Why couples may wish to consider a postnuptial agreement
A postnuptial agreement is a legal contract between a couple after the spouses marry or form a civil union. It governs the ways in which the spouses’ or partners’ finances and property will be divided in the event they divorce or separate. Within the agreement, you can state your wishes regarding the division of property that each partner acquired separately and jointly both prior to and following the marriage or union. You can also address such issues as debts, alimony, child support and how work is to be divided at home.
There are three kinds of postnuptial agreements:
- 1.Those that provide for the distribution of marital property upon the death of a spouse. Usually, these consist of a waiver by the surviving spouse of any rights to property the spouse would have had according to a will or under statutory law.
- 2.Those that function as separation agreements in that their objective is to avoid the time and expense of divorce proceedings. The spouses agree to the disposition of property, other marital assets, custody, alimony and child support in the event they separate, and the agreement is normally integrated into the final divorce decree.
- 3.Those that have an effect on rights in a divorce obtained in the future, typically restricting or waiving alimony and/or child support and the distribution of marital property. This is the type of agreement to which most people refer when they think of postnuptial agreements.
When such an agreement is established in California, it is sometimes referred to as a community property agreement because California is a community property state. The objective of the agreement is to modify the usual rules concerning the categorization of property as community or separate property to indicate the way in which property is to be disposed of in the event the couple enters into a divorce, or one or both spouses die.
The agreement applies to property the spouses currently own or property they anticipate receiving in the future. For example, one spouse might write a book during the course of the marriage. According to the classification rules, any profits realized from the sale of the book would usually be deemed community property. However, in this scenario, both spouses agree that all sales proceeds are the separate property of the spouse who authored the book, and they enter into a post-nuptial agreement to that effect.
Another instance is where one spouse receives a considerable inheritance. According to the classification rules, the inheritance is considered to be that spouse’s separate property. However, if such property is commingled with the community property, it can be changed to community property. By creating a post-nuptial agreement, the spouse can ensure that the inheritance continues to be that spouse’s separate property.
You may also wish to consider a postnuptial agreement if you are in your second or third marriage, and have children from a prior marriage. Preparing such an agreement is one way of making certain that your children will inherit some of your assets. Another reason to create a postnuptial agreement is to safeguard your financial security in the event you stop working in order to spend a considerable amount of time raising your children. In addition, the agreement can provide for a settlement in the event of a sudden increase in assets, offer protection for your business, assist your dependents and resolve disputes regarding finances.
It is possible to prepare a postnuptial agreement as part of an estate plan so that it operates together with the spouses’ joint or individual trusts. In order to avoid any conflicts of interest, each spouse should have separate legal representation. If both spouses wish to have one attorney draft the agreement, specific disclosures have to be made, and each spouse is required to waive any possible conflict of interest.