Should You Consider a Postnup?

Much like prenuptial agreements, postnuptial agreements are important tools for protecting assets and reducing costs in the unfortunate event that a marriage should end. There are many reasons why prenups are wise (even romantic) — particularly when significant current or future income disparities exist between two spouses. But what if you already got married and don’t have one? Or, you have one, but your financial circumstances have changed and your prenup no longer fully covers your marital and non-marital assets? Enter the postnup.

Why Should You Get A Postnup?

Like a prenup, a postnup helps take some of the stress out of the division of assets and how to approach support if a marriage doesn’t work out. There are three main situations in which a postnup is used in lieu of a prenup. The first is the most straightforward: You simply didn’t have time to get a prenup before your wedding day. In most cases, if a couple enters into a postnuptial agreement shortly after the wedding, it’s because they weren’t able to complete a prenup before exchanging “I do’s.”

The other two situations are a little more complicated — a significant change in financial circumstances or a troubled relationship.

Financial windfalls during a marriage could include everything from an unexpected (non-marital) inheritance to a considerable jump in salary or even winning the lottery, and a postnup is well advised because it can help couples account for who gets what money or assets in a divorce and accounts for the use of that money during the marriage. For those couples who have a prenup and experience a surprising and substantial change in finances, it’s often necessary to update that agreement in the form of a postnup. 

Under Illinois law, inheritance is a separate asset from the marital estate. If the marriage ends, the spouse who inherited it gets to keep his or her inheritance unless it was commingled with marital assets. For example, if the money is deposited into a joint account, then used to buy joint property or spent for other marital property purposes, the inheritor’s exclusive right to that inheritance disappears and the marital estate has a claim to some or all of those funds. A postnuptial agreement can be used to ensure that inheritance stays with the inheritor should the couple divorce and still allow the marital estate to benefit, with limitations, from “gifts” by the inheritor.

Postnups can also be useful should the marriage become strained. A couple should be able to focus on improving or reconciling a marriage rather than the financial fears associated with divorce. A postnup contract with creativity and thoughtfulness about what will be done with the marital estate in the event divorce is the new chapter in that couple’s relationship. This allows the couple to concentrate on the marriage. They can now make decisions based on what is in the best interests of the family rather than their fear of the financial unknown.

Postnups Are Road Maps

In most divorces, even though the marriage is legally over, a former couple is required to have a continuing relationship because of their children or jointly-owned businesses or property. A postnup provides a map for at least part of that ongoing connection and allows them to allocate their jointly-owned assets with minimal conflict in the future. Having a postnup can greatly reduce potential fighting and legal expenses down the road.

Are Postnups Inherently Pessimistic?

It could be argued that postnups are pessimistic. After all, they discuss what will happen if the marriage should fail. However, like a prenup, the postnup considers how to approach an unfortunate and unforeseen event in a way that leaves each side in the best possible position.

I encourage my clients to look at postnups from an estate planning perspective rather than a “what if we split up” standpoint. Marital and Non-Marital estates likely already exist: The two spouses have commingled assets and acquired new assets during the marriage; the two spouses each came into the marriage with pre-marital assets. In considering what will happen to the marital assets should the marriage end, the postnup encourages honest and open conversations about making sure outcomes are fair for each spouse. From that viewpoint, postnups are decidedly optimistic!

By acknowledging what a couple has built together and providing a way to protect each spouse’s interests, postnups provide an important backup plan if the original marriage plan doesn’t work out. A postnup won’t save a marriage, but it can help alleviate some of the stress, anxiety and fear over what will happen if the marriage doesn’t work — which, in turn, allows the couple to focus on making the marriage work.

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