For couples who have tied the knot and unmarried, planning for the future is crucial, especially since circumstances change and unexpected events transpire. When these ‘events’ do happen, couples who planned can likely navigate a successful outcome, no matter the reason — and from a legal perspective, ‘planning’ means entering a prenuptial or postnuptial agreement.
Here’s a look at both — and what considerations you need to make and what you should watch out for.
Prenup vs. Postnup
A prenuptial agreement is a legal agreement made before a couple gets married. In this agreement, a couple determines how they intend to divide their joint assets, whether it’s a condo or a classic car, should their marriage end by either divorce or death. In essence, it’s a financial tool that ensures their wealth is secured.
A postnuptial agreement, on the other hand, is similar to a prenup, with the only difference is that this legal agreement is made after a couple gets married.
These documents are customized and need to be agreed on and signed by both parties to become binding. There’s no one-size-fits-all for these agreements — each couple’s needs are taken into account. If you were to walk inside a dentist’s office for the first time, you will be asked to fill out forms and go through a preliminary check. From there, the dentist will assess your case and give you a unique course of treatment. This is exactly what happens when you consult a lawyer for a pre or postnup contract.
Considerations to Make
Each couple’s circumstances are unique, and preparing prenup or postnups agreements are personal and required careful considerations. But, generally, the provisions that couples can include in their prenup or postnup agreements include the following:
- Ownership of Separate Property – Under most States’ ‘marital pot’ rule, either person’s assets are ‘jointly owned by the couple. A prenup or postnup ensures that their ‘individual’ assets receive the couples’ desired treatment during separation.
- Liability for Debts – Couples can use prenuptial and postnuptial agreements to confirm and establish liability for pre-existing or recently incurred debts.
- Budgeting and Savings – The agreement can be an efficient way to manage family finances.
- Ownership and Control of a Business – If you or your partner owns a business, entering a prenup or postnup agreement ensures continuity and control while avoiding potential involvement and ownership issues.
What to Watch Out For
Just like with most legal agreements, you should only agree to a prenup or postnup agreement after carefully considering all of their provisions and implications like the ones mentioned earlier.
Here are some of the reasons to look out for when creating either agreement:
- There’s a Huge Income Disparity Between the Couple – If there’s a massive income disparity between partners, the one with lower-earning income may find the postnup or prenup agreement’s provisions not in their favor in the event their significant other decides to separate with them.
- One Party Wasn’t Given Enough Time to Read or Evaluate the Terms of the Agreement – Prenup and postnup agreements are legal contracts, so couples must read and understand how the agreements protect and limit their rights. Saying you didn’t understand what you were signing won’t likely stop enforcement of the agreements, so take the time to study the documents and clarify when it’s needed.
As each couple’s financial standing and living situation greatly vary, there’s no ‘one-size-fits-all’ answer when it comes to deciding if you should sign a prenuptial or postnuptial agreement or not. However, if you do, the considerations and risks mentioned will make the process easier for you.