There is room for discussion on whether love gives you strength or courage, but we all know that when a marriage ends, there is often less of either and there may be a large accounting to be done. The accounting that we are concerned with in this article is the financial kind, and we hope to help make sure that our clients do not end up heartbroken and broke. Hindsight is 20/20, and as unromantic as it seems, a prenup is an essential legal instrument in many highly predictable situations. We hope for the best and plan for the worst. As a service to you and those you care for, we can prepare prenuptial or postnuptial agreements that will help you maintain your quality of life and achieve your estate planning goals. These agreements will contain provisions for property division, spousal support, and investments, among other elements.
A prenuptial agreement, as indicated by the name, is a contract between parties that is executed before the marriage ceremony takes place. The agreement identifies how the couple will divide their assets if the marriage comes to an end. This type of planning is invaluable in that it can prevent nasty and excessive court battles. “Prenups” are universally accepted in the United States when they are properly executed.
Prenups can apply to the assets and debts that were yours before you were married or acquired later – they can protect a trust distribution or income from a bequest. If there is not a valid prenup in place, the state court will apply the distribution formula that the law in the appropriate jurisdiction requires. Prenups will not, however, decide the fate of the couple’s children, born or on the way, in the event of a custody battle, as the law normally finds those types of clauses to be unenforceable. That will be decided in family court or the tribunal with jurisdiction for that event.
A postnuptial agreement is a contract entered into between the spouses after the marriage takes place. The goal of this relatively recent legal instrument is to deal with assets that were not covered in a prenup or that were acquired after the marriage. Applicable asset classes might include real property, retirement assets, stocks or stock options. Sometimes “postnups” are employed as part of an attempt to give the marriage a second chance. The married couple will have more understanding of their future financial situation.
To illustrate when a postnuptial might come into play, imagine a couple that has children from previous marriages. They may have assets that they want to make sure passes on to their children when they die, including family heirlooms and memorabilia. Another example is when the couple does not want the default laws of the state to apply. This may occur if one partner decides to forego or give up a career.
Circumstances Calling for a Prenup or Postnup Agreement
The more complicated a situation is, the more likely an agreement might be warranted. They are requested more often by men, but an increasing number of women are making the request. The more assets that are at play, the more complicated the estates, and the more former marriages that exist make prenups and postnups more useful. They can set out the financial distribution of assets in the instance of a spouse’s death, which makes this a particularly valuable legal instrument to have in place for couples who have children from previous marriages. If you do not have or do not have assets and haven’t been married, you may not need a prenup (see Three Things to Consider).
Is a Prenup better than a Postnup?
There are legitimate situations for having both. If you know that you are going to need a postnup, there is a good chance that you should start with a prenup. Although they should not be looked at as alternatives to each other, for the purpose of analysis and understanding, it is worth mentioning the different advantages and disadvantages to each instrument. The advantages of a prenup over a postnup is that it is favored and faces less scrutiny from the court. Both should be entered into as arms-length transactions, and ideally both parties should have legal representation. Clauses should not violate public policy and obviously no coercion or duress should be involved. The agreements should be clearly written and fair. They often contain jargon, which could lead to invalidation if it was not explained by a lawyer.
The advantages of a postnup over a prenup is that it can cover unforeseen or changed circumstances, such as a major change in finances or additional dependents. It can help manifest communication that may not have otherwise taken place and provide certainty over crucial issues.
Depending on the circumstances in your lives, you may end up with both or neither: The former situation may occur if you are extra detailed in your planning of life events and if life throws you curveballs. The latter may occur if you throw caution to the wind or don’t find the time to sit down and execute either legal instrument. Either one may bring about more communication on marriage and financial expectations, which is usually a good thing. We prefer the conservative approach and are happy to discuss the appropriateness of these instruments based on your situation.
Protecting Your Estate
An ounce of caution is worth a pound of cure. Entering into these agreements can head off litigation, or in the worst case, prevent a financial disaster. When it comes time to protect your assets and make sure they are preserved for loved ones, we will answer the call. Our experienced attorneys can draft the perfect prenup or postnup for your situation and assist if the strength and courage to request one is lacking.
We are happy to assist by fielding your questions, providing legal advice, examining your plans and any task that can help move you towards this step. Call the trusted estate planning attorneys at Lowthorp, Richards, McMillan, Miller & Templeman at (805) 981-8555 or fill out our online contact form. Our attorneys live and work primarily in the California Tri-Counties area – Ventura, Santa Barbara, San Luis Obispo.