What Every Couple Should Know

When it comes to protecting your financial assets throughout your marriage, you may think a prenuptial agreement (prenup) is the only legally binding solution. However, there’s another increasingly popular option for those who said “I do” before locking down their assets: postnuptial agreements, or “postnups.” 

Both types of agreements spell out how a couple will divide their assets and manage their debts in the event of divorce or death. However, you might encounter more difficulties enforcing an agreement that was signed after you entered your marriage since there are fewer legal precedents for postnups.

Whether you’re contemplating a prenup before the big day or exploring a postnup due to shifting financial circumstances, here’s what you need to know before drafting and signing an agreement with your partner.

What You Need To Know About Prenuptial Agreements

A prenup is a legal document that protects soon-to-be-married couples by spelling out what each spouse is entitled to in the event of divorce or death. Signed before a couple gets legally married, this agreement defines the ownership and distribution of each party’s assets and debts up to that point, as well as how a couple will handle any individual or joint assets acquired during their marriage.

“A prenuptial agreement protects the income and retirement savings you build up after your date of marriage, [as well as] separate assets that are just titled in your name,” explained Patricia E. Tichenor, a Virginia-based family law attorney and founder of My Legal Case Coach. 

Key Features

A prenup can help protect both spouses by addressing the following areas: 

• Assets: Protect assets you owned before getting married, such as properties, stocks, or investment accounts.
• Debts: Ensure premarital debts remain the responsibility of the individual who incurred them.
• Financial responsibilities: Outline who will be responsible for specific financial arrangements or obligations during marriage.
• Retirement accounts: Determine how to divide retirement assets.
• Business interests: Clarify ownership in existing or future business ventures.
• Inheritance: Determine how to distribute inheritance.
• Alimony: Establish spousal support terms if the marriage ends.

What You Need To Know About Postnuptial Agreements

Like a prenup, a postnup is a contract that helps married couples establish asset ownership and debt obligations in case of divorce or death, but it’s signed after the couple gets married.

Karla Dennis, a nationally recognized enrolled tax agent and CEO of tax strategy firm, KDA, Inc., said a postnup “makes sure the rules stay clear, fair, and future-proof” as finances shift throughout a marriage.

“A postnup is like updating your insurance policy when your life changes,” said Dennis. “It’s not a backup plan for divorce; it’s a protection plan for growth.”

Key Features

Couples who didn’t get a prenup before getting married can benefit from a postnup by addressing the same areas as a prenup, but from a post-marital perspective. 

• Assets: Update ownership of property, income, or investments if circumstances change throughout the marriage.
• Debts: State ownership of debts incurred during the marriage.
• Financial responsibilities: Document who is responsible for ongoing expenses in the marriage, especially if one spouse’s income has changed significantly.
• Retirement accounts: Update terms if you’ve opened new accounts or made savings changes during marriage.
• Business interests: Establish spousal ownership of new or existing business ventures.
• Inheritance: Protect the inheritance received during the marriage.
• Alimony: Outline financial support and protection for a lower-earning spouse.
• Flexibility/possibility of revisions: Revise terms if both spouses agree to reflect changed circumstances. 

Key Differences

The biggest difference between prenups and postnups is when they are put into effect (i.e., before or after a couple is married). In terms of legal protections, both documents are fairly similar. However, one important distinction is the legal backing each of these documents has in court. 

Prenups are well established in the legal system, with plenty of successful cases to guide the courts in their decision-making. Postnups are a newer type of legal agreement, which means there’s not always a precedent for enforcing them. 

Even in states where postnups are more common, there may be stricter rules for enforcing post-nuptial agreements than prenuptial agreements. For example, spouses in California have a fiduciary obligation to each other, so a postnuptial agreement must demonstrate “the highest good faith and fair dealing” between the spouses to be considered enforceable. It’s important to check with a local attorney about how your state upholds these protections before pursuing a postnup.

Tichenor noted that marital rights—the spouses’ “equal rights to the possession, use, and disposal” of any joint property acquired during the marriage—can also complicate postnup enforcement.

“It’s a more serious issue for couples who are already married to be asked to forfeit an existing statutory right they already have … in the event of divorce or death,” said Tichenor. “Judges will scrutinize this more readily if … one party is being asked to forfeit some or all of their rights to assert a claim against what would otherwise have been marital assets, including the retirement assets of a spouse, a marital home, etc.”

When To Consider a Prenup or a Postnup

Though a prenup is recommended for all couples regardless of their current financial circumstances, a legal agreement can provide significant protections in the following instances:

• One or both parties have significant debt before marriage: One person’s student loan or credit card debt can become their spouse’s problem later on. A prenup can establish financial responsibility and ensure that only the individual who incurred the debts remains liable.
• You expect to have a higher income or start a business in the future: While you may not have much income now, that could change in the future. “A side hustle, online brand, or rental property can blow up later—plan for that now,” Dennis warned. 
• You have children from a previous marriage: If a spouse has children from an earlier marriage, an agreement can legally protect assets intended to be promised to them. However, it cannot set custody or child support terms.
• You’ve received an inheritance or family heirlooms: Prenups can protect assets passed down through your family, especially in community property states where spouses are required to equally split all assets collected during marriage in the event of divorce or death. 

You and your spouse may wish to sign a postnup (or amend an existing prenup) if the following situations arise during your marriage: 

• You and/or your spouse start a business: If one or both spouses own a business, they might find it difficult to value and divide their company in the event of a divorce. A postnuptial agreement can help decide on fair terms for any business assets ahead of time.
• You become a stay-at-home spouse: If you leave the workforce to care for a child or other relative during your marriage, you can seek income protections through spousal support in case of separation or divorce.
• You experience marital strain: Couples on rocky terms may be willing to reconcile, but only with a postnuptial arrangement that protects their assets in case of separation. For instance, if there has been infidelity in the marriage, the unfaithful spouse might agree to terms that favor the other spouse to show that they’re willing to keep the marriage intact. 
• You’re concerned about future health care expenses: Tichenor explained that a postnuptial agreement can also come into play “if a spouse needs to protect assets from a future Medicaid lien by having their spouse relinquish all rights and claims to such assets.”

The Bottom Line

Whether you’re preparing for marriage or have been together for years, it’s never too late to put legal protections in place. Both prenups and postnups can help to keep your assets safe, clarify each spouse’s financial responsibilities, and promote a level of trust and transparency in your marriage. 

“At the end of the day, these agreements aren’t about divorce,” said Dennis. “They’re about designing your financial future together with clarity and intention.”