depending on the marital property laws of your state). But in many states, couples also have the option of entering into agreements that set certain parameters for how property is divided (among other matters) should the marriage end.
What is a Postnuptial Agreement?
A postnuptial agreement is also known as a “Post-marital agreement” or “Postnup.” is a contract created by spouses after entering into a marriage that outlines the ownership of financial assets in the event of a divorce. The contract can also set out the responsibilities surrounding any children or other obligations for the duration of the marriage.
There are five basic elements to a postnuptial agreement:
- It must be in writing. Oral contracts are not enforceable
- It must be entered into voluntarily by both parties
- It requires full and fair disclosure of relevant information at the time of execution
- Terms must not be unconscionable or unjust or one-sided in nature
- Both parties must sign the agreement
Potential Reasons to Get a Postnuptial Agreement
Postnuptial agreements can serve many purposes. While certainly not always the case, one more widely known reason to get a postnuptial agreement is in cases of marital issues.
Common reasons to pursue a postnuptial agreement might include:
- It works like a prenuptial agreement. Maybe you ran out of time before the wedding, or maybe the realities of marriage have begun to sink in. A postnuptial agreement can work like a prenuptial agreement for those who wish they’d had one.
- It Protects business. A postnuptial agreement can protect the business and any business partners.
- Financial Obligations. Maybe one spouse became financially irresponsible during the marriage, or maybe one spouse won the lottery. Whatever the case, a postnuptial agreement can put plans on paper for carrying debt and future payments.
- It ensures the care of nonworking spouse. In the case of a future divorce where one spouse gave up job skills and a salary to stay home and raise the couple’s children, a postnuptial agreement can ensure the nonworking spouse will be taken care of.
- In cases of prior children. Postnuptial agreements can work as an estate planning tool to pass assets on to children from previous relationships.
- It’s time to make an estate plan. More broadly, postnuptial agreements can help achieve a range of estate planning goals as well.
Why should you consider a Postnuptial Agreement?
Protects your Financial Stability
A well-crafted postnuptial agreement can protect each spouse’s
- separate property from future claims,
- determine the property division of new assets acquired during the marriage, and
- stipulate whether one spouse would be responsible for paying the other alimony in the event of a divorce.
A postnuptial agreement can protect money intended for your children to be taken by your spouse upon divorce.
Saving Your Marriage
Creating a postnuptial agreement may help spouses identify areas of conflict and address them in a productive way. For instance, if spouses exhibit different spending habits, have different expectations with regards to financial issues, or show a lack of honesty when dealing with money matters, a serious conflict is bound to arise. Additionally, if one of the spouses lack financial responsibility, it may also help them change their destructive behavior.
While this may seem counterintuitive to many, creating a postnuptial agreement may actually save a marriage rather than weaken it.
Protecting You from Divorce Conflicts
A postnuptial agreement usually regulates most of the issues many couples fight about when negotiating the terms of a divorce. Therefore, when such a contract is in place before the divorce proceedings have even started, both spouses will know exactly how the division of assets will look like after the divorce is finalized. This can spare a divorcing couple a lot of unnecessary conflict and pain.
Providing Certainty and Control
It gives spouses more certainty and control in the event of separation than applicable default statutory rules.
If a divorce takes place, the parties can at least plan their next steps with some degree of confidence, rather than confronting a pile of accounting invoices and looming questions over who gets what. If a couple files for divorce without a postnuptial agreement and the case proceeds to court, the judge will be the ultimate asset divider. Often, without a formal agreement, rights to all or a percentage of assets cannot be determined without a costly accounting nightmare.
Schedule a Consultation
Postnuptial agreements are not for everyone, but can be quite effective in some instances. Whether you’ve decided after marriage that certain protections are warranted, or want assurances after becoming a stay-at-home dad that you’ll be taken care of in the event of a divorce, you may want to consider a postnuptial agreement.
Learn more about postnups from an experienced family law attorney at The Law Offices of Thomas Stahl. If you have questions about postnuptial agreement in Maryland or DC, call us at (410) 696-4326 or (202) 964-7280 to schedule a consultation.