Curious about prenups and postnups? If you’re a bride-to-be or newlywed thinking the idea of a prenuptial agreement, you are not alone. The legal contracts once thought to be reserved for the rich and famous are becoming increasingly popular with millennials – and we mean seriously popular. As in, there was a 62% rise in prenuptial agreements created for millennials between 2013 and 2016 alone. The good news is that if you are recently married (and kudos for doing so just before or during this global pandemic), you didn’t miss the boat on your chance to reap the benefits of a financial agreement between spouses – in the form of a postnup!
While the pre- and post- prepositions define the type of contract between spouses (you cant sign a prenuptial agreement once you are married, or a postnuptial agreement until after you are married) a “postnup” is very similar in concept to the more common “prenup.” Confused yet? Don’t be. We’re here to guide you through the ins and outs of prenups and postnups, and why they might not just be for A-list celebs anymore.
Prenups & Postnups Defined
Both prenups and postnups are legal contracts that lay out which spouse is entitled to what “property” in the case of a divorce, by superseding state divorce law. Without one of these agreements, the division of your assets is left up to the laws of your state. A prenup or postnup helps to make it more likely that in the unfortunate event of a divorce, the division of assets and debt takes place on terms you and your spouse had already agreed to.
Generally speaking, prenuptial agreements are more widely enforced than postnuptial agreements, in large part because they have been around a lot longer. Many state courts will uphold postnuptial agreements as long as they are in writing, signed without coercion, and fulfill disclosure requirements of both parties. Of course, nothing about prenups or postnups is foolproof, and the specific requirements for enforcement vary greatly from state to state.
Why You May Want a Prenup or Postnup
1. You Will Receive a Future Inheritance
A prenuptial or postnuptial agreement allows couples to dictate what happens to an inheritance that one of the parties may receive, in the event the marriage ends. How this division would occur absent a prenup or postnup is dependent on your state – for example, in community property states, all assets acquired during the marriage are generally split equally, and this can include an inheritance if it was comingled. In equitable division states, the inheritance could be subject to division, based on whether the marriage was only a few years long, or a long term marriage, as well as whether it was comingled, among a variety of factors that vary greatly from state to state. The point here? A prenup or postnup allows you and your spouse to decide for yourselves what should happen to that inheritance, rather than allow state law to decide for you.
2. You Are the Less Wealthy Spouse
Let’s say you’re entering the marriage with significantly fewer assets than your spouse. Guess what? A prenup or postnup can offer you great protective benefits. Depending on what you and your spouse decide to include in the contract, your prenup or postnup can ensure that future alimony is part of the deal, dictate a certain financial payout for each year of marriage to ensure future financial security, and even dictate the date that the agreement should terminate (called a sunset clause).
3. You Own a Business
A prenup or postnup allows a couple to categorize a business as “separate property.” Meaning that such property will remain the property of one spouse if a divorce is to occur in the future. This is crucial for a spouse that owns their own business, because valuing a business for purposes of divorce can be both incredibly expensive and time consuming. What a waste of resources! To balance things out, the business owning spouse may consider agreeing that the other spouse receive a larger share of the marital assets. There are always ways to make sure everybody wins.
4. Either You or Your Spouse Have Student Debt
Who doesn’t have student debt these days? On top of the other financial concerns when combining finances, there are three cringe-worthy words that tend to amplify financial stress for many these days: student loan debt. 65% of graduates carry student loans debt at an average of about $35,000 in federal loans per person. That doesn’t even include private loans! As the cost of education has skyrocketed, student loans place a heavy financial burden on millennials that was unheard of in previous generations. So, why not do something now to mitigate all those “what if” money worries in the back of your mind?
Having a Prenup or Postnup Tends to Lead to Healthier Marriages
While prenups and postnups have long been stigmatized as, well, less-than-romantic, many engaged and newly married couples realize that they can lay the groundwork for a healthy and transparent relationship with finances throughout the marriage. It’s a fact that couples who talk about finances more regularly have healthier marriages. Simultaneously, and probably to no surprise, money serves as the leading cause of stress in marriages.
After all, a prenup or postnup isn’t just about finances. It’s about your relationship and open, honest communication. When crafted properly, these agreements can allow you and your partner to determine what you want in the case of a divorce. Instead of taking what relevant state law dictates. This increasing predisposition to such agreements isn’t happening because people don’t trust each other. But, rather because marriage is about partnership, and a partnership requires open communication about finances.
Until recently, prenups and postnups have been an underutilized, yet simple tool to set you and your partner up for financial and marital success. Are you are not yet married and interested in creating a prenuptial agreement? HelloPrenup is a service that allows users to create a prenup online in just a few hours, at a reasonable cost. If you are already married and interested in a formal financial agreement with your spouse, remember – it is never too late to begin the postnup process. After all, we can all benefit from little bit of financial security.
