By Lee Sherman
Divorced couple Bill & Melinda Gates, one of the wealthiest couples in the world reportedly had no prenuptial agreement in place. Instead, their $130.3 billion fortune is being distributed according to a postnuptial one. While you most likely aren’t as wealthy as the Gates’s, you may want to do the same.
A common piece of financial advice suggests you should try to take the emotion out of every financial decision. In the case of a divorce, this is difficult to do. But a postnuptial agreement can help. Postnups make particular sense where the couple is more established in life and, like the Gates’s, has acquired more wealth.
What is a postnup?
A postnuptial agreement is much the same as a prenuptial one, a contract that specifies how your assets will be distributed, should you divorce. Prenups are common in marriages when one spouse makes more than the other, as a means of fending off the worry that one half of a couple might be marrying the other just for money. The only real difference between a postnup and a prenup is that the postnup is drawn up after the marriage license has already been issued.
While motivations to marry are outside the scope of this publication, it is possible that having a prenup or postnup in place can actually improve the quality of one’s marriage, if both parties agree to it and are hoping to to get the concern off the table. Working on a postnup together can bring a couple closer. And even when a couple decides to divorce, a postnup can help ensure that the breakup is amicable. When you’ve spelled out who gets what ahead of time, there’s no room for argument. Yes, a postnup can even be romantic.
Reasons for a postnup
Postnups make sense when a couple hasn’t gotten around to signing a prenup or when your financial situation has changed. You may have avoided the prenup because you were trying to avoid any awkward discussions in the rush of the excitement over getting married. But now that you’ve settled into marital bliss, it might be a more comfortable time to have the conversation. Postnups can even be used to amend an existing prenup. One half of the couple may have recently come into some money, such as a large inheritance or the sale of a business that they want to claim for themselves. A postnup is one way to do this, but only if both parties agree.
As with a prenup, a postnup includes all of a couple’s assets, already considered community property, including their primary residence, vacation homes, business, retirement accounts, alimony and child support payments, paying the other spouse’s legal fees, etc. A postnup can include other provisions that range from the practical such as the division of household chores to the ridiculous such as insisting that your spouse maintain a certain weight.
Most states recognize postnups, however there may be some exceptions. For example, Nevada doesn’t let you determine alimony payments ahead of time. While Ohio doesn’t recognize postnups at all.
Having a postnup in place can help prevent a contested divorce and save a couple money. Attorneys agree that is far better to have some kind of contract in place should the marriage not work out.
Attorneys recommend a postnup for spouses who didn’t sign a prenup, when one or both partners have significant pre-marital assets, or children from a previous marriage. While a postnup won’t save your marriage, it can eliminate drawn out and expensive battles over money.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.